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

[Harley]

50 minutes ago, Majorpain said:

I dread to think, like the GFC bad things happen when black swans hit and things go outside institutions models.  Like a futures market which goes zero bid and no-one actually wants the stuff.

So what happens when everyone wants out of an ETF tracker but there's no bid as the only buyers would be the other five or so ETF providers and they're in the same boat?  What about those ETF holdings they lent to banks for their dubious paper, even at 120% of principal?  Then there's the synthetic backed ETFs?  Presumably the FED on its white horse?  But hang on, this is mostly retail, not those who own the FED!  Like a certain sunny place having  bank run - lock down while covering your mates?  But at least you can see the holdings(?) and lending unlike many investment trusts!  Maybe a long shot but no need to ignore.  Maybe have a tapered risk mitigation in place if worried.

[Loki]

13 minutes ago, Vendetta said:

Anyone know how ‘Brent Crude’ sits in terms of storage facilities?

Specifically the question is:

’Will The storage problems we have seen with US WTI be the same for Brent etc?’

Additionally the bond market is “flashing red” - Predicting slumping inflation (DEFLATION) amid the oil rout. Any thoughts? Still thinking a surge in inflation after a year of deflation - or will this deflation be even more short lived? 
 

Can we rely on the FED et al. to be printing .....printing .... and inflating as much as possible.

If they don’t control the yield curve surely we’d get an Armageddon deflationary spiral of death. 

I think I'm right in saying they can print all the want, but with no velocity/pushing it into infrastructure (COVID) it won't do a thing.

[DurhamBorn]

11 minutes ago, Vendetta said:

Anyone know how ‘Brent Crude’ sits in terms of storage facilities?

Specifically the question is:

’Will The storage problems we have seen with US WTI be the same for Brent etc?’

Additionally the bond market is “flashing red” - Predicting slumping inflation (DEFLATION) amid the oil rout. Any thoughts? Still thinking a surge in inflation after a year of deflation - or will this deflation be even more short lived? 
 

Can we rely on the FED et al. to be printing .....printing .... and inflating as much as possible.

If they don’t control the yield curve surely we’d get an Armageddon deflationary spiral of death. 

Iv always expected -3% on the inflation measure,outright price deflation,but only for a very short period.Its like you say,if they dont print like crazy the Great Depression will look like a Club 18 to 30 holiday compared to what arrives.The dis-inflation has built in the system since 1982,but even more so since the early mid 90s.They need to print it back.However not all the dis-inflation assets will be left standing,so we will see inflation.Once the government stops handing out consumers free money the pain for them will really start.Probably over half of small companies arent viable in a reflation.Im not sure the trainee dog groomer and her van driver hubby aged 22 have made a good choice moving into a £168k new build last week on HTB 

[Transistor Man]

5 hours ago, RickyBacker said:

Only to reiterate my earlier 'graphene' call.
 

From the perspective of the electronic properties of graphene, Id take a look at TSMC, if you haven’t already. No bargain, as they’re the world’s number 1 foundry.

But they are excellent at introducing the technology boosters, at the right time, and in a low risk way. With Apple paying for it.

Graphene and other 2D materials are on their near term technology roadmaps.

Intel too, but they’ve lost a bit of their manufacturing touch recently. 

[Jesus Wept]

24 minutes ago, Transistor Man said:

From the perspective of the electronic properties of graphene, Id take a look at TSMC, if you haven’t already. No bargain, as they’re the world’s number 1 foundry.

But they are excellent at introducing the technology boosters, at the right time, and in a low risk way. With Apple paying for it.

Graphene and other 2D materials are on their near term technology roadmaps.

Intel too, but they’ve lost a bit of their manufacturing touch recently. 

Yes - TSM - they were one of many stocks that should have been snapped up during the rout of Mar 17th - 20th (alongside Shell @ 916p !). 
 

In my list of top 10 to buy stocks when / if we have next day of carnage on the markets....

[Majorpain]

1 hour ago, Harley said:

So what happens when everyone wants out of an ETF tracker but there's no bid as the only buyers would be the other five or so ETF providers and they're in the same boat?  What about those ETF holdings they lent to banks for their dubious paper, even at 120% of principal?  Then there's the synthetic backed ETFs?  Presumably the FED on its white horse?  But hang on, this is mostly retail, not those who own the FED!  Like a certain sunny place having  bank run - lock down while covering your mates?  But at least you can see the holdings(?) and lending unlike many investment trusts!  Maybe a long shot but no need to ignore.  Maybe have a tapered risk mitigation in place if worried.

Passive mechanical ETF buying is going to be the painful lesson of this crisis IMO, too many people just buying the index and getting a whole load of crap with the gems.  Works in good times but really doesn't in bad.

At least the oil futures have some link to the physical product as shown when the fund blew up, if traders ever realise that the paper promise they hold doesn't actually have a link to anything tangible in another certain futures market (actual value $0?) and they cant take delivery then things will get really interesting.  

[Jesus Wept]

10 minutes ago, Majorpain said:

Passive mechanical ETF buying is going to be the painful lesson of this crisis IMO, too many people just buying the index and getting a whole load of crap with the gems.  Works in good times but really doesn't in bad.

At least the oil futures have some link to the physical product as shown when the fund blew up, if traders ever realise that the paper promise they hold doesn't actually have a link to anything tangible in another certain futures market (actual value $0?) and they cant take delivery then things will get really interesting.  

I think you could be right regarding ETFs - Maybe lots of packaged up bundles of shite out there.

The new MBS’s and CDO’s of the share market? 

https://www.institutionalinvestor.com/article/b1fbh1j3819g21/The-Big-Risk-Lurking-in-ETF-Markets

 

The markets underpinning credit exchange-traded funds are showing signs of declining liquidity — and that could spell trouble in the next downturn, new research from Moody’s Investor Service argues. 

“Unexpected market liquidity shortfalls could be most pronounced within ETFs tracking inherently illiquid markets, such as high-yield credit,” stated the report, published Thursday. “These ETF-specific risks, when coupled with an exogenous systemwide shock, could in turn amplify systemic risk.”

The $3.4 trillion ETF market has grown rapidly during a period of “relative calm,” meaning it has yet to be tested by a period of high market distress or volatility, the research showed. But the funds sometimes invest in instruments that become hard to sell in times of market stress. 

ETF market makers— and authorized participants looking for arbitrage opportunities — trade dynamically to balance the supply and demand for ETF shares and their underlying assets, the report said. But if liquidity in underlying markets suddenly dried up, market makers would likely price that risk into their ETF quotes. 

“In effect, ETFs track not only the performance of their underlying assets, but also the liquidity of these assets,” the report said. “Therefore ETFs targeting illiquid instruments, such as corporate bonds and leveraged loans, would present greater risks, and investors trading on the premise that ETFs are more liquid than their baskets may find that results fall short of expectations in a stressed environment.”

[II Deep Dive: Single-Sector ETFs Are on the Rise Despite Risks, Cerulli Says] 

In other words, investors may be in for a nasty surprise if and when their ETF’s liquidity profile starts to mirror that of its underlying assets, particularly in the less liquid fixed income markets. 

 

 

[Barnsey]

1 hour ago, DurhamBorn said:Im not sure the trainee dog groomer and her van driver hubby aged 22 have made a good choice moving into a £168k new build last week on HTB 

Only £168k DB? You could probably double that number elsewhere, even in the Midlands 

[nirvana]

yesterday I wasn't really concerned about the oil futures price BUT TODAY HOLY F!!! The cash price just took another massive shit!!!

8$ a barrel on the cash market!!!

I can't believe RDSB is holding up so well! I want £9 again so I can go ALL IN!

To add, I've got a feeling the stock markets want to have another massive shit as well 

Get on with it Mr market.........

And if the governement doesn't end this stupid bloody lockdown soon THERE WILL BE NO BLOODY ECONOMY!!!!! 

[kibuc]

4 minutes ago, confused said:

yesterday I wasn't really concerned about the oil futures price BUT TODAY HOLY F!!! The cash price just took another massive shit!!!

8$ a barrel on the cash market!!!

I can't believe RDSB is holding up so well! I want £9 again so I can go ALL IN!

Is the barrel included? 

[DurhamBorn]

1 hour ago, Barnsey said:

Only £168k DB? You could probably double that number elsewhere, even in the Midlands 

Young couple i know who moved in last week.Her mother told me how well they had done.She then told me she couldnt get through to the mortgage to take a holiday as her and her bubby were struggling with shutdown.So happy her daughter had paid so much on low wages,at the same time as struggling at 50 years old when they bought at 23 (re-mortgage after re-mortgage 3 holidays a year couple).Crazy.

[leonardratso]

They're worth every penny.

[Barnsey]

3 minutes ago, DurhamBorn said:

Young couple i know who moved in last week.Her mother told me how well they had done.She then told me she couldnt get through to the mortgage to take a holiday as her and her bubby were struggling with shutdown.So happy her daughter had paid so much on low wages,at the same time as struggling at 50 years old when they bought at 23 (re-mortgage after re-mortgage 3 holidays a year couple).Crazy.

Surely these mortgage payment holidays won’t continue beyond these 3 months? At some point losses have to be realised right?

[Jesus Wept]

When (IF) the world economy gets moving surely all this cheap oil sitting in tanks should drive a bit of a boom? 

I get that ‘it is unlikely to be consumer driven’ - but I’m coming around to DBs theory that it will be government driven and industrial driven and there will be massive investment by governments all around the world. 

[Bricks & Mortar]

1 minute ago, Barnsey said:

Surely these mortgage payment holidays won’t continue beyond these 3 months? At some point losses have to be realised right?

I guess they'll continue as long as the lockdown does.  Or, as long as the property market remains closed.

[nirvana]

7 minutes ago, kibuc said:

Is the barrel included? 

yes if you're quick some dealers are throwing the barrel in! 

tried to upload a pic but getting error imagecreatefromstring(): No JPEG support in this PHP build'

The world is falling apart 

 

[Don Coglione]

Just now, confused said:

yes if you're quick some dealers are throwing the barrel in! 

tried to upload a pic but getting error imagecreatefromstring(): No JPEG support in this PHP build'

The world is falling apart 

 

I wanted to post a jpeg of some really hot tottie on another thread and hit the same issue!

[DurhamBorn]

7 minutes ago, confused said:

yesterday I wasn't really concerned about the oil futures price BUT TODAY HOLY F!!! The cash price just took another massive shit!!!

8$ a barrel on the cash market!!!

I can't believe RDSB is holding up so well! I want £9 again so I can go ALL IN!

The beauty with so low is it means no cash flow so a lot will go under quickly.Crucial in these times you have downstream as well and also gas deals as the integrated do.I would say a worse price for the big integrated would be $25 as it might keep a lot of companies on life support,where $8 is dead time.BP signed a big LNG deal with the Chinese last few days and Shell just green lighted a big gas project with PetroChina 50/50 

[Bricks & Mortar]

3 minutes ago, confused said:

12 minutes ago, kibuc said:

Is the barrel included? 

yes if you're quick some dealers are throwing the barrel in! 

Bargain!  I paid £10 each for a couple of steel oil barrels a couple years back.   Still in use as garden incinerators.

[nirvana]

2 minutes ago, Knickerless Turgid said:

I wanted to post a jpeg of some really hot tottie on another thread and hit the same issue!

Damn that's a shame!! Paging @spunko HELP!

[leonardratso]

yes, this forum only accepts XYY's home made dick and wig pictures. AI you know. It knows.

[Jesus Wept]

Is there any possibility that this is the preceding manifestations of a ‘crack-up boom’....?

If the governments keep intervening and printing money and lowering IRs which they have done In:

2000 - Dot com Crash

2008 - Banking Crash

2020 - Coronavirus Crash

Then we could see people finally realising the weakness of the FIAT money system and dashing for assets and debt.

This could spiral out of control...ergo hyperinflation and collapse of currencies. 

[nirvana]

14 minutes ago, DurhamBorn said:

The beauty with so low is it means no cash flow so a lot will go under quickly.Crucial in these times you have downstream as well and also gas deals as the integrated do.I would say a worse price for the big integrated would be $25 as it might keep a lot of companies on life support,where $8 is dead time.BP signed a big LNG deal with the Chinese last few days and Shell just green lighted a big gas project with PetroChina 50/50 

sure I hear you but the problem now is the oil price is gonna take the whole economy down with it!

Everyone is sat at home on their ever increasing FAT asses doing fuck all! Not that many folk have died at all.....it might be different with wave 2 in the autumn whenever but at the moment it's a dudd......even the hospitals are empty.......we're living in bloody clown world!!!! 

EDit: it's not just the economy......I suspect it's purely the Fed that is holding up the markets at the moment....the markets dive again it's taking folks wealth as well as their jobs!!!

SELL, SELL, SELL before it's too late!!!!  

[sancho panza]

2 hours ago, Majorpain said:

Passive mechanical ETF buying is going to be the painful lesson of this crisis IMO, too many people just buying the index and getting a whole load of crap with the gems.  Works in good times but really doesn't in bad.

At least the oil futures have some link to the physical product as shown when the fund blew up, if traders ever realise that the paper promise they hold doesn't actually have a link to anything tangible in another certain futures market (actual value $0?) and they cant take delivery then things will get really interesting.  

I don't own any ETF's but if I did,I'd be careful what I was buying.I can#t believe people would junk bond ETF's?? I mean seriously.....?

To be fair,I think there are going to many painful lessons dished out in the next two years.I look at our portfolio and things could be a lot lot worse.PM miners beginning to shine.

 

39 minutes ago, DurhamBorn said:

The beauty with so low is it means no cash flow so a lot will go under quickly.Crucial in these times you have downstream as well and also gas deals as the integrated do.I would say a worse price for the big integrated would be $25 as it might keep a lot of companies on life support,where $8 is dead time.BP signed a big LNG deal with the Chinese last few days and Shell just green lighted a big gas project with PetroChina 50/50 

Check out the highs and lows.Incredible to see.$6.55......

 

Then back in the real world we live in,noone's letting Exxon go below $41 dollars let alone the $32 march low,which tells me what I need to know for now.

 

 

Edit to add Just pricing some Jan 21 $50 calls on XOM and the price is up on a few days back when the price was $43-currently $41

 

[sancho panza]

Potential 11.7mn unemployed according to Resolution Foundation.

Hard to see some retail jobs coming back now everyone's learned about contactless payment and online ordering.

https://www.retailgazette.co.uk/blog/2020/04/fears-for-retail-as-11-7m-could-be-furloughed-or-unemployed-in-coming-months/

As many as 11.7 million people across all sectors could be furloughed or unemployed over the next three months, according to a paper from an independent think tank Resolution Foundation.

The report said employees in the lowest-paying hospitality and retail sectors are most likely, 50 per cent more than average, to be affected.

The report entitled Launching An Economic Lifeboat: The Impact Of The Job Retention Scheme warned of the possible extent of joblessness, but pointed to the mitigation impact of the scheme.

“Although we estimate that non-working could increase by as much as 11.7 million in Q2 2020, this is heavily tilted towards use of the JRS (8.3 million employees),” it said.

“Unemployment could still rise sharply to 3.4 million (10 per cent) in Q2 2020, but because of the JRS it will not reach catastrophic levels.”