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

[Loki]

9 minutes ago, sancho panza said:

History is more on his side given the US establishments lack ofwilling to let markets drop into a US Presidential run off

The narrative is that they hate Trump though

[sancho panza]

12 hours ago, DurhamBorn said:

Id rate Steve Kaplan as one of the best contrarian investors in the world,but he isnt a macro strategist.He spots value very well,not timing.People should always read him though as he is superb for highlighting under valued sectors/countries and has a long history.He is also a superb person.

David Hunter is one of the best macro strategists on the planet.His job isnt to allocate capital,its to position a road map for others.I can say though (as i have some of his tools) that he will be watching Fed liquidity closely because everything going down isnt a given due to the structure of the crash.We might see a huge sector rotation and a slow grind down in bonds etc.

Persoanlly I think we'll see a large credit event.We know the banking system in the UK is highly overleveraged, as it is in the USA.I find it possible but improbable  that it unwinds in good order overtime with inflation doing the dirty work.

It's interesting to see two people with such good records diverging at what might be a crucial moment.

[sancho panza]

7 minutes ago, Loki said:

The narrative is that they hate Trump though

Wall St loves Fed liquidity far more than it worries about the sensibilities of aging liberal elites led by octogenarians

[RickyBacker]

29 minutes ago, sancho panza said:

Any chance we can get a laymans explanation of what tight oil refers to CP?

In my  very limited knowledge, I believe it refers to shale/fracking.

[Loki]

5 minutes ago, sancho panza said:

Wall St loves Fed liquidity far more than it worries about the sensibilities of aging liberal elites led by octogenarians

Exactly, what better way to get it than crash "Trump's market"

Two birds one stone(?)

[MvR]

1 hour ago, sancho panza said:

This is a tricky time.I could well be wrong,I'm debating raising some cash or buying some hedges but not willing to sell any oilies/potash/PM's as yet.

I've been basing my speculative trading on David Hunter's thesis.. mostly long dated calls and call spreads in my TastyWorks account. It's been very volatile and plenty of times I wished I'd taken profits earlier, but somehow it's up 300% over 15 months ( including a couple of 60% peak to trough drawdowns.. not fun ), so I've closed out the long SPY Jan calls / call spreads I was using and now I'm mostly putting on limited risk short term bets on the weeklies. 

I do want to capture some of the melt-up if it happens though, so I've put a couple of thousand in my spread-betting account to try get in on pull-backs.  I use very tight stops, meaning I expect to get stopped out a few times, but the hourly chart is good for intraday and multi-day swings and combined with a 1 or 5 minute chart for precision, it doesn't take that many attempts to catch a ride.  

This was my third attempt today, as price failed to get down to the previous day's close during regular trading hours, leaving a gap on the charts. A late day pullback and first-touch of the green Tenken-Sen on the hourly ( a move which appeared rather half-hearted on the 1 minute chart ), plus bullish W%R divergence on the 5 minute was the entry signal. 

Of course we could be forming an island top, in which case we could drop overnight and I'll be stopped out tomorrow, but we could be forming a gap-and-go, as we break above not just the ATH but a longer term up trend-line that's provided support and resistance since 2016. Given the mood, a significant short squeeze is possible here. That's what seemed to trigger the late day move today, but it could gather momentum.  Either way, it's good practice, as I don't do much directional / spread-betting stuff, particularly at size. 

[Popuplights]

34 minutes ago, RickyBacker said:

In my  very limited knowledge, I believe it refers to shale/fracking.

Tight oil is any oil that is hard to get out of the ground. Shale oil, tar sands, that kind of thing. Fracking is just a technique for helping to get that oil out of rock that would traditionally not yeild a good flow by itself. 

[Viceroy]

https://www.bloomberg.com/news/articles/2020-08-24/dow-industrials-kicks-out-exxon-in-biggest-shakeup-since-2013

‘The changes mark a stunning fall from grace for Exxon, the world’s biggest company as recently as 2011, whose ejection reflects the steady decline of commodity companies in the American economy. They represent an equally significant embrace of technology firms, whose giant rallies have have caused the Dow to trail other indexes this year.

“Those changes are a sign of the times - out with energy and in with cloud,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.‘

[Jesus Wept]

11 minutes ago, Viceroy said:

https://www.bloomberg.com/news/articles/2020-08-24/dow-industrials-kicks-out-exxon-in-biggest-shakeup-since-2013

‘The changes mark a stunning fall from grace for Exxon, the world’s biggest company as recently as 2011, whose ejection reflects the steady decline of commodity companies in the American economy. They represent an equally significant embrace of technology firms, whose giant rallies have have caused the Dow to trail other indexes this year.

“Those changes are a sign of the times - out with energy and in with cloud,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.‘

“Under-representation in technology has penalized the Dow in 2020, when it has frequently trailed the market-cap weighted S&P 500, whose concentration on megacap companies like Amazon.com and Alphabet has juiced its returns. Neither of those companies are effectively eligible for the Dow given their $1,000-plus share prices.

The blue-chip index weights its constituents by price rather than market value, making it different from the broader S&P 500. A committee chooses members in an effort to maintain “adequate” sector representation and favors a company that “has an excellent reputation, demonstrates sustained growth and is of interest to a large number of investors,” according to its website. Other major indexes add and subtract members on a rules-based process.”

I never knew that. Always learning here.

@Viceroy Thanks for posting. I had Exxon and Raytheon on a US to buy list. Post crash of course. Makes them ‘more attractive’ as a potential ‘cyclical buy’.

[Popuplights]

Very interesting. I have a fair number of XOM shares bought via a company share save scheme. I will be hanging on to them for the great reflation.

[Majorpain]

https://www.constructionenquirer.com/2020/08/24/work-to-start-on-uks-first-plastic-to-hydrogen-plant/

Interesting development that was kept quiet, first plastic waste to hydrogen recycling plant in the world?

More here:

https://www.rechargenews.com/transition/turning-plastic-waste-into-hydrogen-first-commercial-plant-moves-step-closer/2-1-733678

[M S E Refugee]

9 minutes ago, Majorpain said:

https://www.constructionenquirer.com/2020/08/24/work-to-start-on-uks-first-plastic-to-hydrogen-plant/

Interesting development that was kept quiet, first plastic waste to hydrogen recycling plant in the world?

More here:

https://www.rechargenews.com/transition/turning-plastic-waste-into-hydrogen-first-commercial-plant-moves-step-closer/2-1-733678

Looks interesting, I have just bought 500 shares on Trading 212.

[Cosmic]

39 minutes ago, Majorpain said:

https://www.constructionenquirer.com/2020/08/24/work-to-start-on-uks-first-plastic-to-hydrogen-plant/

Interesting development that was kept quiet, first plastic waste to hydrogen recycling plant in the world?

More here:

https://www.rechargenews.com/transition/turning-plastic-waste-into-hydrogen-first-commercial-plant-moves-step-closer/2-1-733678

£7m plant to process 35tonnes/day (2 truck loads?) of plastic waste?

[DurhamBorn]

30 minutes ago, Cosmic Apple said:

£7m plant to process 35tonnes/day (2 truck loads?) of plastic waste?

Most process plants tend to start like that,it will be able to scale up once proven.Lots of the costs on process plants are connecting them to all the services and building the pipework.Thats why you tend to get new plants next to old plants,or all built in clusters.Lots of these things will fail,but the direction of travel is clear.I dont buy small companies though,big oil and other big players will buy the winners i expect.

[DurhamBorn]

29 minutes ago, Cattle Prod said:

The other thing about Hunter is I think he takes a longer, more cyclic view than Kaplan. Kaplan is a details guy, and has dissected bull and bears going back a long way, but is to me, perhaps a little zoomed in. Hunter is zoomed out, and is looking at a 40 year rather than 10 year cycle. They will both be right, of course, but neither can time it IMO. I try to take the bits of both that resonate, and like @Harley try to listen to more than two people who resonate to try and pick up common threads, including the folks here of course.

Thats right,David is looking across long cycles and looking at likely affects of liquidity (both growing and contracting ) and he is then doing some cross market work.At Fidelity he would provide those road maps to others to choose asset allocation etc and the stock pickers.His job is to say the likely price of oil at the end of the next cycle will be $200.Markets arent linear,so how it gets there will be volatile,and some assets wont make it to enjoy that price etc.

 

[MrXxxx]

1 hour ago, Cattle Prod said:

Sorry, it just means shale. The rock is 'tight', the oil doesn't flow if it's own accord, so you have to frac it to 'loosen' it. It's considered low quality rock (expensive to access), is very energy intensive to recover (therefore has a low EROEI (energy return on energy invested), and has duly been ignored for decades. Till money was cheap, that is!

If you see 'LTO' it means light tight oil. Same thing. The 'light' bit is important too. Oil is different from field to field and region to region. Some is considered poor quality, some excellent. Mainly governed how expensive it is to refine it. The shale stuff is light in density, so it's pale yellow in colour, and lacks the heavy hydrocarbons to make for example diesel. This is why the US suddenly started exporting oil again - they don't need it, or have the refineries for it, which are mostly set up for 'black' oil from Venezuela, Mexico, Canada and further afield. That the refinery owners haven't seen a business case to tool up for LTO/shale oil/tight oil is instructive in itself - there is no long term business case.

As you produce the LTO, the reservoir pressure drops, and gas comes out of solution (associated gas). So the oil gets lighter over time and less useful. They call this 'gassing out'. The Eagle Ford shale oil play is now mostly a gas field, and in permanent decline.

All of the above is lost in the perception by the market that this resource will just keep on giving - they just extrapolate out the curve on Art's graph. It won't happen, and there will be an oil shock if demand picks up.

Edit:

When I said they don't need it, I meant they don't need any more of that type of oil. I didn't mean to imply they were ever energy independent, or had an excess. They never were, and never will be, which will have geopolitical consequences in the coming years. Canada might cover them though.

So when this remaining LTO in the ground has gassed out is it only useful for lubricants or plastic (rather than hydrocarbon fuels), or does it have other uses?....nothing to do with making money, just interested :-)

[janch]

4 hours ago, Majorpain said:

https://www.constructionenquirer.com/2020/08/24/work-to-start-on-uks-first-plastic-to-hydrogen-plant/

Interesting development that was kept quiet, first plastic waste to hydrogen recycling plant in the world?

More here:

https://www.rechargenews.com/transition/turning-plastic-waste-into-hydrogen-first-commercial-plant-moves-step-closer/2-1-733678

Considering how much plastic there is in the world this seems a winner if they can get it to work efficiently (high EROEI) and if it doesn't also produce too many nasty toxic chemicals.  I've often thought if there was such a process it wouldn't be too difficult to "go fishing" for all the plastic in the sea to use as fuel for the plant.

(Likewise I've also considered it might be easier to "mine" metals by excavating them from old landfill sites.)

With a bit of tweaking of the process they can probably produce oil from the plastic too and then it could affect the price of oil.

This is years away no doubt but just a thought about how things might develop in the future.

[JMD]

On 21/08/2020 at 19:13, Harley said:

Excellent to hear.  Totally with you there.  I have a proforma of industries I'm working through.  I ideally would like four companies in each (to share with a friend), across several international markets.   My list of highly ranked industries:

Biotechnology & Drugs

Chemical Manufacturing

Chemicals Plastic & Rubber

Coal

Construction Raw Materials

Crops

Electric Utilities

Fish & Livestock

Forestry & Wood Products

Gold & Silver

Iron & Steel

Major Drugs

Metal Mining

Natural Gas Utilities

Non-Metallic Mining

Oil & Gas Integrated

Oil & Gas Operations

Oil Well Services & Equipment

Tobacco

Water Utilities

Plus a non sector specific screen for any jewels.

Harley, i was doing some research and was reminded of your sectors list. The link below is for the Pictet Megatrend fund which holds 500 (ouch!) 'next cycle stocks', however if you open their annual report from the link below, they break down their stocks into various different sub-groups, e.g. p418 is health, p473 is timber. I haven't read through the relevant sub-groups properly yet, but thought it might be useful, as i notice many of their picks have been discussed here (Ecolab, etc). 

Harley, I think you have your own screening system, so the usefulness of this might be bit limited, but may be useful to others... enjoy!! Many of these stocks may now be considered 'expensive', but if we do get a market correction, i will definitely be looking to buy some.    

https://www.am.pictet/en/uk/individual/funds/pictet-global-megatrend-selection/LU0474969937

 

[Moominpapa]

On 13/08/2020 at 13:55, Lozza said:

I've been hunting for these as well,  found the following funds (available on HL)

ASI Global Inflation-Linked Bond 
Fidelity Global Inflation Linked Bond 
Legal & General Global Inflation Lnk Bond Indx 
Smith & Williamson Global Inflation Linked Bond
Legal & General All Stocks Index-Linked Gilt Index

No idea if they are any good or not.

Thanks I will have a look.

[MrXxxx]

3 hours ago, Cattle Prod said:

the cattle don't need natural gas

They have enough of their own! :-) :-) :-)

[DurhamBorn]

Iv been looking at a few different things on this BT takeover rumour,and i think COMCAST CORP might be running the rule over them.If so it would really kick government and the EU in the nuts for their crazy treatment of telcos during the last cycle.The question is if so will DTelecom counter bid?

[JMD]

A green technology I've not seen mentioned here is carbon capture in the form of 'artificial trees', devices that remove carbon dioxide from the atmosphere. Does anyone know of some good potential investable companies (or funds) operating in this sector? 

[Castlevania]

1 hour ago, DurhamBorn said:

Iv been looking at a few different things on this BT takeover rumour,and i think COMCAST CORP might be running the rule over them.If so it would really kick government and the EU in the nuts for their crazy treatment of telcos during the last cycle.The question is if so will DTelecom counter bid?

Comcast own Sky. I can’t see that getting past the competition commission.

[DurhamBorn]

1 hour ago, Castlevania said:

Comcast own Sky. I can’t see that getting past the competition commission.

Depends what parts of BT they want to keep and what they want to sell.Only competition issue would be over a few TV things.No issues over broadband,mobile etc.

I think Comcast could be interested.

[wherebee]

1 hour ago, JMD said:

A green technology I've not seen mentioned here is carbon capture in the form of 'artificial trees', devices that remove carbon dioxide from the atmosphere. Does anyone know of some good potential investable companies (or funds) operating in this sector? 

I've read about that before, and the number one comment on the page was 'why not just plant more trees'