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

[Don Coglione]

7 minutes ago, Loki said:

If you have to ask...

...you can't afford it?

[MvR]

4 hours ago, sancho panza said:

Wealth gets created and destroyed on a daily basis.

Ref derivatives,I hear that they 'net off' a lot but the reality is that if they did exactly that,then there'd be no point having them.As with all markets there are winners and losers and every now and then there are counterparties that default.

What's meant I suspect is that the big players round off their books and their profit lies for them in the bid offer.The smaller players probably represent the bulk of the losers except @MvR

Thanks SP... I do my best, but mostly I'm just very careful.

Regarding the the massive derivatives numbers quoted, it's hard to say since we don't know what they're comprised of, but in the world of options, when they refer to X trillion, they're often referring to the notional value of the underlying.. so if I spent $2700 on a November 5000 Amazon call ( which I wouldn't, I should add!) , they may count this as 100x $5000 or $500,000.. which in reality doesn't represent $500,000 of uncovered risk as the headlines like to insinuate..

This $500,000 is really just a potential transaction that may occur in the future, if Amazon shares rose above $5000. Furthermore, whoever sold the call in the first place most likely owns the 100 Amazon shares required to cover the transaction, so there's no risk to them, and only $2700 risk to me.

 I wonder how much of that $2000T derivatives bubble are actually just potential, low-risk transactions that may occur in the future depending on market moves? 

[M S E Refugee]

22 minutes ago, Vendetta said:

My man Hunter does not think so.....

I hope to god he is right as I am 10 grand in the hole on Zoom today in virtual money on 212..

Shit it's now 14 grand.

[Castlevania]

2 minutes ago, MvR said:

Thanks SP... I do my best, but mostly I'm just very careful.

Regarding the the massive derivatives numbers quoted, it's hard to say since we don't know what they're comprised of, but in the world of options, when they refer to X trillion, they're often referring to the notional value of the underlying.. so if I spent $2700 on a November 5000 Amazon call ( which I wouldn't, I should add!) , they may count this as 100x $5000 or $500,000.. which in reality doesn't represent $500,000 of uncovered risk as the headlines like to insinuate..

This $500,000 is really just a potential transaction that may occur in the future, if Amazon shares rose above $5000. Furthermore, whoever sold the call in the first place most likely owns the 100 Amazon shares required to cover the transaction, so there's no risk to them, and only $2700 risk to me.

 I wonder how much of that $2000T derivatives bubble are actually just potential, low-risk transactions that may occur in the future depending on market moves? 

The derivative numbers banded about are based on notionals. 

Anyone taking out a fixed rate mortgage is taking out a loan with an embedded derivative (a loan at a floating rate, and an interest rate swap to convert that floating rate to a fixed rate). Which is likely to cause them the most trouble, the loan that needs paying back or the interest rate they’ve fixed at?

[Democorruptcy]

24 minutes ago, Vendetta said:

My man Hunter does not think so.....

That S&P figure keeps going up and up. I remember in the old days when this thread started on ToS, the figure DB mentioned was a lot lower than that. I'd be down at the foodbank if I'd gone short.

[Don Coglione]

29 minutes ago, Vendetta said:

My man Hunter does not think so.....

25-33% up from today, then?

Big calls.

[Heart's Ease]

50 minutes ago, Loki said:

If you have to ask...

My man Walter... 😁

[Hardhat]

28 minutes ago, Knickerless Turgid said:

25-33% up from today, then?

Big calls.

Now that Trump is taking credit for the stock market I wonder what props they will try before the election...

[DurhamBorn]

33 minutes ago, Democorruptcy said:

That S&P figure keeps going up and up. I remember in the old days when this thread started on ToS, the figure DB mentioned was a lot lower than that. I'd be down at the foodbank if I'd gone short.

Yes the S+P is at Davids old target now.Im never one for shorting as i never ever use margin.The markets are so unbalanced now i dont see any worth is top out figures on indexes,though they will be huge on sentiment of course as most people are now in passives that mostly track the index.

[BurntBread]

42 minutes ago, M S E Refugee said:

I hope to god he is right as I am 10 grand in the hole on Zoom today in virtual money on 212..

Shit it's now 14 grand.

Remember it defaults to real money when you log in, and you have to manually reset it to "virtual" each time.

 

 

 

 

 

Sorry, couldn't resist!

[Shamone]

Hydrogen mentioned https://apple.news/AUgfJZcGxRkmfzmfKcRqFag

[DurhamBorn]

@Cattle Prod my macro road maps show oil demand growing,not falling,growing from the level before the crisis,i know thats hugely contrarian,but i trust the call.Almost everyone is looking at things from the position of a dis-inflation cycle,but that has ended,or is ending.Huge world blocks are in a scramble for position,a new cold war is under way,the west is bringing back manufacturing.Everything that is a big user of energy/oil is going to grow.

There is no question the world is moving to green energy,its 100% certain,but the only countries who will get there in decent shape are the ones with access to oil and gas during the transition.

Imagine when you can stop paying to look for something,but you already have a lot of it,and prices and going to go parabolic.The cash flow will be incredible.

Hopefully oil can stay down a while longer or retreat 15% to finish shale off.The integrated oil companies can survive at $40 oil.My exact cycle high target on oil is $247 Brent,maybe $300+.Im not in a rush to see it as il be heading towards 60 years old.

[MrXxxx]

3 hours ago, Vendetta said:

Is this the crash starting....? 😁

No, this is to `suck in` the last of the Robinhooders...

[MrXxxx]

6 hours ago, sancho panza said:

and @Underwhelmed the devil is in the detail.this won't be govt laons at 1%.

not noly will they struggle getting tenants to tkae it,but they'll struggle to get any thrid parties involved under 15% I suspect.

If you can't pay your rent,then borrowing the moeny and going bust thereafter is one option.Otherwise claiming housing benefit and coming to a working agreement with your LL is much more liekly.that agreement will most likely be a haircut for the LL.

LL's going to be getting hosed for the covid months.

I've been renting for years and never been asked for a LL reference.

from the link

Perhaps I am looking at this too simplistically, but why anyone would become involved in BTL as an investment is beyond me. OK, if you want to be in residential property buy, do up and flip...at least when you sell you know the money is in your bank account, and if it isn't it doesn't happen...BTL in the same scenario would be selling the house, letting the new owners move in, and then letting them decide if they want to pay you or not!

[M S E Refugee]

23 minutes ago, MrXxxx said:

Perhaps I am looking at this too simplistically, but why anyone would become involved in BTL as an investment is beyond me. OK, if you want to be in residential property buy, do up and flip...at least when you sell you know the money is in your bank account, and if it isn't it doesn't happen...BTL in the same scenario would be selling the house, letting the new owners move in, and then letting them decide if they want to pay you or not!

BTL is the aspiration of Britain's petit bourgeois, many working class people shun stocks as being too risky will quite happily borrow money to buy a shitty terrace and tell you that you can't go wrong with bricks and mortar.

[Chewing Grass]

https://plainenglishfinance.co.uk/opinion/you-cant-go-wrong-with-bricks-and-mortar/

[King Penda]

1 hour ago, M S E Refugee said:

BTL is the aspiration of Britain's petit bourgeois, many working class people shun stocks as being too risky will quite happily borrow money to buy a shitty terrace and tell you that you can't go wrong with bricks and mortar.

The problem so far is it’s worked .its tangible and you can see it 

[MrXxxx]

French €100bn Coronavirus recovery plan mentioned in FT, states €30bn on ecological trans transition of which €9bn earmarked for development of hydrogen and other gree tech.

[MrXxxx]

Just posted a link over in Investing regarding changes to early access age...it looks as though some of you were right, and if you are 47 or younger today you will have to wait/`slave` for another two years!

[Popuplights]

52 minutes ago, MrXxxx said:

Just posted a link over in Investing regarding changes to early access age...it looks as though some of you were right, and if you are 47 or younger today you will have to wait/`slave` for another two years!

Makes be happy to be 51.

[Democorruptcy]

13 hours ago, DurhamBorn said:

@Cattle Prod my macro road maps show oil demand growing,not falling,growing from the level before the crisis,i know thats hugely contrarian,but i trust the call.Almost everyone is looking at things from the position of a dis-inflation cycle,but that has ended,or is ending.Huge world blocks are in a scramble for position,a new cold war is under way,the west is bringing back manufacturing.Everything that is a big user of energy/oil is going to grow.

There is no question the world is moving to green energy,its 100% certain,but the only countries who will get there in decent shape are the ones with access to oil and gas during the transition.

Imagine when you can stop paying to look for something,but you already have a lot of it,and prices and going to go parabolic.The cash flow will be incredible.

Hopefully oil can stay down a while longer or retreat 15% to finish shale off.The integrated oil companies can survive at $40 oil.My exact cycle high target on oil is $247 Brent,maybe $300+.Im not in a rush to see it as il be heading towards 60 years old.

Report here about oil demand, it's only by a "think tank"!

Quote

The war on plastic waste could scupper the oil industry’s multi-billion dollar bet that the world will continue to need more fossil fuels to help make the petrochemicals used in plastics, according to a new report.

Major oil companies, including Saudi Aramco and Royal Dutch Shell, plan to spend about $400bn (£300bn) to help grow the supply of virgin plastics by a quarter over the next five years, to compensate for the impact of electric vehicles and clean energy technologies on demand for fossil fuels.

Industry data has predicted that plastics will be the largest driver of oil demand growth in the coming years but new figures suggest these investments may be left stranded as global governments push through plans to cut single-use plastics and increase recycling to help tackle plastic pollution.

The report by thinktank Carbon Tracker and consultancy Systemiq found that demand for virgin plastics may peak in 2027, as its growth slows from 4% a year to 1%, strengthening the theory that global oil demand may already have reached its peak in 2019.

“Remove the plastic pillar holding up the future of the oil industry, and the whole narrative of rising oil demand collapses,” Kingsmill Bond, energy strategist at Carbon Tracker, said.

The report described the plastics industry as “a bloated behemoth, ripe for disruption” by governments eager to reduce its heavy carbon footprint and tackle the scourge of plastics in the world’s oceans.

Earlier this summer the EU proposed a tax of €800 (£713) per tonne for unrecycled waste plastic, months after China announced a ban on non-biodegradable single-use plastics in major cities from the end of this year, and in all cities and towns by 2022.

Meanwhile BP agreed to sell its petrochemicals business for $5bn to Ineos, which is owned by British billionaire Sir Jim Ratcliffe, after warning that a ban on single use plastics would hit oil demand over the coming decades.

Manufacturing less plastic, which is made from refined fossil fuels, could wipe millions of barrels of oil from global demand forecasts which have already fallen in recent months due to the impact of the coronavirus pandemic on travel patterns.

It could also help reduce carbon dioxide emissions which are estimated to reach five tonnes for every tonne of plastic produced, or 1.75 gigatonnes of carbon dioxide a year.

“It is simply delusional for the plastics industry to imagine that it can double its carbon emissions at the same time as the rest of the world is trying to cut them to zero,” Bond said.

https://www.hl.co.uk/news/2020/9/4/war-on-plastic-could-strand-oil-industrys-300bn-investment?

 

 

[Heart's Ease]

Just a marker to say - this thread has now had just over a million views 🍻

[Bobthebuilder]

24 minutes ago, Heart's Ease said:

Just a marker to say - this thread has now had just over a million views 🍻

That will be mainly me,, sorry.

[Hardhat]

39 minutes ago, Heart's Ease said:

Just a marker to say - this thread has now had just over a million views 🍻

I've always suspected there are quite a few more readers than posters. 

Of course, many are only here for the pizza recipes.

[JMD]

1 hour ago, Heart's Ease said:

Just a marker to say - this thread has now had just over a million views 🍻

I think that is really impressive result. Great job DB, and all the many other 'SME'(!) contributors.

I wonder what the current daily view rate is? (it might even be higher than the number of illegal immigrants crossing the channel!)

Just a thought, and tbh don't know if individual threads can do this - but with that many viewers, might it be worth considering doing some survey/votes to gauge opinions on topics, it could provide useful data during the reflation cycle? Then again, I guess it would need to be moderated by DB - so downside is it would increase DB's workload when he already gives his time so generously. Anyway just a thought.