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

[Democorruptcy]

GOOOOLLLLLLLLLDDDDDDDD!

Quote

 

The Parys Mountain property is a significant zinc, copper, lead, silver and gold, with a reported a resource of 2.1 million tonnes at 6.9% combined base metals in the indicated category and 4.1 million tonnes at 5.0% combined base metals in the inferred category.

https://www.hl.co.uk/shares/shares-search-results/a/anglesey-mining-plc-ordinary-1p-shares/share-news

 

I had a walk up to the mine this week. There's nobody to stop you taking your pan and the little cloth bags!

[leonardratso]

Did you see elon musk there on mars?

[JREWING]

10 hours ago, wherebee said:

If I had a pension in the UK I'd be moving it all to commodities sector, and if not that then cash.

Totally agree....

Oil and cash for me. The cash waiting to see if there are any further drops?

Part of me wants BP sub £2.50 and RDSB sub £10 and part of me wants them both to go to the moon.

STR in late 2003. Joined TOS that year, one of the first members; was convinced this madness could not go on much more. How wrong I was. Injin a member at the time, was banging on about get out of sterling, money printing, thats all he or she kept sprouting, money printing. How right he or she was...How wrong I was.

In 2003 I was a mortgage free home owner, today I am a mortgage free probably lifetime renter. Unless the market helps me out a bit.

Such is life, I still have love.

[Lightscribe]

3 hours ago, DurhamBorn said:

 

 David is looking at the collapse of Fiat and the debt system at the end of the inflation cycle,but thats a long way out and a lot can change.We could see a new Bretton Woods,or some kind of drawing rights with the central banks all linking so no currency can collapse and start a chain reaction.

The main problem is that governments are now structured to simply give out more and more free money.This crisis has shown that as clear as day,and how the bennie class and government/council workers mostly get to sit at home on full money (councils claiming to be working as hard at home is bullshit) and that means debt is exploding higher,and its structural.It looks like the government has zero stomach to actually do whats needed and the left seem to of infiltrated the whole of government,the media,all of education,councils etc etc.

However our worry for now is if,when and how a big collapse works through.Will everything come down,or a huge sector rotation? 

 

A lot of newly unemployed in former low/average paid jobs with a rented house and two kids will now realise that they are better off on universal credit and wonder why they ever bothered in the first place.

I was at a 40th birthday party last night, the amount of people who aren’t going back to the office until 2021 was in the majority of those there. London will be a wasteland of deserted businesses, offices and half built ‘luxury’ flats.

The strain on the remaining PAYE tax workers will be immense, the government will have to act one way or another. We basically have UBI already except to a small minority of the country.

The government (not just ours) have allowed themselves to be embroiled in political red tape of the left (intentionally or not) They won’t be able to close the stable door now the horse has bolted and the free money tap has been turned firmly on.

I can’t even begin to think about 2030-40 when the next 5 will bring this country and many others on the brink of collapse. Maybe a global war or something can sweep it all under the carpet.

[DurhamBorn]

12 minutes ago, Panda said:

Totally agree....

Oil and cash for me. The cash waiting to see if there are any further drops?

Part of me wants BP sub £2.50 and RDSB sub £10 and part of me wants them both to go to the moon.

STR in late 2003. Joined TOS that year, one of the first members; was convinced this madness could not go on much more. How wrong I was. Injin a member at the time, was banging on about get out of sterling, money printing, thats all he or she kept sprouting, money printing. How right he or she was...How wrong I was.

In 2003 I was a mortgage free home owner, today I am a mortgage free probably lifetime renter. Unless the market helps me out a bit.

Such is life, I still have love.

The big energy companies wont provide fireworks,but they should provide a cycle return way above inflation.My mid range is for 220% return including divis from here for BP with inflation at 68%,Repsol i expect around 270%,Shell 190%,etc etc.However im not selling any of them on return,only on oil price and where we are in the cycle,$200 oil the minimum before i look to sell down.

BP might only be worth 50% more than now by the end of the cycle,but share buy backs and divis should deliver the return.

On telcos i think they will re-rate once debts start to fall more.OPEX and CAPEX should both fall just as prices increase so hopefully free cash will grow quite fast.

Unlike oil i expect growing free cash (after this down period) to go on paying down debts to at least EBITDA 2.5 and then rising divis,or buy backs if the stocks are below around 50% higher than they are now.Telcos might simply see equity rise as debt falls,with divis that might provide 14% compounding returns over the cycle.

Potash the return will come from simply selling the stocks at some point,hopefully during a parabolic end frame though iv actually sold a few already as they went up nearly 150% and re-allocated into other areas.

The key is to let the cycle play out now and try to do small adjustments etc.Im actually getting times now where i dont check my portfolios for a few days at a time and soon it will be 5 minutes a week and company results only mostly.

 

 

[DurhamBorn]

14 minutes ago, Sideysid said:

A lot of newly unemployed in former low/average paid jobs with a rented house and two kids will now realise that they are better off on universal credit and wonder why they ever bothered in the first place.

I was at a 40th birthday party last night, the amount of people who aren’t going back to the office until 2021 was in the majority of those there. London will be a wasteland of deserted businesses, offices and half built ‘luxury’ flats.

The strain on the remaining PAYE tax workers will be immense, the government will have to act one way or another. We basically have UBI already except to a small minority of the country.

The government (not just ours) have allowed themselves to be embroiled in political red tape of the left (intentionally or not) They won’t be able to close the stable door now the horse has bolted and the free money tap has been turned firmly on.

I can’t even begin to think about 2030-40 when the next 5 will bring this country and many others on the brink of collapse. Maybe a global war or something can sweep it all under the carpet.

Or a global inflation ,the cycle was always going to favour the industrial areas,i never expected it to be so quick of course.

[Errol]

US inflation rampant:

In the four weeks ended Aug. 22:
-Egg prices rose 16.5%
-Cheese prices rose 7.3%
-Lunch meat prices rose 8.1%
-Diaper prices rose 8.8%
-Laundry detergent prices rose 9.2%

https://twitter.com/jessefelder/status/1301209563396485120

 

[Errol]

[DurhamBorn]

@Cattle Prod i agree it will likely come after,im just not 100% sold on total collapse after the reflation, though David is.Its to be remembered though lots of actions bounce off road maps along the way.I think its a great way to approach things giving a date on when to retire whatever the amount of capital.The periods iv spent not working i hardly spent anything,fixing myself etc,cooking from fresh,everything 2nd hand.I can retire on £600 a month,but i keep my figures at £1000 up until state pension then £1300 until death.

Are you thinking of a fishing boat? ,iv been many time offs Hartlepool ,its only 25 minutes away and cracking fishing.

[DurhamBorn]

1 hour ago, Errol said:

US inflation rampant:

In the four weeks ended Aug. 22:
-Egg prices rose 16.5%
-Cheese prices rose 7.3%
-Lunch meat prices rose 8.1%
-Diaper prices rose 8.8%
-Laundry detergent prices rose 9.2%

https://twitter.com/jessefelder/status/1301209563396485120

 

As you know better than anyone Errol inflation gets hold when people expect increases.Its starting.

[Democorruptcy]

33 minutes ago, Cattle Prod said:

That's what's swung it for me. During lockdown, I have the same ten pound note in my wallet since March, and overall spending is way down. I really don't need as much as I thought.

Definitely a fishing boat, though the independence of sailing is appealing. A Mitchell 22, ideally. Great sea boat for the Atlantic. I've a lot of experience fishing at sea, since I was 6 years old, its not for everyone but I increasingly miss it. It's kept my fsmily going in tough times past.

A mate of mine owns the front one and the rib alongside. He regularly gives me fresh fish. I had no idea it was so hard to cut, you need a proper knife. I baked a huge coalie with a mackerel in some foil last week, beautiful!

 

 

[JMD]

15 hours ago, DurhamBorn said:

@sancho panza David answered your dollar question in the video above,looks like he now sees 85 (im sure he had 78 before).

I thought it was very interesting how he thinks solvency of companies is going to be the big thing going forward.Here in the UK we probably have an even bigger problem as it seems most government workers/council workers,bennie claims and a big chunk of office workers have decided they dont want to go to work and want paying for doing nothing,or at best a lot less than they used to do.

Cash flow problems must be very broad based now.I also saw today a document from the treasury that said interest rates going to 1% would increase government debt payments by £40 billion.The UK is close to bust,and the even more reason to think of hard assets as two things.One part hard assets in this country,houses,land etc,but also hard assets outside of sterling,gold,silver of course,but also oil,gas,potash etc as we do.

I dont think rates are going anywhere near the 20% David expects,but i think double figures is likely chasing inflation at say 14%.

Really good towards the end to hear him mention how bad tracker type investments and bond investments will be and that we might see a secular top that stands for decades and decades.That will cause massive damage to peoples pensions.Rates above 5% stopped equity release and pensions falling 80%+ in real terms before any draw down.

Harley is right to fear how we allocate through this,and its a hard truth that we cant be certain at all we dont take a lot of damage along the way.So far the knocks are much smaller than the gains,sustaining that isnt going to be easy.

 

DB, in terms of holding hard assets outside the financial system, I have gold/silver, but does BTC also 'fit'? I think a number on here have bought BTC recently and I myself now have 1% of my portfolio in BTC. What do others think, is that about right % to hold long term? I'm thinking the downside is small compared to the potential upside.

[Shamone]

4 hours ago, Sideysid said:

A lot of newly unemployed in former low/average paid jobs with a rented house and two kids will now realise that they are better off on universal credit and wonder why they ever bothered in the first place.

I was at a 40th birthday party last night, the amount of people who aren’t going back to the office until 2021 was in the majority of those there. London will be a wasteland of deserted businesses, offices and half built ‘luxury’ flats.

The strain on the remaining PAYE tax workers will be immense, the government will have to act one way or another. We basically have UBI already except to a small minority of the country.

The government (not just ours) have allowed themselves to be embroiled in political red tape of the left (intentionally or not) They won’t be able to close the stable door now the horse has bolted and the free money tap has been turned firmly on.

I can’t even begin to think about 2030-40 when the next 5 will bring this country and many others on the brink of collapse. Maybe a global war or something can sweep it all under the carpet.

I hope that my wife and I never pay any PAYE again.

[DurhamBorn]

7 minutes ago, JMD said:

DB, in terms of holding hard assets outside the financial system, I have gold/silver, but does BTC also 'fit'? I think a number on here have bought BTC recently and I myself now have 1% of my portfolio in BTC. What do others think, is that about right % to hold long term? I'm thinking the downside is small compared to the potential upside.

I have no idea about Bitcoin but seems to me it could explode ,even if a remote chance.I see nothing wrong with 1% or 2% of a portfolio.The Scottish play share was once 1.1% of my portfolio but is now 0.14%

[JMD]

3 hours ago, DurhamBorn said:

The big energy companies wont provide fireworks,but they should provide a cycle return way above inflation.My mid range is for 220% return including divis from here for BP with inflation at 68%,Repsol i expect around 270%,Shell 190%,etc etc.However im not selling any of them on return,only on oil price and where we are in the cycle,$200 oil the minimum before i look to sell down.

BP might only be worth 50% more than now by the end of the cycle,but share buy backs and divis should deliver the return.

On telcos i think they will re-rate once debts start to fall more.OPEX and CAPEX should both fall just as prices increase so hopefully free cash will grow quite fast.

Unlike oil i expect growing free cash (after this down period) to go on paying down debts to at least EBITDA 2.5 and then rising divis,or buy backs if the stocks are below around 50% higher than they are now.Telcos might simply see equity rise as debt falls,with divis that might provide 14% compounding returns over the cycle.

Potash the return will come from simply selling the stocks at some point,hopefully during a parabolic end frame though iv actually sold a few already as they went up nearly 150% and re-allocated into other areas.

The key is to let the cycle play out now and try to do small adjustments etc.Im actually getting times now where i dont check my portfolios for a few days at a time and soon it will be 5 minutes a week and company results only mostly.

 

 

DB, I am really interested in the correlation between the oil price and the timing for selling your oil stocks that you mention. If the oil hit 200+ dollars very early, say before 2025, would that mean inflation had really taken off and you would probably sell early in the cycle? Alternatively if the oil price rise was more slow and reached 200-300 only by say 2028, would you anticipate holding the stocks until late cycle? 

[JMD]

4 hours ago, Democorruptcy said:

GOOOOLLLLLLLLLDDDDDDDD!

I had a walk up to the mine this week. There's nobody to stop you taking your pan and the little cloth bags!

Nah, don't believe any of it... it looks like a 'fake news' positive on-shoring story to me, conjured up by those stupid hapless evil Brexiters!

[DurhamBorn]

6 minutes ago, JMD said:

DB, I am really interested in the correlation between the oil price and the timing for selling your oil stocks that you mention. If the oil hit 200+ dollars very early, say before 2025, would that mean inflation had really taken off and you would probably sell early in the cycle? Alternatively if the oil price rise was more slow and reached 200-300 only by say 2028, would you anticipate holding the stocks until late cycle? 

It would need cross market work at the time,but i would start looking at $200 yes.I might not sell the whole sector even at the end of the cycle.If BP for instance was valued at £65 billion after buying back the same in stock and was getting 9% ROCE in its re-newables with £60 billion invested id probably hold.In simple terms il start considering selling when oil hits $200ish and if it doesnt consider by around 2027/28 what to do.In the short term id rather oil stays down,even if it means capital losses on the stocks.

 

[Clueless Imbecile]

16 hours ago, DurhamBorn said:

Really good towards the end to hear him mention how bad tracker type investments and bond investments will be and that we might see a secular top that stands for decades and decades.That will cause massive damage to peoples pensions.Rates above 5% stopped equity release and pensions falling 80%+ in real terms before any draw down.

Harley is right to fear how we allocate through this,and its a hard truth that we cant be certain at all we dont take a lot of damage along the way.So far the knocks are much smaller than the gains,sustaining that isnt going to be easy.

A while back I saw on David Hunter's twitter that he mentioned two books:

1. Winning The Loser's Game (by Charles Ellis)

2. Contrarian Investment Strategies (by David Dreman)

I think he might have mentioned these in the video in the post above by Noallegiance.

I bought both of those books earlier this year. So far I've only read the first one (Winning The Loser's Game). As I understood it, the book seemed to be promoting passive investing & equity index-tracking as a stragegy. I was quite surprised that David would mention a book like that, considering his apparent view on the likely prospects for indexes over the next, say, 10 years.

Regarding what you say about "how we allocate".... I find this whole situation a bit of a nightmare! Until recently I had a lot of faith in passive investing & index trackers. I had read "Smarter Investing, Third Edition (by Tim Hale)" and was all set to arrange an asset allocation of bond funds and equity index tracker funds using the principle of "Own your age (as percentage) in bonds and the rest in equities", but reading this thread (and other things such as the book "The End Of Indexing (by Neils Jensen)"), and reading about bonds being poor value, has made me really question my beliefs. I still believe in some of the old pricincples though, such as diversification.

I've already sold some of my index funds and bought some reflation stocks (as discussed on here). I'm currently thinking of selling most of my index funds in my ISA during the anticipated "melt-up" (possibly over the next few weeks or months) and replacing them with more reflation stocks, with an overall aim of having about 50 percent of my savings in equities and 50 percent in cash (including Premium Bonds and some NS&I index linked bonds). That's my ISA and savings I'm referring to. I'm in my late 40's and expecting to be able to retire by age 65 at the latest (hopefully a lot earlier!).

My pension is mostly in index tracker funds (equities and bonds). I've currently no intention of changing that. That way, if the indexes end up performing better than expected, or better than my attempts at stock-picking and asset allocation, at least I might not screw up my pension as badly as I might screw up my ISA!

Cheers,
Clueless Imbecile

Disclaimer: I am not an expert. Anything I post here is just my opinions, which may not be factually correct. My posts are intended purely for the purpose of debate and are not to be taken as advice. If you act on any of the above then you do so entirely at your own risk. I do not accept any liability.

 

[Eventually Right]

Anybody on here following Gold Ventures on twitter?

He's an interesting follow-his "story" is that he started with $32k in 2009, turned it into $18.5m in about 5-6 years trading silver/miners/options on both.  Then sat out of the markets for the last 5 years, but now is back because he sees the biggest opportunity in gold/silver that he's ever seen.  He sees $65 silver next year, and $350 by 2026.

Strategy is broadly 60% in small/micro cap silver co's, 30% in small/micro cap gold co's, and 10% options on SLV/Couer/First Majestic/Alexco/Hecla etc.  With the miner portfolios he's spreading it out over 25-40 companies to spread the risk.

Obviously this is the internet, so his claims of turning $32k into millions might be complete BS, but to my mind, it's not coming across like that.  What he's saying re options makes sense, and I'm not seeing the mining twitter accounts I trust (Grant Beasley, Pamplona Trader etc) rubbish him.

https://twitter.com/TheLastDegree

This is his website where he details his portfolios/thoughts-it comes up as unsafe on my work network, but works fine on my phone:

goldventures.org

The only thing I'd note though, is that I don't think he sees the big kahuna happening anytime soon-he sees S&P going to 5-6,000 before a crash.  

[DurhamBorn]

Behind the scenes hydrogen continues to grow while everyone thinks its all electric.

https://www.spglobal.com/platts/en/market-insights/podcasts/focus/090220-cis-steel-bounces-back-china-trade-flows

https://en.wikipedia.org/wiki/Direct_reduced_iron

What interests me here is BP is going to build and invest in hydrogen in Teesside,who already produces over 50% of the UKs hydrogen.Its only a small step to then building an arc furnace or a DRI furnace.I can even imagine the symbolism if the Tories brought steel making back to Redcar,it would be huge.

https://www.gazettelive.co.uk/news/teesside-news/prove-youre-serious-teesside-mayors-18605842

Is it simply coincidence that the photo in the picture isnt of the chemical sites on Teesside but is of the old steelworks at Redcar?

https://www.bp.com/en/global/corporate/news-and-insights/bp-magazine/net-zero-teesside-project.html

Of course DRAX and Equinor are doing the same for the Humber area

https://www.edie.net/news/6/Plans-for-zero-carbon-industrial-hub-fleshed-out-in-new-roadmap/

https://www.edie.net/news/8/Government-urged-to-ramp-up-hydrogen-spending-through-national-strategy/

I think we are seeing a classic contrarian situation in the energy sector.Just as everyone thinks its curtains and all the funds have sold/are selling these polluting dinosaurs,they are the companies that will have the capital to deliver real massive change and investment.

What the above shows as well goes un-noticed.Its an industrial strategy with huge implications.If we can produce hydrogen cheaply enough from idle wind farms at night backed up with natural gas,then we can make steel cheap again.

Now imagine that then steel gets cheap,and energy cheaper than other countries,does that then mean Ship Building returns to Sunderland?,Swan Hunters?.Who knows,but if i was Dominic Cummings id look at this and imagine what it would mean,the red wall seats that fell stay blue.That must be hugely tempting.Its obvious that DRAX and SSE are both going to get took over during the cycle ,lets hope its quite early and we get a stock option for our shares.

[Democorruptcy]

1 hour ago, Cattle Prod said:

Lovely deck space on her, I've been out on similar. Nothing better than fish if it's fresh! We used to throw coalies back as a kid, received wisdom was that they were inedible. They just weren't looked after like cod or mackerel on the boat (left in the sun etc) so it became self reinforcing. Hadn't two pennies to rub together, but still so rich you'd chuck that delicious protein back in the sea, or give it to the cats. 

I find a bit of a lightly serrated or rough edge works best for heads and tails, my Grandad used to sharpen it on the step of the house. Gets through the bones.

Did you put the mackerel inside the coalie? Never thought of that

It is a nice deck space he takes up to 20 out on fishing trips and booze cruises IOM TT etc.

I didn't put the mackerel inside, he just suggested I wrapped them together in the foil, so the juices flowed.

[BurntBread]

10 hours ago, DurhamBorn said:

However our worry for now is if,when and how a big collapse works through.Will everything come down,or a huge sector rotation?

I'm going to hang tight, but not sure how I will react psychologically to big losses. I think I would probably be in the class of people who have a strong tendency to sell close to the bottom, then miss out on even a partial recovery. For that reason, I probably need the anchor/energy-barrier of not having sold any stock in order to get me through a putative collapse still holding stocks and therefore able to catch any up-swing. It would be nice to think I would have the conviction or discipline to buy into a strongly falling market, but I suspect it will be all I can do to avoid selling.

Just musing here, because this will be my first test of nerve as an investor. I have obviously asked myself: "Why am I not selling now, given the clear warning, and the fact that I don't want to lose a lot of capital in a crash over the next 6 months?". I have now experienced the process of owning stocks, so theoretically I could re-buy easily at a lower point. I think part of my decision is that there will be a lot of churn and volatility, and I'm not convinced I would find a comfortable point to buy back in: it might even be at a higher point than I own now, and therefore I might never buy in. A much more minor point is that if I sold on Monday I would crystallise a slight loss.

David Hunter was of the opinion that as he is not a trader (and I'm definitely not that) he would hold precious metals through the bust, despite temporary losses, because of the difficulty of timing. Unfortunately he wasn't asked about other sectors, such as oil. Clearly for some sectors, like tech (which dominate the indices) he would be in favour of selling now, and buying (other things) afterwards. For precious metals his aversion for trying to time the market versus missing out on losses falls the other way ... so it may not be clear-cut for different sectors.

My take-aways from his interview were what others have noted: he expects a 65-85% fall in the major indices, with no complete recovery for decades; but much less, and more temporary falls for PM's. Dollars and treasuries will do very well during the crash, before being eroded strongly over following years. Commodities, especially metals, will be the big winners thereafter.

As a UK citizen, there is one extra source of risk: if we sell out, we are likely holding pounds sterling, and it's not clear to me how that will fare with respect to the dollar during a crash. Do you have thoughts on that, @DurhamBorn? It's potentially another argument in favour of holding a current position in stocks, unless one wants to layer the risks of currency trading on top of those of market timing.

For me, I think it's mainly a matter of preparing for losses: I've made my decision, and need to imagine the psychological turmoil and try to put up fire-breaks, for example by considering everything in the shares as lost already, and being glad to have whatever is left after a couple of years.

[DurhamBorn]

@BurntBread is we do get a complete market melt down id expect the dollar to go up 30%,maybe 40%.Sterling would likely be in that mix.It might mitigate the falls in certain sectors and mean ones who have assets in $ recover quickly,hence gold,silver,oil etc.

[sancho panza]

On 03/09/2020 at 19:25, Cattle Prod said:

Art Berman put out another essay today.

If demand picks up does, @sancho panza will get his price spike to trigger BK, for sure. He now has US production halved by July next year to less than 6mbpd. Have a read for yourself:

https://www.artberman.com/2020/09/03/stop-expecting-oil-and-the-economy-to-recover/

It's a long article, but I'll post it in entirety so as my bias doesn't come into it, though I'll bold key bits for the skim readers. I'd be interested to hear thoughts on the demand side.

 

My view:

He's a natural pessimist I think (definitely doesnt work in exploration!), and was very chicken little about the Covid thing, so I'm not sure he's on such firm ground on the demand side, seems a biit more arm wavy. He may be a little severe on the supply loss side, but not by much. And in fairness he calls it a thought experiment. He knows what he's talking about on the supply side, he is an active pertroleum geologist working in the US, and I'd believe what he says about leads and lags for shale to respond to price (short answer: 1 year). I had it about 9 months. So he's even more bearish than I am on supply loss for next year. I have no idea what way demand will go, but I don't agree that the 4 years it took to pick up after the GFC is a valid comparison. This is not (yet) a typical recession, the demand loss has been mandated by decree. I think all the lockdown,, BLM, riots, etc etc in the US anyway is being let happen because of the election, Republicans and Democrats are trying to make each other look bad to the electorate. I suspect once the election is over, it will all be knocked on the head pretty quick. National Guards into the cities, and vaccines out the wazoo. I do wonder it demand will pick up fairly quickly...

"Energy is the economy. Money is a call on energy. Debt is a lien on future energy. What is happening to oil markets and to the global economy is not because of a virus. The virus greatly accelerated what was already happening. Things won’t go back to normal when the virus ends. The expansion of energy and debt have been leading toward some sort of reckoning for at least the last fifty years. That day of reckoning has been brought forward by coronavirus economic closures."

Requote this bit. I think he's right about the reckoning, but wrong about the timing. He's not factoring all the disinflation to be printed back now, to allow a few more years of can-kicking. I think you can apply what he said to when the Fed can't print anymore. And he doesn't seem to relate the current massive credit impulse on his graph with past oil price spikes!

But the man knows how a shale well declines, and what it takes to drill another one. I'm trying to see how he's wrong, as it seems crazy. Can you imagine the headlines with the USA back at 6mbpd?! The only thing I can think of is Canada getting new pipelines, but I don't think they'll be ready for next year. There is no way around shale decline, it's a very measurable thing (we have to do it all the time to model cashflow), and an unstoppable natural phenomenon. The well drilling treadmill has flung the shale companies across the room, and stopped working. Schlumberger decided it couldn't be arsed with treadmills anymore and sold and scrapped theirs. And  that's where the vast majority of world supply growth has been from for the last decade. 

CP,finally had time to have a proper read and take some notes.Thanks for psoting..Whata fine piece of work.Some rhetorical questions/statements as I flow through the article

getting very tempted to take some winnings and have a treble or nothing punt on oil going into the winter via the options

 

 

1) stunning/incredible that 83% of new supply since 2009 has been in US shale,23% in oil sands/deep water and even more that conventioanls attually declined 9% over that timeframe.I'd imagine conventiaonl is the cheaper of the three.

2) as you've said 12 months from higher oil rpice to new production in shale.If he's right on that then it's Q1 2022  before it gets reignited but then you also wonder if the shale that's left will be as cheap to extract as the last tne years has probably got out the cheap stuff.

3) amazing that he considers EIA has only one thrid of the rigs it needs for 11mmb/d.Wonder who theyre doing their maths for?It seems patently obvious,why are they so far out?

4)is demand really going to stay down 20mmb/d?really?This is where I take issue with the copmparisons of 2008.Firstly,people were ordered to stay in and many did more than they needed to.Secondly,the demand destruction occurered not because of a debt deflation as in 2008 but rather govt order. A lot of stimulus is going to be thrown at the return to normal,so I'm sturggling to see 20mmb/d being maintained as we emerge from the panicdemic.

Interesting as well to see that diesel demand is only down 16% compared to 66% for kerosene.Tells you that industrial demand is strong,although as more stay at home,commuting may reduce demand long term.

5) also,I think Art sees the workld through USA eyes.Whislt I find the Great SImplification a compelling theory-as would many on here I suspect, there's every chance that if we get a weaker dollar more pemanently,we might see emerging market demand pick up quite a bit of the slack.?There are burgeoning middle calsses in many emerging markets.

This appears to be a very USA centric point of view that presupposes the dollar hegemony will remian.I'm not alone on this thread in thinking it's running our of road on that score.

 

 

[sancho panza]

On 04/09/2020 at 14:35, Harley said:

The one thing this thread lacks is a discussion about how to navigate the BK.  All very well to discuss the green fields on the other side but you first need to get there with you and your precious intact!  @Vendetta is providing a good service here in terms of reminding us how bad and fast it could be (and has started a new thread to explore).  For example, about how margin calls at such a time can severely impact (even if just for a shortish time) supposedly safe havens such as PMs.  The time to start planning in detail (and executing anything that needs doing like opening additional accounts) is now.  The imperative is to have pre-planned and tested things before it kicks off or you risk being bashed about and being at the mercy of emotion, circumstances, luck, etc.  We each need to draw a big red button and have a plan (including trigger points) to go with it.  For example, would you just go into cash?  Suppose that gets taken as part of a bail in or frozen until such time as the opportunities have gone, etc.  Anyone made any concrete plans ready to go come the possible BK?  For me, I've diversified in every way possible and have backed off funds/ETFs, etc to reduce the risk of them halting withdrawals.   

I read this post a couple of days back H but haven't been able to comment at it's aptness for the moment.

I menitoned @M S E Refugee point about Saxo being CHinese owned to a couple of fmaily members and their immediate response was 'get us out'.I know CP/MvR had a similar attitude.

Youre absolutely right,no point waiting until the SHHTF to try and open new accounts.

As for navigating the BK,I have floated the notion of trading it like it's June 08 before which obviously relies on reading the dollar ..........but that's the trade here all eyes on USD imho.As during discussion with CP about oil prices rising before a recession,I'm taking a view that I'll ignore the excessive covid lows of $20 and take a more sensible average of $40 to try and price the moves off.