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

[Chewing Grass]

4 minutes ago, Harley said:

Are you saying your bank limits your transfers to these amounts?  Daily limits?  One of the major UK banks?

Looks like it, my guess is it is to potentially throttle the movement of money, especially abroad.

[StrugglingMillennial]

Looks like things are being locked down again after the PMs speech.

Ive got a feeling the market is going to drop in the morning, added pressure to the oil industry if people aren't moving around as much again and the economy as a whole.

Bargin time maybe?

[Chewing Grass]

Came across this yesterday in some old records, they basically get the tenderer to swear that they have not paid any of their employees more than the government decree from 1973 to the date of 31st of March 1978.

That's 5 years of the government dictating wage levels (or trying to).

[reformed nice guy]

On 21/09/2020 at 10:08, JMD said:

The other company reserves below Ovintiv were much lower/similar in size, but Ovintiv is still a standout as it is a non-major, at the time it did have large land assets - however it changed company structure late last year so now might have sold off those land assets.

Gazprom 1200tr cu feet world natural gas reserves

Exxon 85tr cu feet

BP 45tr cu feet

Ovintiv/Encana Energy 14tr cu feet                

I looked into Ovintiv a bit today, hopefully this will help people.

They have a p/e of 2.49

Their net cash flow for 31/12/2019 was  $-868m but they bought back $1250m of their own shares.

They have $55B of property/plant/equip assets and $40B of that has already been depreciated.

Total assets $21.5B, liabilities $11.3B. They havent been increasing their debt over past 5 years.

Retained earnings of $818m as of 31/3/2020

In its second quarter results it said "The Company stated that all excess cash flows would be allocated to debt reduction over the next six quarters."

I bought in at 12.23 today and my ladders are 10.5, 9 and 7.5.

[Loki]

44 minutes ago, StrugglingMillennial said:

Looks like things are being locked down again after the PMs speech.

Ive got a feeling the market is going to drop in the morning, added pressure to the oil industry if people aren't moving around as much again and the economy as a whole.

Bargin time maybe?

Would not surprise me, DXY now a gnat's knacker away from 94...

[christh]

1 hour ago, Chewing Grass said:

 

So interesting to see these historic market manipulation artifacts.

Inflation controls are also referenced in Dominic Sandbrook's excellent Seasons In The Sun book. A cracking read / listen if you have Audible.

[JREWING]

1 hour ago, reformed nice guy said:

 

I bought in at 12.23 today and my ladders are 10.5, 9 and 7.5.

Am I looking in the wrong place?

 

https://m.uk.investing.com/equities/encana-corporation

 

[reformed nice guy]

12 minutes ago, Panda said:

Am I looking in the wrong place?

 

https://m.uk.investing.com/equities/encana-corporation

 

Sorry, that was the price in Canada bucks

[JREWING]

4 minutes ago, reformed nice guy said:

Sorry, that was the price in Canada bucks

No don't be sorry. Thanks for the heads up. My beady is focussed... I like...

Added to my watch list. Ladder's noted..

[Bricks & Mortar]

3 hours ago, Chewing Grass said:

Came across this yesterday in some old records, they basically get the tenderer to swear that they have not paid any of their employees more than the government decree from 1973 to the date of 31st of March 1978.

That's 5 years of the government dictating wage levels (or trying to).

I remember speaking with a couple of old hands, (office workers), from the construction industry in a pub one evening.  They said the 70's were the best time of their working lives.  Pub lunches regularly, and the boss coming round on a friday with your wage packet, and a £20 note for your 'extra on top'.

[MrXxxx]

Witholding tax...I understand for US/Canadian stocks its simply the W8 form to stop pre, but has anyone got any experience with European stock; I understand its a reall ball ache

[DurhamBorn]

1 hour ago, MrXxxx said:

Witholding tax...I understand for US/Canadian stocks its simply the W8 form to stop pre, but has anyone got any experience with European stock; I understand its a reall ball ache

It is and not really worth it for most.Repsol and Telefonica get around the tax by doing scrip and buying back in the market so you simply sell the shares tax free,but they can only continue while they have treasury  shares i think.

Here is the up to date list for every country,notice Caymen Islands you pay no tax on anything 

https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-withholding-tax-rates.pdf

[DurhamBorn]

1 hour ago, MrXxxx said:

Witholding tax...I understand for US/Canadian stocks its simply the W8 form to stop pre, but has anyone got any experience with European stock; I understand its a reall ball ache

Also only tax free in a SIPP i think for US stocks its only reduced to 15% outside of a SIPP

[Castlevania]

1 hour ago, DurhamBorn said:

It is and not really worth it for most.Repsol and Telefonica get around the tax by doing scrip and buying back in the market so you simply sell the shares tax free,but they can only continue while they have treasury  shares i think.

Here is the up to date list for every country,notice Caymen Islands you pay no tax on anything 

https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-withholding-tax-rates.pdf

Chances are you’ll own a fair few companies incorporated in tax havens. There are a lot listed on the LSE - especially PM miners; smaller oil and gas companies and gambling companies. 

[wherebee]

15 hours ago, Harley said:

Are you saying your bank limits your transfers to these amounts?  Daily limits?  One of the major UK banks?

Aussie banks have a limit which you can set to reduce the chance of fraud.  I set mine at 1000 bucks a day to any third party.  I can change it with two factor authentication.

 

I like it.  Plus, when the bail ins start any controls used will be done anyway...

[Loki]

Any thoughts as to if this affects our timelines?

https://www.bbc.co.uk/news/business-54267795

Quote

The Treasury has scrapped plans for an Autumn Budget this year because of the coronavirus pandemic.

The statement said: "As we heard this week, now is not the right time to outline long-term plans - people want to see us focused on the here and now.

"So we are confirming today that there will be no Budget this autumn."

 

[DurhamBorn]

57 minutes ago, Loki said:

Any thoughts as to if this affects our timelines?

https://www.bbc.co.uk/news/business-54267795

 

No budget because the BOE will launch more QE and the government will open the fiscal taps even more.No need to have tax policy when you are being handed inflation for free from you CB.Cycle is baked in,only the scale in question.

[Loki]

1 minute ago, DurhamBorn said:

No budget because the BOE will launch more QE and the government will open the fiscal taps even more.No need to have tax policy when you are being handed inflation for free from you CB.Cycle is baked in,only the scale in question.

That makes sense, thanks mate

[DurhamBorn]

1 hour ago, Cattle Prod said:

K&S AG has had a big reversal this week already, and the other potash firms are looking strong too. Perhaps they are reacting to natural gas prices? Futures up 15% today, just as all the bears were piling back in 

Indeed,people need to let the cycle play out,adding to holdings on pull backs with divis etc.I expect by the end of the cycle we will see days where oil goes up $40 in a week and gas $2.I hope for a bit more pain though,prefer them to stay down or go down more when divis are landing ,i noticed today how well tobacco had done the last few weeks as well.

[leonardratso]

well fuck me, ive been trading in and out of NYSE:SPI for about 4 hours, £180 is now £1000, will i piss it all away before 9pm?

 

[DurhamBorn]

18 minutes ago, Cattle Prod said:

That answers my rant a few weeks back when they were floating trial balloons about raising taxes. I guess they took the easier option.

I think the big tax reforms will be NI joined with income tax at £12.5k so pensioners are sucked into NI.It will mean SIPPs ISAs etc will need to be juggled more.Also 40% tax relief on pensions will likely go,could be 25% for everyone.

The only way a deficit as big as ours can be worked on is inflation and wages/benefits lagging.

[sancho panza]

On 21/09/2020 at 17:06, DurhamBorn said:

This is a cycle turn,not a business cycle,a dis-inflation/reflation one,and its a violent affair.Very close now though to where i wont be selling anything for around 8 years,apart from maybe the odd skim if i want anything new etc.Im not actually that far away now where i could not even look at the market for months on end.My biggest mistakes in the past have been selling far too early,and that has cost me multitudes more than buying a bit early.

Sector rotation will start from here i think,maybe a couple of months,but it will last 8 to 10 years.Expect a big fiscal pump from governments inbound,you know very well thats why the Fed etc has kept its foot on the longer end 

Exactly that DB.I've made the msitake of telling a good friend what we were buying and now he's texting me worried he's down 10% on BP and Shell..............there's only so muich you can explain to people before they have to learn for themselves.

On 21/09/2020 at 23:38, jamtomorrow said:

New installment up on Surplus Energy: https://surplusenergyeconomics.wordpress.com/

... complete with this zinger on the absurd times we're living through:

Had Daniel Defoe’s Robinson Crusoe, shipwrecked on his desert island, only known about classical economics, he wouldn’t have wasted his efforts finding water, food, firewood and shelter, but would instead have spent his time accumulating bits of coloured paper. Indeed, had computers existed in 1719, he wouldn’t even have needed the paper.

Thanks for psoting JT.

[Loki]

Quote

Stocks Extend Slide
U.S. stocks hit session lows amid warnings from the Federal Reserve on the need for additional economic stimulus.

212 alert - so the price being driven down to snap up bargains before more stimulus-induced price rises?

[sancho panza]

29 minutes ago, sancho panza said:

https://lockdownsceptics.org/covid-19-parliamentary-brief

Whilst my note on the false positive rate (FPR) made its way into the corridors of power, the Health Department’s response was at once dismissive but innumerate. Fortunately, not all parliamentarians are so easily fobbed off and one has asked me to prepare a brief, which is why the following is not in the usual format.

It appears that the number of amplification cycles used in PCR tests, whether there is any quality control, the false positive rate (for both Pillar 1 and Pillar 2) and the incidence of the disease are all state secrets. However, what is clear is that none of those wielding the controls understand the maths.

Both Secretary of State, Matt Hancock (who says the FPR is “under 1%”) and Baroness Harding’s chief medical advisor, Dr Susan Hopkins (definitely less than 1-in-100 and more likely 1-in-1000) believe the FPR is so low as to result in what Hancock calls a “very small proportion of false positives”.

In fact, even a FPR as fancifully low as 0.1% (and there is a mass of evidence to suggest it is 10-20x higher than that) would mean that 4 out of 5 positives were false.

1% false positive rate does NOT mean 1% of positives are false

Transcript, Matt Hancock TalkRadio interview with Julia Hartley-Brewer, 8.42am Fri 18^th Sept

JHB: “What is the FPR on the testing we’re doing in the community?

MH: Under 1%.

JHB: It’s under 1%. Even around under 1%… do you know the exact rate?

MH: It’s um.. well, under 1% means that for all the positive cases the likelihood of one being a false positive is very small. 

JHB: I understand what under 1% means. But do you have the exact figure for what it is?

MH: We do. We do. I don’t have it in my head. I know that the specificity is what it’s called of the PCR test is over 99%… But Julia, I can see the thrust of the questions and what I can tell you is that we take into account, of course we do, the issue of the very small proportion of false positives (my bold).

If incidence is < the FPR, most positives are false

The Secretary of State for Health, Matt Hancock, seems to think that a false positive rate (FPR) of 1% means that 1% of positives are false but what it actually means is that 1% of all negatives will test positive. If the incidence is lower than the FPR, more than half of all positives are false. Hancock is dangerously and complacently unaware that when incidence is low, up to 99% of all ‘cases’ might be false positives. This relationship is illustrated by the matrix below (FPR down the left-hand side and incidence along the top).

Matrix: % of ‘cases’ that are false positive

Results from a pilot survey of 35,000 people by ONS ‘academic partners’ found household incidence peaked on 26 April at 0.32% (right-hand column above) before ‘stabilising’ at 0.08% (centre column) by the end of the study period on 28^th June. However, after that, NHS daily ‘estimated admissions’ fell another 80% from 246 on 28^th June, to < 50 by late August, which implies that incidence declined to 0.016%, a level that renders 98-99% the 1,200+ daily ‘cases’ reported at that time ‘false’ (see matrix above).

Positives are not ‘cases’

By 1^st September, UK ‘cases’ had risen 2.5x from the 8^th July low, yet hospitalisations (incidence) were down by three quarters. Which is the signal and which the noise? In April we were getting 5,000 cases a day from less than 20,000 tests (25%). Today we are getting 4,400 ‘cases’ from 235,000 tests (1.9%) 70% of which are being analysed by people who weren’t even doing this job in April.

The signal and the noise

The very low level of NHS diagnoses (only about 37 a day by early September) compared to the large number of Pillar 2 tests suggests that > 90% of Pillar 2 tests are taken by people who are asymptomatic (demand is now 4x capacity). So, since 28^th June, only 6.5% (3,638) out of 56,047 ‘cases’ during July and August were confirmed by NHS England diagnoses. If most Pillar 2 subjects are asymptomatic, then their selection is close to random and the consistent 2% Pillar 2 positivity is indicative of the underlying FPR (making the Pillar 2 FPR up to 200x higher than the 0.1% that ONS assumes for NHS-lab Pillar 1) and explains the huge discrepancy between positives (top), which are almost back to April highs and the hard data on hospitalisations (middle) and deaths (bottom), which are barely off the floor. The plan to increase tests to 10m per day will guarantee that all tests are effectively random (i.e. asymptomatic), so we will keep finding ever more ‘cases’, no matter the incidence.

Amplification: why the analytical FPR is ~1%, not 0.1%

PHE consultant Dr Susan Hopkins provided Baroness Dido Harding with a “rapid off my head (sic) response that could be used” clearly intended to dismiss the warnings about false positives out of hand, rather than invite further informative discussion. Hopkins confirmed a “population prevalence < 0.02%” whilst insisting that all serological tests (Pillars 1, 2 and 4) had FPRs that are “definitely less than 1 in 100 and… more likely 1 in 1000.” Yet she did not seem to understand the mathematical implications. With 0.02% incidence, a FPR of “1 in 1000” means 83% of positives are false, whilst “1 in 100” means 98% would be. Does H3 (Hancock, Harding and Hopkins) seriously not know this?

Amplifying the inaccuracy

However, there is very little chance that the FPR is as low as 1-in-1000 for two important reasons. The first is that the cycle threshold (Ct) used to establish the original ONS 0.1% FPR must have been far lower than the Ct in use today. Fear that the false negative rate (FNR) is higher than the FPR has led to the increased amplification of swab samples far beyond the accurate limit of 24 Ct or even the conventional PCR max of 30 Ct (i.e. 2 to the power of 30 = 1 billion DNA copies). Amplification increases sensitivity (fewer false negatives) but also the specificity (more false positives) until, ultimately, all (negative) samples would test positive.

The relationship between Ct (amplification) and accuracy (measured here by the successful isolation of live virus in cell culture) is shown in the chart below. The accuracy of the test falls away sharply above 24 Ct (17 million copies) and > 33 Ct (8.5bn copies) zero live cultures can be obtained in vitro (i.e. in the absence of any functional immune system) suggesting no viable virus and zero chance of a human with a functioning immune system being either infected or infectious. Yet pillar 2 PCR assays are amplified all the way up to 42-45 Ct (35 trillion copies), 2 million times more than the Ct 24 accurate (> 90%) live virus detection cut-off point and 30,000x the maximum ‘safe’ limit used by experienced lab researchers. The pillar 2 use of very high Ct amplification is also why previously infected but recovered cases are also (wrongly) testing ‘positive’, sometimes weeks later.

Operational FPR is always much higher than analytical FPR

The second reason why the FPR will be substantially above the ONS best-case, 1-in-1000 is because even if we went back to reduced amplification to bring the analytical FPR back down to 0.1%, there is nothing that can be done to control the pillar 2 ‘operational’ FPR.

Analytical vs operational FPR

RT-PCR equipment is sensitive, requires delicate handling and inaccurate enough to be marked ‘not for diagnostic use’. Unlike the experienced NHS labs which carry out < 30% of tests (pillar 1), 70%+ of tests are carried out in the private sector by the Lighthouse Labs network (pillar 2) which was assembled from scratch in May and is run by Deloitte. Most machines were co-opted from universities (on the promise of replacement upgrades later) by labs unfamiliar with the hardware, often without the supporting software instructions, to be run by inexperienced teams, using emergency approved testing kits (now numbering more than 500), synthetically validated and provided by new suppliers of unproven, not to say dubious, quality.

Operational (real world) FPR is always going to be far higher than the analytical (ideal world) FPR; but especially when handled by inexperienced operators, using unfamiliar equipment, under stressful conditions (pillar 2 tests have risen from zero to 173,000/day in less than 5 months) due to:

1. contamination of ‘clean room’ test kits during manufacture & distribution
2. contamination of equipment or reagents during sampling
3. ‘aerosolization’ can cause sample cross-contamination during swab extraction
4. cross-reaction with other genetic material during DNA amplification
5. contamination of the DNA target

The ‘expected’ FPR

Consequently, to believe in an operational FPR as low as 0.1% flies in the face of all previous experience. A review of 35 previous EQAs of RT-PCR RNA assays with negative samples, for 13 separate pre-Covid-19 viruses, found that the median FPR was 2.5% (25x higher than the ONS’ wishful-thinking) with an interquartile range of 1.2-4.0% (12x-40x higher).

Five ways to find the FPR

Ironically, it would be quite easy to establish what the pillar 2 FPR was, using any one of five different approaches, though government seems unwilling to provide the data.

1. Simplest would be to re-test all positives, preferably twice and in different labs to the ones producing the initial result. The proportion of positives corroborated will give you a rough estimate of the FPR.
2. You could seed definite negatives (eg. saline) in the test kits at the manufacturing stage and see how many came back positive.
3. You could test positives for viral protein.
4. The Sanger Institute could report what proportion of ‘positives’ they are able to gene sequence (according to Hopkins this will be published shortly but if it doesn’t include the number of invalid and/or unviable, then these results will be useless.
5. Culture the samples to detect what Hopkins calls “live or viable virus.” Once again, unless this is published data and includes the relevant Ct amplification necessary, compared to that used in pillar 2 positive tests, such results will be uninformative (see Ct chart above).

The ‘second wave’

The idea behind lockdown was to ease the ‘burden’ on the NHS but as at 17^th September 2020 there were 1,081 diagnosed COVID-19 patients in hospital, significantly less than one patient for each of the UK’s 1,257 hospitals. The woeful state of statistical understanding underpinning the Government’s dependence on positive pillar 2 tests notwithstanding, what are we to make of the September surge in positive tests? Unless corroborated by hard data, like NHS diagnoses, hospital admissions and, with a 2-week lag, deaths then we should consider the possibility that the surge in positives may be due to contamination (a ‘lab crash’ in the parlance). The shortage of available test kits will have put pressure on distributors to release kits that had been held back as sub-standard. Rumours of contaminated supplies, especially vials, are now widespread.

Perspective

The number of healthy people below the age of 60 that have died is only in the 300s, whilst all those that have died within 28 days of symptom-onset is closer to 37,000. The number that die in a bad flu year (eg. 2017-18) is about 25,000 more than in a good year (e.g. the last two winters). Thus the ‘dry tinder’ theory, as explained by Dr Ivor Cummins and viewed > 1.1m times, means that total UK Covid-19 deaths (i.e. not from old age) could realistically be as low as 12,000 (sub-0.02% of the population).

Appendix: Theory of models

 

 

 

 

 

Tory MP's starting to realsie the damage Bozza has done.

 

 

Cross psot from sceptics thread.Key thing here is that a lot of business people and politicians are starting to question the sanity of our covid response.

Intersting to see that matt Hancock clearly didn't know the importance of the false positive rate even after 6 months of covid.Amazing that someone so clueless is in charge of the NHS.

Lot of Tory MP's lining up to revolt .

[MvR]

Margin rates increasing ahead of expected increases in volatility.

This from Interactive Brokers just now.

Quote

Dear Client, 

As you’ve likely observed, elevated option implied volatilities indicate that the markets will be confronting elevated volatility both before and after the November 2020 election. IBKR shares that sentiment and believe it’s appropriate to start controlling leverage in a measured fashion in advance. 

Consequently, to protect IBKR and its customers, IBKR will increase margin requirements by as much as 35% above normal margin requirements leading up to the November U.S. election. To illustrate, consider a Reg. T margin account with stock XYZ having an Initial Margin requirement of 50% and a Maintenance Margin requirement of 25%. With the increase fully implemented, the new requirements would be 67.5% Initial and 33.75% Maintenance. Accounts subject to risk based margin will have their scanning ranges increased in a similar manner. 

This will be implemented gradually each day, increasing Initial margin requirements from normal levels starting September 28th to a rate that will be 35% higher by October 23rd. Maintenance margin requirements will increase in a similar manner between October 5th and October 30th. The new requirements will be implemented each day, after the market closes in New York, and will be effective the next trading day.  

IBKR may make additional changes to the margin on certain products, or all products, depending on volatility. This includes changes built into the standard margin model as well as any new house margin requirements that may be imposed. 


Interactive Brokers Client Services