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

[M S E Refugee]

13 hours ago, Viceroy said:

Armstrong and Hunter are on the same page as to where we’ll be politically in the 2030s.

I would imagine if the Democrats were elected and abused their power it would lead to the break up of the United States.

[BurntBread]

@DurhamBorn, I have a question about your price targets for oil, if that's OK? I think you said the central estimate was for $200 at the end of the cycle. I am just wondering if that is nominal, or inflation-adjusted?

The reason I ask is that if it is a nominal target, that sounds quite conservative, since the price reached $150 in 2011 and spent quite a lot of time around $100 between 2011 an 2015. Projecting those historical prices forward with 68% cycle inflation (which I vaguely remember you mentioned) would mean that prices could reach $170 to $250 without reaching new inflation-adjusted highs. Returning to similar real prices from 2011 to 2015 doesn't feel like a game-changing "race to hard assets".

On the other hand, if you mean $200 in 2020 dollars, I guess that means $340 nominal in the late 2020's, which would be a game-changer for anyone driving a car who had seen only minimal wage inflation.

[Harley]

5 hours ago, Panda said:

Harley.

What are you thoughts on BP?

Been looking at their share price, the bumps over the past few years. It touched the all time low last week around £2.10.

Do you think that will be the lower of the lowest low to enter at, or is there scope for sub £2?

My train of thought is you see, since March the market has returned to 6000'ish. But BP and RDSB has not made any gains really. Losses.

Now should we have another crash, (even KAHUNA) will we see the Oiliies drop further or will they sit the next one out? Bad news priced in?

Just how low can BP really go? Timing your entry point is vital at the moment. Had my finger burnt on RDSB.

I've just had a closer look at the charts now I'm at my desk and the timing of your question is spot on in that it may be making even more of a bottom than I thought.  Not perfect but I note the daily just bounced off the downward sloping support line on all three time periods:

The bottom of a megaphone type pattern on the stochastic (momentum) which could signal a run up (permanent or not tbd)?  That pattern is historically unique and that usually means something!  I wonder how many shorts there are out there.  A fair move on the technicals on the chart for the daily, too soon for the weekly (only happened on Thursday!), and still understandably well off on the monthly.  MACD is just a bit meeh but a divergence between that and the stochastic sometimes means a nice resolution to the upside.  Bottom line, a timely one to watch after (as you said) many false starts.  Next question is if BP is indeed bottoming, what about the rest and will DB's call yet again be on the money?

PS:  And Financial Sense podcast again this week talking about the sector rotation to basic materials.

PPS:  @Panda, you playing me my son?    I just had a look at the candles, especially the monthly:

The March candle had a very long wick and sometimes price will explore those types of major wicks later on.  Well It's just done that.  The price also gapped down in March and the June high mostly filled the gap (another often seen move).  Gap filling is something that tends to have to happen before we can move on, one way or another.  Don't get me wrong, I'm not saying press the buy button (never would intentionally!) but things may be stirring!

[JMD]

On 05/10/2020 at 11:57, JMD said:

Has anyone considered the tech firm MicroStrategy (nasdaq:mstr)? 

A very profitable and had built a $500M cash reserve. Its stated policy is not to hold cash, so last year it bought approx. 40,000 BTC for average $8k. The company is still profitable with no debt. Stock maybe overpriced - but if stock price were to drop, think it would be cheap way of picking up exposure to BTC?

The main point here is that other cash rich companies may start doing same if negative bank rates happen, so worth watching out for perhaps? 

I know there are some Bitcoin investors and traders on here. I was wondering what the view is regarding what Bitcoin price will do from here?... I'm thinking it will continue to rise from here, though not necessarily in straight line of course.                                                                                                                                   ...The reason I say this is because, particularly I regard to my previous post above, I wasn't aware that institutional investors in the form of Black Rock (own 12% of micro strategy and agreed the bitcoin purchase) had already started to enter the bitcoin space. Is this a game changer?

[Harley]

12 minutes ago, JMD said:

I know there are some Bitcoin investors and traders on here. I was wondering what the view is regarding what Bitcoin price will do from here?... I'm thinking it will continue to rise from here, though not necessarily in straight line of course.                                                                                                                                   ...The reason I say this is because, particularly I regard to my previous post above, I wasn't aware that institutional investors in the form of Black Rock (own 12% of micro strategy and agreed the bitcoin purchase) had already started to enter the bitcoin space. Is this a game changer?

Funny, I was looking at the chart in GBP (same in USD) recently.  My fuddy duddy biases say it will go down but the chart may just be drawing out an intermediate term cup and handle chart pattern like gold did (but that was more longer term).  And with the political/macro/etc backdrop why not!  It if does, we should see some action soon (off or fail at resistance).

The weekly chart in GBP....

 

[JREWING]

2 hours ago, Harley said:

 

PPS:  @Panda, you playing me my son?    I just had a look at the candles, especially the monthly:

The March candle had a very long wick and sometimes price will explore those types of major wicks later on.  Well It's just done that.  The price also gapped down in March and the June high mostly filled the gap (another often seen move).  Gap filling is something that tends to have to happen before we can move on, one way or another.  Don't get me wrong, I'm not saying press the buy button (never would intentionally!) but things may be stirring!

Now then Harley. That's exactly the reply I was looking for. 

I was looking at the RR one week chart last night. Albeit after a good few cask ales. Something stirred me. Are we going to see BP north of £3 in the coming weeks. But your comments support my thoughts. I think we've seen the low of the lowest low at 2.10. There's only how high we can go from here. My opinion, and I have known to be incorrect often.

But thanks Harley, wonderful post.

PS. RDSB made quite an upward tick Thursday and Friday. BP would normally follow. It did not.

I'll be watching both on open tomorrow. I'm wondering how many shorts out there are about to be closed. Divi festivities fast approaching...

Between 18th and 30th March, the uptick was a £1. Definitely one to watch.

[DurhamBorn]

2 hours ago, BurntBread said:

@DurhamBorn, I have a question about your price targets for oil, if that's OK? I think you said the central estimate was for $200 at the end of the cycle. I am just wondering if that is nominal, or inflation-adjusted?

The reason I ask is that if it is a nominal target, that sounds quite conservative, since the price reached $150 in 2011 and spent quite a lot of time around $100 between 2011 an 2015. Projecting those historical prices forward with 68% cycle inflation (which I vaguely remember you mentioned) would mean that prices could reach $170 to $250 without reaching new inflation-adjusted highs. Returning to similar real prices from 2011 to 2015 doesn't feel like a game-changing "race to hard assets".

On the other hand, if you mean $200 in 2020 dollars, I guess that means $340 nominal in the late 2020's, which would be a game-changer for anyone driving a car who had seen only minimal wage inflation.

Its nominal and yes im expecting around 68% cycle inflation.$200 is the target,but i actually expect we will see near to $300.Oil isnt a hard asset like the metals,it has different drivers.There are lots of brakes that will start working as it goes over $200.$200 oil isnt from investment demand,its from actual real world demand and supply shortages.Gas will likely outperform as well.

As you say oil up at $300 will hit hard consumers.Unless you own assets that leverage that increase.

Oil will remain hated probably as it keeps going up,everyone will say it cant go on but will.

[UnconventionalWisdom]

9 hours ago, DurhamBorn said:

"into the uninvestable basket"

"the great uninvestable asset today,oil"

@Cattle Prod will be pleased to see this guys understands the supply situation about shale from about 33.00

A good talk  on why holding the equity of energy companies is better than the underlying asset etc.A lot of where we are is macro,but sentiment is hugely negative.These guys mention the Fed wanting inflation and its good to hear people mention this as its being ignored by almost everyone.Fed history is crucial to where we are and where we are going.

 

One of the best podcasts I've listened to in a long time- thanks for sharing!

[Castlevania]

32 minutes ago, Cattle Prod said:

 wells are stealing each others oil

Is it like the scene about milkshakes in There Will be Blood?

 

[jamtomorrow]

2 hours ago, Harley said:

Funny, I was looking at the chart in GBP (same in USD) recently.  My fuddy duddy biases say it will go down but the chart may just be drawing out an intermediate term cup and handle chart pattern like gold did (but that was more longer term).  And with the political/macro/etc backdrop why not!  It if does, we should see some action soon (off or fail at resistance).

The weekly chart in GBP....

 

BTC/XAU looks like a stonking great 2 year bull penant

 

[DoINeedOne]

Wheaton Precious Metals will list in the UK during the first week of November and will become the largest gold and silver company quoted on the LSE since Randgold delisted after its merger with Barrick in 2019.

[leonardratso]

52 minutes ago, DoINeedOne said:

Wheaton Precious Metals will list in the UK during the first week of November and will become the largest gold and silver company quoted on the LSE since Randgold delisted after its merger with Barrick in 2019.

tuesday for yamana

[Talking Monkey]

On 10/10/2020 at 09:41, DurhamBorn said:

Yes big demand still,and by 2050 i expect natural gas sales to treble.They will likely be around 370tcf from todays 137tcf .Oil i expect will be down to around 80mbpd by 2050,maybe 75mbpd,then slowly fall away up to 2100.

I think as the world sees they cant transition and still function as they want carbon offsetting will become much bigger.Im talking tree planting etc.Re-forest the Sarah fringes etc.

Im looking a lot more at the macro numbers for the industry at the moment.Im starting to see a situation where it might be worth keeping some of these stocks for 30 years.I want big companies though with big gas exposure.

Cheers DB, I was moving to the opinion that the big oil I have so far most of it will be kept for the very long term, glad you think similar.

[sancho panza]

On 10/10/2020 at 06:11, Harley said:

like Nazi Germany, Rome, and many many others, it requires continual expansion to sustain itself.  And that never worked out in the end.  It ends in destruction whether through war or societal collapse.  That is the balancing of the nature of finance in the long term.  Being brought to account, here and as in heaven (ethics used to be an area of study!).  There is no sustainable trick, just good times and bad times.  Didn't they use to say you don't get something for nothing.  There is growth, real growth but I have less faith in that argument these days as that argument gets perverted and misused too.  And piddling against what they want and now need.

These are the glasses through which to see the current situation and plan.  The reality, the mob rule, the consequences. 

exactly right.I must be due to dust of my copy of Gibbon's Decline and Fall....

[sancho panza]

21 hours ago, Viceroy said:

Armstrong and Hunter are on the same page as to where we’ll be politically in the 2030s.

Intersting as I've been surprised by how many Western countries have tended so easily towards totalitarian left wing statist politics over the last 6/7 months.

Even the supposedly(I know,I know) libertarian end of the Tories has barely squeaked about the loss of civil liberties and the blatant pushing of a big state agenda- and by that I'm talking about the spying on neighbours/the shuting of pubs and churches/curtailing movements.

I love Armstrongs historical work-not so much a fan of his Pie theory-.I remember reading years ago that we'd eventually move to a period of smaller govt but I think he seems to be agreeing with Hunter that we'll move through a period of what you might call 'peak govt' first.Going into this govt expenditure was 40% of GDP across the western world.I jsut can't see that going down.

Politically,I don't think the future's has ever been so dark during my 50 years,inclduing the cold war ,which we never looked like we'd lose thanks to the US>

6 hours ago, Harley said:

 

The bottom of a megaphone type pattern on the stochastic (momentum) which could signal a run up (permanent or not tbd)?  That pattern is historically unique and that usually means something!  I wonder how many shorts there are out there.  A fair move on the technicals on the chart for the daily, too soon for the weekly (only happened on Thursday!), and still understandably well off on the monthly.  MACD is just a bit meeh but a divergence between that and the stochastic sometimes means a nice resolution to the upside.  Bottom line, a timely one to watch after (as you said) many false starts.  Next question is if BP is indeed bottoming, what about the rest and will DB's call yet again be on the money?

PS:  And Financial Sense podcast again this week talking about the sector rotation to basic materials.

PPS:  @Panda, you playing me my son?    I just had a look at the candles, especially the monthly:

The March candle had a very long wick and sometimes price will explore those types of major wicks later on.  Well It's just done that.  The price also gapped down in March and the June high mostly filled the gap (another often seen move).  Gap filling is something that tends to have to happen before we can move on, one way or another.  Don't get me wrong, I'm not saying press the buy button (never would intentionally!) but things may be stirring!

Once you'd drawn it on,you can see how unique it looks.I hear these megaphone patterns mentioned before.Are they generally a decent signal in your opinion?

[sancho panza]

1 hour ago, DoINeedOne said:

Wheaton Precious Metals will list in the UK during the first week of November and will become the largest gold and silver company quoted on the LSE since Randgold delisted after its merger with Barrick in 2019.

Telling in a way that we're really entering a bull......there's whole new markets of money waiting to be tapped.Nice to see the UK being used despite Brexit.

[Viceroy]

37 minutes ago, sancho panza said:

Intersting as I've been surprised by how many Western countries have tended so easily towards totalitarian left wing statist politics over the last 6/7 months.

Even the supposedly(I know,I know) libertarian end of the Tories has barely squeaked about the loss of civil liberties and the blatant pushing of a big state agenda- and by that I'm talking about the spying on neighbours/the shuting of pubs and churches/curtailing movements.

I love Armstrongs historical work-not so much a fan of his Pie theory-.I remember reading years ago that we'd eventually move to a period of smaller govt but I think he seems to be agreeing with Hunter that we'll move through a period of what you might call 'peak govt' first.Going into this govt expenditure was 40% of GDP across the western world.I jsut can't see that going down.

HIs latest podcast - https://www.howestreet.com/2020/10/alberta-usa-vs-alberta-canada-martin-armstrong-peter-downing/

He questions why politicians like Boris would be so draconian on the people with lockdowns as it guarantees Boris would never be re-elected by said people - unless they plan to get rid of future elections communist-style, or they've been paid off and can live very, very comfortable lives once they're out. Lukashenko (Belasrus) recently stated the IMF offered him a bribe of $940million to impose covid restrictions and lockdowns & crash the economy.

Armstrong's long term cycles work show the 2030s as the end of a 1800+yr cycle known as the dreaded 6th Wave.  The ends of the last 2 saw the fall of the Greek/Roman and Minoan civilisations. 2030s is the end of the next one - fall of Western civilisation and the rise of China/the East.  https://www.armstrongeconomics.com/armstrongeconomics101/understanding-cycles/dark-age-v-renaissance/

'The Dark Age is the fragmentation of society reverting back to where we see nations breaking up unto regions and then all the way back to city states. The  Renaissance is typically inspired by the rediscovery of lost knowledge...We either regress contracting into authoritarianism, then break-up into a fragmented feudal type system of local tribes basically, or we can perhaps crash and burn, but then see the light and we make a major technological leap forward.

The least authoritarian place to live in the coming decades he views/forecasts as South East Asia..

[Harley]

1 hour ago, sancho panza said:

.....

Once you'd drawn it on,you can see how unique it looks.I hear these megaphone patterns mentioned before.Are they generally a decent signal in your opinion?

They are popping up in a few places.  They can be momentus in the size of their swings and that feels appropriate at this troubling time.  An intermediate traders dream though.

[JMD]

2 hours ago, sancho panza said:

Intersting as I've been surprised by how many Western countries have tended so easily towards totalitarian left wing statist politics over the last 6/7 months.

Even the supposedly(I know,I know) libertarian end of the Tories has barely squeaked about the loss of civil liberties and the blatant pushing of a big state agenda- and by that I'm talking about the spying on neighbours/the shuting of pubs and churches/curtailing movements.

I agree, but in effect there has been no squeaking by any of the 'caught in the headlights' vermin that infest our parliament(s)... Too strong/unfair?? To be clear 6/7 months ago I wouldn't have said this, but the closing down of parliamentary process, and replacing it by a 'government by decree' I find truly alarming. And what laws did the police willfully follow in order to control the public?                                                                                                  Jonathan Sumption, former supreme court judge, has been vocal about this (once a darling of the BBC, Reith lectures, etc, but now strangely uninvited) - he goes as far as saying the whole setup has the hallmarks of a police state!!

[Loki]

7 hours ago, JMD said:

And what laws did the police willfully follow in order to control the public

"They're only following orders"

Sounds familiar. 

[JMD]

1 hour ago, Cattle Prod said:

Found a fund in my SIPP that has exposure to companies I can't directly access, thought it might be interesting to this thread:

 

So iron, oil, gold, lumber, copper and farm machinery. A nice fund to be in for the next cycle I think, fees aside.

https://www.trustnet.com/factsheets/o/btp5/investec-enhanced-natural-resources-i-acc-gbp

That resource fund is a particularly good one in my opinion.

Personally, I use these types of fund to 'steal' ideas from. For example, perhaps take a look at the fund's annual report for its full portfolio breakdown, fund is on page 42...(its got yellow cake to whitehaven coal, those guys have certainly done their research!)

https://documentscdn.financialexpress.net/Literature/F5E3A9D342455B7177496EBBBEBDF96F/111994124.pdf?__hstc=204257039.b2d8efc636c6432f5e71d01222ea9b99.1602495516607.1602495516607.1602495516607.1&__hssc=204257039.1.1602495516619&__hsfp=2329393404

 

[geordie_lurch]

I'm surprised no one has posted this here yet...

https://www.bbc.co.uk/news/business-54506853

Quote

 

The Bank of England has written to UK banks asking them how ready they are if interest rates were cut to zero or turned negative.

The UK would be following countries such as Japan and Switzerland if it cut borrowing costs to such a low figure.

"We are requesting specific information about your firm's current readiness," the bank's deputy governor, Sam Woods, said in the letter to banks.

The Bank of England cut rates to the current historic low of 0.1% in March.

Mr Woods said he wanted to know if the banks would face technological challenges if rates should turn negative.

 

 

[Democorruptcy]

I'm watching a series on All 4 catchup TV. I keep having to watch this graveyard scene!

 

[Harley]

15 minutes ago, geordie_lurch said:

I'm surprised no one has posted this here yet...

https://www.bbc.co.uk/news/business-54506853

 

Also, HMG have apparently been asking wealth managers about a wealth tax.

[Barnsey]

23 minutes ago, geordie_lurch said:

I'm surprised no one has posted this here yet...

https://www.bbc.co.uk/news/business-54506853

 

And how about this for a chaser!