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

[sancho panza]

23 hours ago, Cattle Prod said:

 In rough order:

- Blue water Navy building and belligerence by China

- A trade war initiated by the USA once it had its fill of cheap Chinese goods

-The obstruction of Chinas attempt to move up the value chain (Huawei etc) by USA

- A global pandemic emanating from China, alongside the probable manipulation of our thicko politicans into lockdowns

- China buying oil hand over fist in the subequent carnage.

They are very, very weakened and exposed by an 11mbd oil import deficit IMO. When the USA had a similar import bill, they had alliances in the ME going back decades, and the guns to back it up.

 

 

I've been rereading this psot CP as it really does pose an interesting question.Like with many things in life sometiems it takes sifting through the evidence,tiem and again,testing theses etc to get to the nub of the issue.

As per the Art Berman/Western centric discussion,we tend to forget that the bulk of the worlds population lives in Asia.When you start consdiering the geopolitical issues alongside the the 11mn bpd deficit that China faces.For a start,the Chinese political system relies on ever rising standards of living to sustain itself.It's not-and never will be-led by a uniting charismatic leader.Rather it's led by dictat.AS long as living standards are rising,noone will question the authority of the CCP.

However,history shows us time and again that dictatorships collapse a lot quicker than democracies-GDR,Imperial Russia,pre WW1 Germany,pre civil war England etc etc.The reasons are myriad but very much centre on the Norman Dixon thesis of being governed by the 'fear of failure'.

China has a lot of problems bubbling under the surface such as the bubble in their shadow banking sector,the ponzi scheme in the property market and the fact that geopolitically they are quite isolated.

The oil supply deficit may well be their achilles heel-how much of the facade of Chinese growth relies on cheap oil? How much will it raise the cost of living for China's lower income deciles(we know that the lower income deciles feels food and fuel price rises more keenly than higher income deciles)?

All of a sudden,you start looking at the recent border troubles with India in a different light(China's always trying to unsettle Taiwan).Looking at the discipline of Chinese troops,there's no way they went out and accidentally ended up having a massive fistfight/ruck/pickaxe battle with locval Indian troops.That they came out on top suggests they were more prepared than the Indians were.

Intriguing location given that two armies fought without weapons.

All in all CP,I think you're really getting to the nub of the issue in the current environment.I think that 11mn bpd/energy security is going to drive Chinese foreign policy for the foreseeable and I think the gold backed yuan is the most obvious threat to the dollar hegemony

 

[JMD]

3 hours ago, Cattle Prod said:

Thawing the tundra would make it a lot more expensive, much cheaper to drive on ice in the winter than building a road through soggy mosquito infested bog.. Ice is surprisingly grippy, if it's cold enough, as I found out! Russia has plenty of exports, and is already using its export power on the world stage. My comment was about oil production - you can't easily ramp up oil production by millions of barrels unless you have idle giants lying around like Iraq. Russia has already had this ramp up after the fall of communism. Incremental gains, sure. Excellent engineers. The production curve is pretty clear.

They have plenty of large scale untapped gas. They have one field that has more gas than all of Europe combined, Shtockman, it's jut too expensive to develop. It will be as prices go up. That's what's happening in the Yamal now, it's no vanity project. There is tons of gas up there, its literally pouring out of the ground. 

For a bit of colour, there are these 'mysterious' craters up there. Various flavours of scientist have been trying to figure out what they are and how they got there. It's pretty obvious to a petroleum geologist that they are gas pockmarks - a natural process where gas leaks from its trap underground, and bubbles to the surface, kind of like opening a bottle of Coke (in sloooww motion). I've seen them all over the world in the subsurface, and I do enjoy the surface geos/geographers scratching their heads about them . Of course it means there is probably a large gasfield underneath, I'm sure the Russians will get around to drilling them eventually.

Thanks CP. Energy is my largest invested sector so am sometimes a bit obsessive about it! 

You wouldn't happen to know who owns the rights to that Shtockman gas field that you mention? Novatek has the Yamal one, is it perhaps also them? 

[RickyBacker]

Further to CP's incredible post yesterday about 'gold being a play on oil'. I follow this guy on YouTube and his knowledge about gold are amongst the best I've ever heard/seen.
He explains in this video about that even though the dollar is no longer backed by gold, Bullion banks, oil exporters and mining companies work hand-in-hand to keep the monetary system in order.
Basically, gold is very much still part of the system.

Thanks again CP for such amazing train of thought.

 

[sancho panza]

7 hours ago, jamtomorrow said:

I'm wondering whether Biden-like vs Trump-like makes much difference in the long run.

I think China's real game is: be ready to take advantage of the coming global systemic collapse (by which I mean: the end-of-decade Really BK).

Natural resources are part of it, but so is social/political unity. That's the part that will screw us in the West - values are completely shattered, and the glue of unity is all but gone.

China know this - that, if you like, *is* their plan.

I think you've yet to see Europe and the USA nascent populist groupings grow to fruition and govt.History shows that during economic hard times that societies break down along ethno religious lines.I always remember a great quote from Steve keen in 08/09,

'the last time we had a Depression,it ended after ten years with WW2'.

Whether that occurs at the end of the 20's or as David Hunter suggests 2040's,I don't know,but some sort of seismic East/West face off seems likely and I suspect Russia will either side against China or remain neutral.China appears to be on a path to self destruction longer term.

Groupings like AFD in Germany,National rally(France),Law&Justice(Poland) Fidesz (Hungary) etc show that Europeans are prefectly capable of being as populist as the US.The UK is somewhat behind on this road due the petering out of both Ukip and Brexit party and the First past the psot system.The ingredients for a really nasty break down of niceties are looming.

 

[JMD]

22 hours ago, Loki said:

The Freegold/Friend of Another/FOFOA links from the late 90s/early 2000s mentioned this too.  

I think @Heart's Ease and @JMD were chatting about it with me.  Apologies for anyone I forgotted 

Yes Loki, it was very interesting discussion. But the source material (Another, Friend of...,etc.) if i were to be honest was a bit hard going for me (i never was top of my class!). I suppose the ideas being developed dictated that it was going to be like that... having said that i think i'll look and see if there are any updates by 'FOFOA'.    

[Loki]

2 minutes ago, JMD said:

the source material (Another, Friend of...,etc.) if i were to be honest was a bit hard going for me (i never was top of my class!)

Same.  I just had to persevere with it 

[JMD]

33 minutes ago, sancho panza said:

Groupings like AFD in Germany,National rally(France),Law&Justice(Poland) Fidesz (Hungary) etc show that Europeans are prefectly capable of being as populist as the US. The UK is somewhat behind on this road due the petering out of both Ukip and Brexit party and the First past the psot system. The ingredients for a really nasty break down of niceties are looming.

 

[JMD]

45 minutes ago, sancho panza said:

Groupings like AFD in Germany,National rally(France),Law&Justice(Poland) Fidesz (Hungary) etc show that Europeans are prefectly capable of being as populist as the US. The UK is somewhat behind on this road due the petering out of both Ukip and Brexit party. The ingredients for a really nasty break down of niceties are looming.

I read that here in the UK, Laurence Fox is starting his own political party. Fox comes from the liberal Fox family acting dynasty. He is abandoning acting to embark into politics - for the sake of his children apparently. Funny/Interesting how these things play out. What's the old saying, something about beware the '... zealousness of the convert'.

btw, Laurence Fox does seem a perfectly nice chap, iv'e mentioned him on here before. Time will tell if he does becomes a new, younger, even more popular version of Nigel Farage!

[DurhamBorn]

4 minutes ago, sancho panza said:

I think you've yet to see Europe and the USA nascent populist groupings grow to fruition and govt.History shows that during economic hard times that societies break down along ethno religious lines.I always remember a great quote from Steve keen in 08/09,

'the last time we had a Depression,it ended after ten years with WW2'.

Whether that occurs at the end of the 20's or as David Hunter suggests 2040's,I don't know,but some sort of seismic East/West face off seems likely and I suspect Russia will either side against China or remain neutral.China appears to be on a path to self destruction longer term.

Groupings like AFD in Germany,National rally(France),Law&Justice(Poland) Fidesz (Hungary) etc show that Europeans are prefectly capable of being as populist as the US.The UK is somewhat behind on this road due the petering out of both Ukip and Brexit party and the First past the psot system.The ingredients for a really nasty break down of niceties are looming.

 

I think Russia would gladly see China weaken.Putin has cast himself as a great warrior and defender of the Orthodox Christian Church and Christian values.Its probably the main reason the public support him so much.That wouldnt tie with joining forces with China.This video shows all people need to know about Putin and the Orthodox Church,the new cathedral dedicated to Russian military forces ressurection.Russia wants a weakened west and a weakened China so that is can re-gain influence in Eastern Europe,maybe even an alliance with Patriotic Western leaders if we elect some,doing Christs work saving western peoples from the liberals etc.

 

[sancho panza]

2 minutes ago, JMD said:

I read that here in the UK, Laurence Fox is starting his own political party. Fox comes from the liberal Fox family acting dynasty. He is abandoning acting too embark into politics - for the sake of his children apparently. Interesting how these things play out. What's the old saying, something about beware the '... zealousness of the convert'.

btw, Laurence Fox does seem a perfectly nice chap, iv'e mentioned him on here before. Time will tell if he does becomes a new, younger, even more popular version of Nigel Farage!

Unfortunately,Fox has no real background in politics and more particualrly,in political organising which is the school of hard knocks.Very difficult business getting candidates up-finance,signatures,national/regional/local organisers-a lot of mistakes cost a lot of time and energy.And enrgy is the thing that disspates quickest among new activists.

 

The one I'm watching with interest is this chap.Not afraid of saying what a lot of people think.Hardline is many respects-free speech,anti lockdown,fiscal conservative,controlled immigration- even Pro life,although it appears he's moderating that to gain traction with a broader audience.He's the sort of person who comes with committed,experienced organisers.Time will tell.

He was in Ukip for years.

https://www.heritageparty.org/

[sancho panza]

16 minutes ago, DurhamBorn said:

I think Russia would gladly see China weaken.Putin has cast himself as a great warrior and defender of the Orthodox Christian Church and Christian values.Its probably the main reason the public support him so much.That wouldnt tie with joining forces with China.This video shows all people need to know about Putin and the Orthodox Church,the new cathedral dedicated to Russian military forces ressurection.Russia wants a weakened west and a weakened China so that is can re-gain influence in Eastern Europe,maybe even an alliance with Patriotic Western leaders if we elect some,doing Christs work saving western peoples from the liberals etc.

 

You've managed to work out where I was going with my meandering thoughts and have probably saved me a month's head scratching DB.My thanks.

More chance of Russia falling in line with Christian Western democracies than China.Way,way more.

 

[sancho panza]

12 minutes ago, Cattle Prod said:

I don't know - I think Statoil was last in it, and walked away. Crazy expensive due to offshore Arctic, will need higher prices .Thats why they're doing Yamal first (cheaper onshore). If you want an angle on all that, just buy Gazprom I think. Anything big will fall into their laps.

Whats the ticker you'd buy for Gazprom.Please feel free to explain the difference between the different shares in laymens temrs,I've always wondered.I have some spare at HSBC but can only UK/USA stocks.I've always stayed away for fear of buying the worng thing.

this one is in London-GAZPq

https://www.investing.com/equities/gazprom

Gazprom Neft PAO-SIBNq

https://www.investing.com/equities/gazprom-neft?cid=1061239

USA

Gazprom Neft-GZPFY

https://www.investing.com/equities/gazprom-neft

Gazprom PAO-OGZRY

https://www.investing.com/equities/gazprom-adr

Gazprom-OGZPY

https://www.investing.com/equities/gazprom?cid=102876

[sancho panza]

@kibuc

been buying some BVN and Rio2 today after selling Hochschild yesterday.

Genuine question have you much knowledge of a company called Oceanagold,recently run a placing for $100mn+.Shares are low,they look like they have some good assets.

[DurhamBorn]

21 minutes ago, sancho panza said:

You've managed to work out where I was going with my meandering thoughts and have probably saved me a month's head scratching DB.My thanks.

More chance of Russia falling in line with Christian Western democracies than China.Way,way more.

 

Remember the Russian Church was the original Byzantine Church.The enemy of the Greek/Catholic Church who they see as pretty much heretics.Their natural allies are more the Protestant UK version,and of course the once that ended up in the US from us.Eastern Europe wants freedoms,but its also scared of the way it has seen the west destroy itself with woke liberal insanity.The orthodox church is the link between them.Putin used it as a clear reason to unite Crimea (and Ukraine if he could,or at least control)

Russia would consider a world leading China as a nightmare i suspect.They wouldnt want conflict,but they would be quite happy  for the west,Japan and India to pin China down.Actually part of my forecast for the macro situation is based around this sort of scenario because the west will need to invest more in the military,that then means everyone else does including Russia.

Notice today the EU is digging its heals in over a deal on electric cars as it wants around 50% and growing of the parts value to come from the EU or UK.That pretty much means the drive train and clever bits,the cheap bits anyone can make can be imported.Everything is moving to slowing China down.

Imagine the influence in Europe as well if we do get a rush for oil/gas and Putin makes sure Europe is supplied,thats a hell of a bargaining chip.

[Castlevania]

12 minutes ago, Cattle Prod said:

I don't know, I just buy Gazprom Neft OJSC on HL. They are ADR representing 5 shares. I'm aware of the risks that Harley has talked about on this, but my reasoning is that I'll hopefully be all in cash in such an environment, and I can get exposure in the meantime.

That’s Gazprom Neft as opposed to PJSC Gazprom?

[Errol]

2 hours ago, Cattle Prod said:

the Soviet Union (via Gazprom precursor) supplied Europe with gas uniterrupted across the Iron Curtain through the Cold War, and Russia continued to through the chaos that followed the Cold War. The supply was never apparently even threatened. An utterly reliable supplier.

Indeed. Russia remains the most reliable supplier of gas/oil to Europe. Never failed and Germany, in particular, understands this very well.

[kibuc]

4 hours ago, sancho panza said:

@kibuc

been buying some BVN and Rio2 today after selling Hochschild yesterday.

Genuine question have you much knowledge of a company called Oceanagold,recently run a placing for $100mn+.Shares are low,they look like they have some good assets.

Nope, sorry. The name rings a bell, so probably one of my twitter gurus must have mentioned it at some point, but that's about it. 

[JMD]

7 hours ago, sancho panza said:

Unfortunately,Fox has no real background in politics and more particualrly,in political organising which is the school of hard knocks.Very difficult business getting candidates up-finance,signatures,national/regional/local organisers-a lot of mistakes cost a lot of time and energy.And enrgy is the thing that disspates quickest among new activists.

 

The one I'm watching with interest is this chap.Not afraid of saying what a lot of people think.Hardline is many respects-free speech,anti lockdown,fiscal conservative,controlled immigration- even Pro life,although it appears he's moderating that to gain traction with a broader audience.He's the sort of person who comes with committed,experienced organisers.Time will tell.

He was in Ukip for years.

https://www.heritageparty.org/

I mostly agree. But my point wasn't that Fox's new party would have a political break through. The 'Heritage' party you cite above, and Fox's party was (barring legal challenge over name) to be called 'Reclaim'. The thing is these parties, and others, all appear to align with the culturalist movement/political parties, which have been growing in Europe for many years. The EU and it's MEPs, along with the individual nation state politicians have collectively gone AWOL - choosing to ignore the difficult socio-economic questions for the last 30 years. Tbh, despite watching this unfold, I still can't believe the crazy politics we now find ourselves in - this 'search for identity' - but this time by the majority, will in my opinion only snowball. It is a poisonous concept, introduced by the far left, and it will fracture society for a generation. The only think of light is that I think our first past the post system will at least 'save us' from getting any charismatic Weimer types. And the US has its own checks and balances. However the rest of Europe is I think fair game for far right/left politicians to hoover up the many unrepresented voters there, ie those who merely want a decent job. Tragically such 'luxuries' are no longer in the gift of our politicians and time will tell if it will end up with 'history repeating' on the continent.

[JMD]

8 hours ago, Cattle Prod said:

There is a Putin documentary on Prime with the premise that Putin, and Russia, consider themselves European. He started it off his tenure very friendly to the West (who can forget Bush and Blairs cringy comments), but felt snubbed. Particularly when no European or US leaders showed up to the WWII Victory Day celebrations in Red Square, not long after he had paid respects to the D Day commemorations in France. Putin is known to walk with the crowds carrying a photo of his father on Victory Day. Possibly the most stupid example of diplomacy in recent years. Why on earth would you turn your back on Russia when it is modernising etc??

I think Russia would happily ally with the West, if allowed.

 

I'm not sure why people don't consider Russia European? I think it is mostly a rather sniffy political rejection because Russia is considered so 'awfull and reactionary'. They do have many Asian minorities, but In the main and in terms of - art (the three great literatures are french, russian, English), science, philosophy they are similar. Ok they split with Rome and have an orthodox church, but so does Greece. 

[wherebee]

https://www.theguardian.com/business/2020/oct/15/bhp-bosses-defend-companys-decision-to-stay-in-gas-and-oil-for-the-medium-term

[Tingles]

Short sighted, tiresome and inconvenient:

https://www.fca.org.uk/news/press-releases/fca-bans-sale-crypto-derivatives-retail-consumers

[BurntBread]

6 hours ago, JMD said:

I'm not sure why people don't consider Russia European? I think it is mostly a rather sniffy political rejection because Russia is considered so 'awfull and reactionary'. They do have many Asian minorities, but In the main and in terms of - art (the three great literatures are french, russian, English), science, philosophy they are similar. Ok they split with Rome and have an orthodox church, but so does Greece. 

I would imagine from Peter the Great until the revolution, it was very much seen as European; and not just the geographically western-most part, but Siberia, too, had cities where European culture was very fashionable. I think the revolution itself, and in particular the "Asiatic" ruthlessness of the subsequent Soviet regime, with purges and murders of various sections of society, meant that Europeans wanted to distance themselves from it. If Russia is not Europe, then that provides some psychological comfort that the same terror won't descend here. There was also the argument that European culture had been purged from the Soviet union, with the flight of the White Russians.

[jamtomorrow]

6 hours ago, JMD said:

I'm not sure why people don't consider Russia European? I think it is mostly a rather sniffy political rejection because Russia is considered so 'awfull and reactionary'. They do have many Asian minorities, but In the main and in terms of - art (the three great literatures are french, russian, English), science, philosophy they are similar. Ok they split with Rome and have an orthodox church, but so does Greece. 

Right now, boils down to fear.

If you know any Russians or have been there, you'll know it just "feels" European, and Russia certainly has the science, technology and culture to play a leading role economically.

The problem is the risks involved in playing with their big boys - go off-message or spill the beans and you'll "mysteriously" end up like Skirpal/Navalny/Litvinenko/Magnitsky, or one of the journos with exploding apartment syndrome.

Morals aside, it's arguably a misplaced fear - my observation is they save the worst stuff for other Russians, whereas it's mostly light intimdation for foreign outfits.

But for the time being, this makes Russia look a bit more like "them" than "us" (unless you're Italian)

[UnconventionalWisdom]

More hate on oil from the mainstream.

https://www.theguardian.com/business/2020/oct/14/bp-shares-plunge-amid-low-carbon-plan-and-slipping-oil-market

Market analysts believe BP faces a double risk due to its potentially expensive and financially risky transition into low-carbon energy, and the uncertain outlook for the oil industry.

It seems they can't win- basically slating them simultaneously for being in fossil fuels and trying to push greener methods. 

Non- contrarians will be exiting without realising there will be a big swing to green energy so you need conpanies with the infrastructure in place to make it happen. Developing all the new technology will require energy and resources so bp are prob in the best position to make it happen. There seems to be this belief that SMEs can be the driving force. I work in one and it's frustrated how slow things get developed abd finalised and then when products are completed, you face another battle in selling it because noone has heard of you. 

 

[Hardhat]

We might see BP under 200p here. Incredible how bad sentiment is right now.