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

[Noallegiance]

6 hours ago, DoINeedOne said:

China has nearly 250 gigawatts (GW) of coal-fired power now under development, more than the entire coal power capacity of the United States. 

Our Chinese friends now have 97.8 GW of coal-fired power under construction, and another 151.8 GW at the planning stage. And so while some poor sap was penning Xi’s carefully crafted speech to the UN, Xi and his underlings were busy. Busy financing and building out what is likely to be the worlds most impressive global energy infrastructure.

But they are not only investing in their backyard. Nope… according to a Boston University database they have made more than $244 billion in energy investments abroad since 2000 with the bulk of that in recent years going into oil and gas. 

(Yeah not wind, solar or renewable and recyclable Unicorn farts. Good ol O&G…)

https://capitalistexploits.at/how-china-is-capturing-global-energy-market-share/

 

 

[DurhamBorn]

8 hours ago, Cattle Prod said:

Just as you said, DB. Telecoms know they are now more strategically important than ever.

Exactly and they all have an interest in seeing prices find a higher level.Once the backbone providers increase prices everyone can follow.The beauty is as well investment will fall hard mid cycle as fibre and 5G finishes roll out.The prices are so cheap at the moment as well who will really notice £28 a month instead of £24 etc.Fantastic sector for the cycle ahead,could be up there with silver miners and oil/gas as the best returns over the cycle.

[Barnsey]

1 hour ago, Democorruptcy said:

I remember there was one you were tempted by early covid but you thought there would be a dip this Autumn? I suggested a discount then was real. Did you not offer or try but get knocked back. I suppose finding a distressed seller in Autumn would help. Their handling of it is textbook support prices at all costs, even now we have a so called killer plague but the housing market is open as normal, so buyers can step over the dead bodies and still complete before Christmas!

We had two offers rejected as I greatly underestimated the pent up demand frenzy which is now most certainly coming to an end here in the West Midlands. One of the offers made was 8% below asking and the agent refused to put it forward as it was "too embarrassing". I sh*t you not. It was for the best looking back now as would have been the wrong choice. The months since have given us time to consider so many other areas I hadn't thought of.

Thankfully I'm seeing quite a bit of inventory sticking recently and very little going sold STC, VERY area specific, some new build prices even coming down a little (very surprised given how they're reluctant to do so for land reg reasons), been the case for about a month now I'd say and worsening.

The lending market really needs to ease up as it's incredibly restrictive at the high LTV/FTB end which is a killer for chains.

[Democorruptcy]

2 minutes ago, Barnsey said:

We had two offers rejected as I greatly underestimated the pent up demand frenzy which is now most certainly coming to an end here in the West Midlands. One of the offers made was 8% below asking and the agent refused to put it forward as it was "too embarrassing". I sh*t you not. It was for the best looking back now as would have been the wrong choice. The months since have given us time to consider so many other areas I hadn't thought of.

Thankfully I'm seeing quite a bit of inventory sticking recently and very little going sold STC, VERY area specific, some new build prices even coming down a little (very surprised given how they're reluctant to do so for land reg reasons), been the case for about a month now I'd say and worsening.

The lending market really needs to ease up as it's incredibly restrictive at the high LTV/FTB end which is a killer for chains.

Agent's shouldn't be refusing to put offers forward. Sounds like the market was dipping a bit where you are. I've only very recently thought the same where I am. Being a touristy place it's probably due to the end of the season. Maybe this is why they have fire-hosed so much money today? The only problem with looking at more areas is it makes it harder to make a decision. I say that as someone who has recently lived in 3 countries and nowhere nearer making a decision but it's not a complaint, I'm happy as I am. I hope it works out for you in the end. Good luck.

[leonardratso]

ive gone and done it now, i bet the frigging farm on emmerdale farm;

[DurhamBorn]

3 hours ago, Barnsey said:

Last tweet for today

 

 

I think a good time to add a few lines from the very first post on this thread,

"Once this does hit the central banks will be slow to react with the right response as they themselves will be shocked at the speed and scale.They will panic and print direct into the economy by passing money/debt to governments at 0.1% or zero coupons.This is what will kick in the first reflation cycle since the 70s"

The UK BOE bank rate is now 0.1% just as i predicted it would be as the BOE prints direct into the economy by passing money to the government.

https://uk.reuters.com/article/uk-britain-boe-sunak-idUKKBN27L0X2

 

By my dis-inflation calculations we are about through printing back now,so future QE will start the inflation ball rolling.No stopping it now.Macro road map is very clear.

All coming along nicely apart from a few bloodied and beaten stocks .

 

[Barnsey]

12 minutes ago, DurhamBorn said:

 

I think a good time to add a few lines from the very first post on this thread,

"Once this does hit the central banks will be slow to react with the right response as they themselves will be shocked at the speed and scale.They will panic and print direct into the economy by passing money/debt to governments at 0.1% or zero coupons.This is what will kick in the first reflation cycle since the 70s"

The UK BOE bank rate is now 0.1% just as i predicted it would be as the BOE prints direct into the economy by passing money to the government.

https://uk.reuters.com/article/uk-britain-boe-sunak-idUKKBN27L0X2

 

By my dis-inflation calculations we are about through printing back now,so future QE will start the inflation ball rolling.No stopping it now.Macro road map is very clear.

All coming along nicely apart from a few bloodied and beaten stocks .

 

I was just about to ask you about this, read my mind!

[Chewing Grass]

7 minutes ago, DurhamBorn said:

By my dis-inflation calculations we are about through printing back now,so future QE will start the inflation ball rolling.No stopping it now.Macro road map is very clear.

I have noticed the first real signs of inflation in the supermarket economy with everything nudging up, meat is up 10% for starters along with dairy, the signs are everywhere. The biggest one I noticed this week is toothpaste almost doubling in price for some reason.

I just about remember 1970s inflation when I was a kid, crisps going from 2p a bag to 10p a big over the course of junior school and my father once saying that when he sold his 1973 ford escort after 4 years he got what he paid for it four years earlier.

If you live on benefits you will struggle to cope with what is to come.

[DurhamBorn]

6 hours ago, kibuc said:

Two quick takes on the go:

Great Panther reports spectatular 3Q financials, not only posting record revenues, record cash flow, record literaly everything, but also coming up with massively reduced AISC, $200/oz lower than ytd average anf the same amount down yoy. Fantastic numbers. 

First Majestic with record earnings and cash flow too, obviously, but what's impressive is that they delivered it against average sale price of $22.5 per punce of silver. Average spot fpr the quarter was $24.5/oz. Haven't read the full report yet so dunno why they sold their silver so cheaply, but early there's a lof of upside of they star achieving spot prices. 

Ha youl have to take it back kibuc on the nasty names you called Great Panther when it was on my rubber band silver list,the stinking pile of turd it was 

[DurhamBorn]

1 minute ago, Chewing Grass said:

I have noticed the first real signs of inflation in the supermarket economy with everything nudging up, meat is up 10% for starters along with dairy, the signs are everywhere. The biggest one I noticed this week is toothpaste almost doubling in price for some reason.

I just about remember 1970s inflation when I was a kid, crisps going from 2p a bag to 10p a big over the course of junior school and my father once saying that when he sold his 1973 ford escort after 4 years he got what he paid for it four years earlier.

If you live on benefits you will struggle to cope with what is to come.

Its everywhere isnt it,creeping in,creeping up.The dam is breached.Just wait until the energy inputs start to move higher.

 

[Sugarlips]

21 minutes ago, DurhamBorn said:

 

I think a good time to add a few lines from the very first post on this thread,

"Once this does hit the central banks will be slow to react with the right response as they themselves will be shocked at the speed and scale.They will panic and print direct into the economy by passing money/debt to governments at 0.1% or zero coupons.This is what will kick in the first reflation cycle since the 70s"

The UK BOE bank rate is now 0.1% just as i predicted it would be as the BOE prints direct into the economy by passing money to the government.

https://uk.reuters.com/article/uk-britain-boe-sunak-idUKKBN27L0X2

 

By my dis-inflation calculations we are about through printing back now,so future QE will start the inflation ball rolling.No stopping it now.Macro road map is very clear.

All coming along nicely apart from a few bloodied and beaten stocks .

 

Are you adding to positions in the the bloodied and beaten here DB?

Dave H has been reiterating his bullish stance on Twitter today..

[kibuc]

14 minutes ago, DurhamBorn said:

Ha youl have to take it back kibuc on the nasty names you called Great Panther when it was on my rubber band silver list,the stinking pile of turd it was 

Fuck it, they are still shit

That being said, I still made them my biggest holding some time ago, around $0.7 mark. As one would expect, at +8% they are the worst performing stock in my portfolio today.

Shit, as I said  

Meanwhile, Endeavour Silver posted their financials and it's not a record quarter, but it's only because they decided not to sell their production during the downturn in October. Sold just enough to turn profit for the first time in a year and a half, and are planning to sell the rest this quarter, so expect fireworks in 3 months. Still good enough for +18%.

[Bobthebuilder]

23 minutes ago, Chewing Grass said:

father once saying that when he sold his 1973 ford escort after 4 years he got what he paid for it four years earlier.

Something people miss with inflation, i remember my old man doing up minis in the late 70s and making a few quid.

[DoINeedOne]

https://podcasts.apple.com/gb/podcast/the-grant-williams-podcast/id1508585135#episodeGuid=ttmygh.podbean.com%2Fae906c16-cef7-3624-955c-de143fd8e845

[sancho panza]

8 hours ago, Cattle Prod said:

Brent hit 35.67 on Monday before bouncing hard, despite physical oil traders saying at the weekend (in response to lockdown demand fear questions) that there will be no price crash next week as inventories are being drawn down. Inventories are what physical oil is priced off. If traders think it'll be harder to get, they will pay more, and not if not. It's a pretty efficient market. It's up 15% since then, and if that holds till the weekend, I'll take that as my $35 Brent target.

Vitol reckons worldwide stocks are being drawn down by about 2m a day, but as they are in buying mode (not having floating storage to sell), I'd say that is conservative. There are some signals that October stocks drew down by much more golbally, but I'd need to see the same signal in November.

Take a pre-covid oil consumption level of 98 (BP data, oil only), and OPEC currently has 5.6mbpd off the market (they had a 'cut' of 2.1mbpd in 2019, 7.7mbpd now), 2mbpd draws implies a current consumption level of 94.4mbpd. Using a 101mbpd baseline (BP data inc other liquids), current consumption is 97.4mpd, in line with the IEA figures. So in terms of a cap on price, OPEC is really only holding 3.6mpd (7.7 minus 2.1 minus 2) off the market, and shrinking. And as I said, the 2mbpd Vitol mentioned is probably lowballing. This is what is putting a base under price (and oil equities being discounted to it is not rational, I suspect they will just take a while to catch up like all equity markets).

So what happens next? Well, US inventories have just gone below 2016 levels, when price was $51. Given the overhang of OPEC supply, current price is not an unreasonable discount. I think inventories will be drawn down harder than 2016, and as I said there are some signals that this is happening now. Everything I see points to inventories globally going to the 5yr average by the end of the year.

I've previously said that Art Bermans predictions for US production loss were too extreme, and I thought that 7-8mbpd was more reasonable @sancho panza. He was putting more of this out recently, so I and another geo challenged him on it, and he has since revised his prediction upwards. His assumptions are too vague, and I am now more sceptical about what he is putting out. It's already pretty inconsistent. Anwyay, I'll now say that I think they'll decline to the 8.5-9.5 region, and I have pretty high confidence in that. If the wells they are currrently drilling and completing are of lower quality, that number might undershoot, but I have no way of knowing that. 

The important bit is that that is coming off a pre-Covid production high of c. 13.8mbpd. So there is a fairly solid 5mbpd loss baked in from the US, which is still the largest natural (and very very difficult to reverse) supply drop in history. There will also be losses from Canada and other non-opec suppliers. In summary, the idea that if demand normalises there is a coming supply gap still stands, and is becoming visible in US production as expected, and also visible in Asian demand up at pre Covid levels. If OPEC extends their cuts at the end of the month, it can only be to keep the US quiet, and bake in $80 a barrel to rescue their economies IMO. There is a fair chance of world inventories undershooting significantly to the downside.

Also on demand, I heard on LBC this morning that the roads around and in London are choc a block. I checked the TomTom data, and it's true. If the people England are ignoring lockdown restrictions, there is hope for the country yet! And is also an interesting view on the demand story.

Many thanks for the heads up CP.I've been bsuy with the US election and the kids for the last week.(daughter got sent home from nursery as her bubble had a positive)

Haven't even looked at a share price in that time.I'll have a proper read of this psot later when I've finished the washing ....it's all go here.

 

[Lightscribe]

45 minutes ago, DurhamBorn said:

Ha youl have to take it back kibuc on the nasty names you called Great Panther when it was on my rubber band silver list,the stinking pile of turd it was 

Lucky for me, it’s one of a few PM holdings left that I’ve desperately avoided taking profits to average down further in oil

[DurhamBorn]

The difference with the printing in 08 to 2020.In 08 it was to re-capitalise the banks.This time it also mainly goes in fiscal spending by the governments.People think QE is deflationary,but thats only when its to re-capitalise banks.When its for fiscal spending its inflationary.

 

[Bobthebuilder]

2 minutes ago, Sideysid said:

Lucky for me, it’s one of a few PM holdings left that I’ve desperately avoided taking profits to average down further in oil

I bought Great Panther many moons ago wishing for a profit. Still waiting. (love the name tho).

[DurhamBorn]

31 minutes ago, Cattle Prod said:

Sorry DB, I don't mean to be too direct about a macro road map, but does this mean that the deflation phase is almost past, and we are nudging the reflation cycle to come? I think you'll say there is still a risk of another big crash, especially if governments/CBs disengage, and I'd agree with that, but do you now see that risk reduced?

Lots of risk out there for a quick sharp down leg,but i think in reflation areas it would be over very quickly.Iv just put up the debt figures in relation to M2 in the US and debt is falling hard in relation to liquidity in the pipes.I think the deflation is in the process of ending yes.As you say the key now is that the CBs dont disengage,and also that governments dont.Fiscal spending is crucial.Its the fiscal that lowers private debt that then feeds industry that lowers industrial debt,that forces prices higher and then business chases those higher prices by investing.Dollar is down to 92 now (remember at 100 everyone and their dog and the MSM said it was going much higher,our call was for 88).

[DurhamBorn]

40 minutes ago, kibuc said:

Fuck it, they are still shit

That being said, I still made them my biggest holding some time ago, around $0.7 mark. As one would expect, at +8% they are the worst performing stock in my portfolio today.

Shit, as I said  

Meanwhile, Endeavour Silver posted their financials and it's not a record quarter, but it's only because they decided not to sell their production during the downturn in October. Sold just enough to turn profit for the first time in a year and a half, and are planning to sell the rest this quarter, so expect fireworks in 3 months. Still good enough for +18%.

Endeavour has almost become blue chip  and Harmony,up 12% ,could of bought a house with Sibanye profits if i hadnt sold them 

[Democorruptcy]

1 hour ago, Chewing Grass said:

I have noticed the first real signs of inflation in the supermarket economy with everything nudging up, meat is up 10% for starters along with dairy, the signs are everywhere. The biggest one I noticed this week is toothpaste almost doubling in price for some reason.

I just about remember 1970s inflation when I was a kid, crisps going from 2p a bag to 10p a big over the course of junior school and my father once saying that when he sold his 1973 ford escort after 4 years he got what he paid for it four years earlier.

If you live on benefits you will struggle to cope with what is to come.

I suppose you didn't have much interest in the +50% annual HPI? Noticeable how HPI front runs RPI?

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/1995/the-housing-market-and-the-economy.pdf?

 

[MrXxxx]

5 hours ago, Yellow_Reduced_Sticker said:

Cor blimey gold ROCKETING...UP ...$50 as i post!

meanwhile Rolls-Royce DOWN 11% today ...well i never!

I'm saying nothing...but I am regretting welcoming you back now! :-)))

[Errol]

30 minute presentation from Ronnie Stoeferle on Gold (and silver). Well worth watching.

 

 

[Talking Monkey]

3 hours ago, DurhamBorn said:

Lots of risk out there for a quick sharp down leg,but i think in reflation areas it would be over very quickly.Iv just put up the debt figures in relation to M2 in the US and debt is falling hard in relation to liquidity in the pipes.I think the deflation is in the process of ending yes.As you say the key now is that the CBs dont disengage,and also that governments dont.Fiscal spending is crucial.Its the fiscal that lowers private debt that then feeds industry that lowers industrial debt,that forces prices higher and then business chases those higher prices by investing.Dollar is down to 92 now (remember at 100 everyone and their dog and the MSM said it was going much higher,our call was for 88).

 DB the mega PE glamour stocks at some point have to come back down to earth, I reckon a huge correction in the Nasdaq at some point. Defo agree any pullback in the reflation stocks shouldn't be too brutal

[DurhamBorn]

5 hours ago, Talking Monkey said:

 DB the mega PE glamour stocks at some point have to come back down to earth, I reckon a huge correction in the Nasdaq at some point. Defo agree any pullback in the reflation stocks shouldn't be too brutal

Key to inflation stocks is inflation rising and running above trend and above interest rate lag.I think thats certain now and will last the whole cycle.