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


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  • DurhamBorn

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@Cattle Prod i think i speak for everyone when i say how thankful we are to have your superb knowledge of the oil sector on this thread and the way you gladly share that knowledge. The irony is m

12 months ago I didn't own a single share, now I am up to my neck in stocks! Thanks to all contributing to this thread, especially @DurhamBorn for starting it in the first place. It's been a fascinati

Iv had a lot of direct messages lately asking what shares to buy etc and how to position.I simply havent had time to reply to them,and am unable to.Im not a financial advisor and to do it properly you

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18 minutes ago, Barnsey said:

Well looky here...

 

Interesting, Barnsey. Its stupid not to set this up when rates are zero IMO, I hope it's real and not more spin. Says it's going to be located up north too, trying to keep those new seats. 

In other reflation news, here is where India sees it's oil and gas demand going over the cycle:

20201121_094558.thumb.jpg.57f3a199cb01719154f3add6a95484c0.jpg

20201121_094624.thumb.jpg.30e82397007a17405c53ac7123a5dd47.jpg

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11 hours ago, Cattle Prod said:

Granted. Do any of my lot look dicey, do you think? I'm guilty of thinking more about how they could do in the future, rather than how they are faring at present.

Nothing's perfect, especially in this group of industries atm, and I own some of these, but the debt and current ratios of some do get my attention.

Edited by Harley
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10 hours ago, sancho panza said:

Have a you a time frame for those foirst four calls DB?

I'm looking for an oil peak April-July,although I am worried that a long stalemate in US Pres could reduce stimulus(Seante looks stacked against Biden)

Might peak early next year or into mid summer.To be honest im not really bothered.Those $300 oil and $18ish gas prices are my only concern.The market will get there in its own time.

I do of course consider how an out and back in could really boost returns,but that is risky.I think the answer is to build up divis etc and top slice a few things that run so extra capital is on hand if needed.

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9 hours ago, Cattle Prod said:

I don't know it KT, but any of those I've looked at are synthetic or based on futures which will decay most of the time. Oil is consumed, so you can't buy physical like silver or gold which are hoarded. It's very difficult to leverage the oil price directly. Quality stocks will, if you have time!

Exactly,the way to leverage oil is through quality stocks who have it sat in free storage in the ground and a route to market.

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This will come as no surprise to anyone on this thread. As unemployment rises from next year, capital projects will be needed to give the unemployed jobs. Its location in the north and, no doubt, its priority for funding in the north rewards the ex-labour areas who voted conservative. It gives those voters' kids and grand kids a future not reliant on benefits. If done right. They sold off the Green Investment Bank to private equity, which they said afterwards was "deeply regrettable", and now are planning a new Green Investment Bank.

It's interesting that Labour also had a similar policy in its manifesto. Politicians of both "sides" are now being driven by economic need and fear.

The article also says that "the chancellor would set out tens of billions of pounds of infrastructure investment during the spending review, including £1.6bn for local roads in the next financial year."

So in addition to the new bank and its infrastructure spending, the givernment will spend billions more on infrastructure.

https://www.ft.com/content/7a4f278b-4462-4123-a4c9-c7786d225baf

 

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Just now, arrow said:

couldn't quote for some reason

 

 

1 hour ago, Barnsey said:

Well looky here...

 

 

This will come as no surprise to anyone on this thread. As unemployment rises from next year, capital projects will be needed to give the unemployed jobs. Its location in the north and, no doubt, its priority for funding in the north rewards the ex-labour areas who voted conservative. It gives those voters' kids and grand kids a future not reliant on benefits. If done right. They sold off the Green Investment Bank to private equity, which they said afterwards was "deeply regrettable", and now are planning a new Green Investment Bank.

It's interesting that Labour also had a similar policy in its manifesto. Politicians of both "sides" are now being driven by economic need and fear.

The article also says that "the chancellor would set out tens of billions of pounds of infrastructure investment during the spending review, including £1.6bn for local roads in the next financial year."

So in addition to the new bank and its infrastructure spending, the givernment will spend billions more on infrastructure.

https://www.ft.com/content/7a4f278b-4462-4123-a4c9-c7786d225baf

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@arrow Teesside will be booming late cycle.House prices in areas like Redcar will way outperform the country.Massive investment coming.BP might build a huge hydrogen plant on the old steel works site.Anglo American bought Sirius etc.This will be worldwide as well.The energy needed to get there incredible.MSM say sell energy :wanker: 

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3 hours ago, Cattle Prod said:

In other reflation news, here is where India sees it's oil and gas demand going over the cycle:

Indeed. And gas to China increasing right now. None of it being traded in dollars ...

 

Russia’s natural gas supplies to China hit new record highs

Russian energy major Gazprom pumped more gas to China than it had initially planned, boosting daily supplies by as much as 25 percent, according to the company’s data.

Russia is set to further increase the supplies of piped gas to China next year, including via the Power of Siberia link as well as the Power of Siberia 2 project, Gazprom said. The latter pipeline entered the design stage earlier this year, and will be capable of delivering as much as 50 billion cubic meters of gas once finished. 

https://www.rt.com/business/507289-russia-record-gas-supplies-china/

Edited by Errol
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I posted this on the Bitcoin thread but others might find it useful.  Being naturally cautious I haven't even dipped a toe in as yet but this Lyn Alden piece answers some of my questions although the ways to buy mentioned may not be applicable to buying in sterling.  The GBTC Grayscale Bitcoin Trust is available on OTCMKTS.  I don't know if this means we can buy it or not:

https://www.lynalden.com/misconceptions-about-bitcoin/

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2 hours ago, arrow said:

After the Kyoto accord, the msm proclaimed coal dead. Its use in asia did drop for about 3 years, but then steadily increased. The west’s use of coal has decreased, while asia’s has grown. It generates about 40% of asia’s electricity, even higher at about 60% each for China and India. Echoes the msm’s current view of oil as dead.

Both China and India need to move from coal generated electricity, about 60% of electricity generation, to gas, renewables, etc to meet their proclaimed green goals. They need to decrease their coal power by about 5% every year, with a growing middle class and population that needs more energy. Even though China and India have their own coal production, they still need to import coal to support their needs.

image.png.4fce9882cd64562064fd6e09ce1ba41d.png

 

image.png.96338209bb8b897935f4b36cf4d260f9.png

 

When they start switching to gas, it’s going to hugely increase their imports. It will probably due that anyway, as their energy needs keep growing. Especially with China, it’ll make them dependent on Russia, the US (India not China) and the middle East. It’s just not power stations that will need gas,

Gas is used to make chemicals and fertilisers. Fertilisers that Asia will be in increasing need as their population expands.

image.png.2d31641ac4c8827148a227fa2d57b89b.png

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I can’t see how gas won’t be increasing in demand from 2022 onwards. I don’t know high the price will go, but I would’ve thought the shares of oil/gas producers will reflect the rises.

Declaration, I own Shell, Bp, Gazprom, etc.

These are my thoughts on gas, anyone think differently?

 

I own lots of oilies. My concern is them not getting a big enough proportion of the 'emerging energy cake' coming from the Asian markets. Most new demand will be coming from that region and my concern is will just owning oil majors like Shell Exxon etc, be sufficient - or will they be increasingly 'shut out' from participating in new Asian projects. Is the answer to buy more Gazprom (I do have some) or the Indonesian energy co's? I believe India is partnering with the Western oilies so I guess Shell, etc will derive income from that side after all. So am I perhaps just over thinking this and there is not too much to be concerned about - given how slow the industry changes - at least not for the next 10 years or so?                                         

Edited by JMD
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1 hour ago, janch said:

I posted this on the Bitcoin thread but others might find it useful.  Being naturally cautious I haven't even dipped a toe in as yet but this Lyn Alden piece answers some of my questions although the ways to buy mentioned may not be applicable to buying in sterling.  The GBTC Grayscale Bitcoin Trust is available on OTCMKTS.  I don't know if this means we can buy it or not:

https://www.lynalden.com/misconceptions-about-bitcoin/

You can't I believe, FCA recently ruled  no crypto derivatives or ETN are allowed for retail investors for 'your own good' as we are too stupid to understand the risks. Previously you could buy XBT Bitcoin Tracker which I have in my SIPP.

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1 hour ago, janch said:

I posted this on the Bitcoin thread but others might find it useful.  Being naturally cautious I haven't even dipped a toe in as yet but this Lyn Alden piece answers some of my questions although the ways to buy mentioned may not be applicable to buying in sterling.  The GBTC Grayscale Bitcoin Trust is available on OTCMKTS.  I don't know if this means we can buy it or not:

https://www.lynalden.com/misconceptions-about-bitcoin/

Nice article.

Increasingly feeling about Bitcoin "I came for the FOMO, I'm staying for the principles"

By which I mean: the more I understand how Bitcoin's governance model *actually* works, the more I think central banks look screwed, because of the way Bitcoin governance is accountable to its users via the moral hazard of forks (a "feature" CBs cannot hope to compete with).

Don't like central bank monetary policy? Your options are: suck it up, suck it up or suck it up.

Don't like the direction Bitcoin has taken? Fork it!

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6 hours ago, DurhamBorn said:

@arrow Teesside will be booming late cycle.House prices in areas like Redcar will way outperform the country.Massive investment coming.BP might build a huge hydrogen plant on the old steel works site.Anglo American bought Sirius etc.This will be worldwide as well.The energy needed to get there incredible.MSM say sell energy :wanker: 

DB, I recall you writing some time ago, that these specific type of events might happen. I know you talk about your cross market/maths work. But personally I don't think that those prosaic methods adequately explain the brilliant accuracy of your predictions - Instead I believe the true explanation behind your sooth-saying is that you are in fact a 'financial witch'!!!                                                                                                                                       Fortunately, I am a secular kind of guy, (I have even lost 'faith' in money) so this doesn't bother me in the slightest! Anyway, as the economic events play out as this great forum discussed they would, please accept my humble thanks for the brilliant work you do here, more power to your maths sliderule (or should that be broomstick!)

Edited by JMD
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3 hours ago, janch said:

I posted this on the Bitcoin thread but others might find it useful.  Being naturally cautious I haven't even dipped a toe in as yet but this Lyn Alden piece answers some of my questions although the ways to buy mentioned may not be applicable to buying in sterling.  The GBTC Grayscale Bitcoin Trust is available on OTCMKTS.  I don't know if this means we can buy it or not:

https://www.lynalden.com/misconceptions-about-bitcoin/

I bought a Bitcoin ETP in my trading 212 ISA, don't understand Bitcoin just bought it for FOMO reasons.

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damn that nio, i never looked at. Mind i have tsla so im not that bothered, i wish id have kept my NYSE:XPEV though when they IPO'd - was lookinga bit shaky @ $20, fuckers went on to $40 after a while, ah well. You live and learn.

Did you get that BTCE german ETP for bitcoin, I bought £800 of that a few weeks back, i just keep slicing the top off it and leaving it at £800, i think ive had like £200 nearly out of it so far. Keeps me in milk.

Mind you had a a couple a grand in BTC and link as well, thats over £3K now, but im a bit narked at the questions coinbase are asking now, such as nationality and how much you expect to trade this year, think its probably tax shit, but doesnt look good.

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3 hours ago, Cattle Prod said:

In the o&g business, you rarely do projects on your own. Risk is shared out, and your competitors are also your partners. Its weird, but fun too, we all get to know each other. The latest development in this respect has been the national oil companies "coming out". Notable in the last couple of years are Mubadala and Qatar Petroleum - they have been buying into top drawer projects around the world, generally with a major (QP seems to like BP). But Petronas has been doing it a while too. They are building up good technical expertise. Most, however, are still sitting on their arses at home, learning nothing.

NOCs (national oil companies) are generally third rate (Aramco excepted), clueless and moribund. They only know their own assets/country and struggle internationally. They NEED to partner with the likes of BP, Shell, XOM, and in turn the IOCs (international) are happy to have cashed up partners who smile and nod at JV meetings. IOCs have a small share of world oil production compared to NOCs, but all, as in 100%, of innovation comes from IOCs at least in my field. I can't think of a single idea or initiative the NOCs have come up with that we have brought into our workflows. Just look at Pemex: they had a monopoly for 80 years in Mexico. In the very first well that the IOCs drilled there after it was opened up, they found a 1.6bn barrel field, biggest in years. I saw the data: with our tech you could see the oil from outer space. Pemex missed it for decades. Or look at Sakhalin Island gas. Not a simple Siberian hump full of gas, they got XOM in to develop it with some of the most challenging wells in the world.

Short answer: the big IOCs will have a share of every big project going, so don't worry about it. They get invited to participate - just look at Iraq. And though the demand is going to be in Asia, the supply won't be, so it's still a global supply view.

Thanks CP, really great to get a 360% view from someone like yourself in the industry. The subject has been discussed in part before, so the issue kept knawing away at me. I begun thinking this was a risk factor, in terms of reduced future return, that I hadn't fully thought through. But if I understand you correctly, so long as the oil majors at least do JV's with the regional/national companies there appears little to worry about, in fact in terms of reduced risk and quicker project turnaround there may even be more upside to doing things that way.

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I note the Cornish mining industry is opening up again for business. More modestly this time, but it still does have ambitions - and apparently also the reserves - to become Europe's largest Lithium producer. I understand that strategically this may put the UK in prime position for EV production because battery manufacture/fitting logistically means siting these things together.... Hmm, maybe Dyson will make a return to electric cars?                                                                                                                                                                         I had a look to see if I could buy some British Lithium stock, as it has rights to the largest Lithium mine, but it appears to be private company. Does anyone know of any other British miners that are worth a punt?

Edited by JMD
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9 hours ago, JMD said:

But if I understand you correctly, so long as the oil majors at least do JV's with the regional/national companies there appears little to worry about, in fact in terms of reduced risk and quicker project turnaround there may even be more upside to doing things that way.

It's the way it's done. Just google any big field in the world and you'll see a bunch of JV partners listed. NOCs often have 100% of their own country projects, but you wouldn't be able to access them for investment anyway. Quite often the NOCs have invited the IOCs in at home too. One of XOMs biggest assets is in Qatar. Chevron had big investments in Venezuela. BP has a large slice of Russia. Shell dominant in Brunei and Nigeria, ENI in North Africa. Total was invited in by the Iranians till sanction, now the Chinese have it unfortunately.

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Rishi: "We'll have to look at returning to sustainable public finances".

Erm.

Yo, Rish! When was the last time we had sustainable public finances and what does that look like?

Yo, Rishi my man! How's the £600bn infrastructure plan coming?

Rish! What happens to public life when the printing and handouts stop? You know? The situation we wouldn't be in if we hadn't created state reliance and credit-driven economies in the first place?

Rishi! Over here! Rishi! It's Reality! Don't you recognise me?! Rishiiiiiiiiii!!!!

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