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

[DurhamBorn]

https://swarajyamag.com/insta/big-boost-for-indias-energy-independence-reliance-and-bp-find-gas-in-asias-deepest-offshore-field

These fields will supply 15% of India's growing gas demand by 2023,growing into the biggest run up in gas prices ever i expect.

The reason BP and others are pushing green energy in the west is so they can learn all about it while they make the real money east.BP is very well placed for India in both supply and growing ICE use and fuel supply.

[janch]

7 hours ago, MrXxxx said:

2. There is never a right time/always more to read, so get started now and `learn on the job`rather than waiting.

This is me.  I would probably have left my cash in the bank/NS&I if I hadn't discovered this thread and followed it.  I plunged in not at the best time and bought the worst (cannot be named) share first.  I still have it as I can't bring myself to sell the losers and it may yet recover or be bought out. It was a baptism of fire but I've carried on and learnt so much plus it's a new interest.  I held on in March and didn't panic when any other novice may well have given up.  So a big thankyou to all on here and especially @DurhamBorn.  You helped me keep my nerve.  Having a road map means it's much easier to get a feel of the direction of travel than just buying random shares here and there. 

However I am also trying to grow my meagre pot so have branched out a bit from the contrarian approach.  I have  two "green" holdings: INRG and IEM which so far are growing nicely and I figured it can't hurt to follow sentiment with the herd for a time at least while the green agenda is being pushed so hard.

So I guess that makes me a shizophrenic investor (new category?) as I also have faith in the reflation approach and the majority of my shares fall into this camp. 

I have a couple of consumer staples which don't seem to be doing much Tesco and Diageo and as soon as they turn positive I will probably cash in and use the proceeds elsewhere.  I've learnt some pretty basic things like seeing when the dividend is due and how much it is etc.  So it's a balance because their dividends would maybe amount to quite a lot over say 20 years.

My worst mistake so far was to try and jump on the Covid bandwagon and I bought a (luckily) small amount of Genedrive GDR right at the top thinking it could rocket.  Hopefully I won't do this again. 

I just heard they've cancelled Christmas.  Words fail........

Happy New Year to all and this thread and the rest of Dosbods (thanks@spunko)can keep us sane.

[Noallegiance]

Tier 4!

Hands up who thinks Andrew Bailey received a phone call this morning?

[MrXxxx]

14 minutes ago, janch said:

I have a couple of consumer staples which don't seem to be doing much Tesco and Diageo and as soon as they turn positive I will probably cash in and use the proceeds elsewhere.  I've learnt some pretty basic things like seeing when the dividend is due and how much it is etc.  So it's a balance because their dividends would maybe amount to quite a lot over say 20 years.

My worst mistake so far was to try and jump on the Covid bandwagon and I bought a (luckily) small amount of Genedrive GDR right at the top thinking it could rocket.  Hopefully I won't do this again. 

Couple of [rhetorical] questions regarding this:

1. Why did you buy Tesco and Diageo?

2. So GDR didn't rocket but did you buy it as a short-term trade or a long-term hold, and which one of these two approaches do you consider you are [or were] when you bought it?

[Loki]

30 minutes ago, Noallegiance said:

Tier 4!

Hands up who thinks Andrew Bailey received a phone call this morning?

In what way? An excuse for more stimulus?

[Noallegiance]

3 minutes ago, Loki said:

In what way? An excuse for more stimulus?

No no Boris was just wondering how he got his hair so flat.

[leonardratso]

2 minutes ago, Noallegiance said:

No no Boris was just wondering how he got his hair so flat.

its obviously all the slime hes applied so that anything bad can slide off him.

https://www.dailymail.co.uk/news/article-9069515/Bank-England-chief-Andrew-Bailey-tried-remove-report-savings-scandal.html

[DurhamBorn]

3 hours ago, Cattle Prod said:

This is an example of when I said not to worry about missing out on regions or territories, that if you buy the large integrated companies, they will have a piece of all the best projects around the world. Reliance wouldn't have a clue how to find that, let alone drill it in 2000m of water (not easy). So they partner up with BP. They were probably invited in. You'll see the big western oil companies pop up again and again. They are miles ahead in tech and skills.

This is the key isnt it.Companies like BP,Repsol etc have hundreds of years old cultural connections.Its simply the Raj in India.Reliance will trust BP and its an easy sell.BP are clever enough to know they have to look like the junior partner and take a junior slice.Repsol do the same in South America etc.Drilling gas in 2000m of water is something else.

On paper it looks like BP are the smaller partner,and that suits them.They are also running out a huge fuel station network in India.Obvious where their oil is going to be going.

[DurhamBorn]

On the subject of BP this is another great move from the company,

https://www.bp.com/en/global/corporate/news-and-insights/press-releases/bp-acquires-majority-stake-in-largest-us-forest-carbon-offset-developer-finite-carbon.html

I think as the cycle develops natural carbon offsets will really grow.They are the lowest cost solution,and a no brainer.Planting and protecting forests is an easy sell,and provides huge bi-diversity gains on top of carbon storage.BP has made a great move here and i expect this new company to end up a great profit provider to BP.As a shareholder im very happy that my capital is seeding and taking control of this.

I was a bit worried that BP might be going all woke,but what im seeing is fantastic oil and gas finds alongside really good strategic investments in new energy.

Im full to the gunnels but if i wasnt id be still buying at any price under £3.50.They are going over £10 +divis in the cycle i think.Minimum.

[JMD]

15 hours ago, Cattle Prod said:

Thanks for that post, and @JMD. I get the "crisis go to waste" idea, but I've really been struggling with "why" and to "what end". The quoted bit is food for thought. I can see they needed cover to dump in liquidity, but they could have done that after a stock market crash which was going to happen anyway. Why deliberately cause so much pain? I read yesterday that calls to the NSPCC were up 80% this year which made me very angry.

So its a case of sociopaths or idiots? Probably both, I'd say. I still think most of them don't understand that there is no pandemic any more. There are hardly any scientists or engineers in government, and I've met these PPE Oxford types, they wouldn't have a clue how for example check the assumptions going into a graph. Or think critically/logically at all really. They think like all the world is a linguistuc game. Thats why you see them laughing and sniggering to each other off camera. 

That's not to say there isn't also a bunch of sociopathic wankers in there stirring it up, not caring who gets hurt.

Good point on deaths caused by lockdown going into excess death curve, unfortunately. I brought that up with my MP to, expect that. So far, it's barely visible. I expect we'll be above range next year as cancers, heart disease, and stroke take their toll. But there won't be the sharp parabola you see in Feb-May. That was a sharp, short epidemic. There is none now.

I didn't see the control the population element coming, frankly. I really didn't think it would be accepted so easily, it's terrifying. I decided the best thing I could do is keep focussed on accumulating capital as best I can till I can get out. Money is the only way left to freedom, and there will be increasingly less people who have it. I think there is a short window left to get family resources in the door, just a few years left. That's why this thread is a godsend, even if we are anonymous, it's good to know you're not alone.

Must say i don't know the why, or to what end, as unfortunately I'm not that insightful. But I do remember that Boris Johnson initially mocked any hint of controls saying 'it is an Englishman's right to go to the pub' or something similar. He then did a 180, so something 'strange'(?!) happened there. But I shall eagerly await Michael Green's take on the global government responses, ie all Western nations used the same policies, plus apropos this thread it is Green's macro investment focus I'm more interested in. My only personal thoughts so far are that the control instinct coming from government chimes with the authoritative tendency emerging from the younger generations, both left and right, so we should expect more of the same to follow I think. I did previously state that I'm not looking at this through conspiratorial eyes, that wasn't meant as a feeble/easy get out by me - moreover I'm actually quiet sanguine about all this!                                                                                                                 ...Maybe such a 'wild statement' demands some explanation... It is also an opportunity to give some end-of-year thoughts - vis a vis Harley's excellent suggestion - anyway I posted couple weeks back how my macro view had begun to crystallise this year - mainly I must say because of this excellent thread keeping me sane knowing that others had similar concerns, motivations, etc. And also due of course to DBs epic investment thesis, and which gives me hope that an investment novice like me can hopefully secure, maybe evan grow, my wealth through the coming cycle. But also philosophically, Neil Howes Fourth Turning generational cycle theory, helps i find puts things into context for me. The theory is somewhat derivative (every culture has a similar alagory to tell) but Howe's recent interviews and his excellent narrative explanations show I think it's continued contemporary relevance (he also has a new book out next year). That book might not work for everyone but I find I'm no longer so shocked by events that I would have formerly considered as being totally mad or inexplicable. Anyway just some thoughts... as they (the Chinese no less!) say, interesting times...

[JMD]

14 hours ago, DurhamBorn said:

Iv been going over a lot of data from the early 1970s charts to try to get a feel for where our inflation might come from this time.What might be the trigger.

Its pretty obvious back in the 70s inflation was mostly a local issue,not worldwide,and it tended to ebb and flow with the odd periodic pressure from worldwide commodity prices.

Since the start of dis-inflation in 1982 there is a graph that times perfectly in the opposite direction.The growth of global supply chains,starting first with Japan and its just in time manufacturing.

That process is now in reverse,because they are forgetting the comparative advantage and are concentrating on security of supply instead and home political problems.This will make things more secure but only by using higher cost local supplies.Already these supply chains are fractured causing huge problems and thats with demand down with lockdowns etc.Indeed my own company has to keep paying people double time to work sundays when parts arrive that werent there when they should of been friday,never heard of before.I keep getting asked "is there anyone local?" 

These fragmented supply chains will give an inflation pulse very soon,and then it will be compounded as demand moves higher out of lockdowns.

There is massive liquidity building,and that means it can be done,but with much higher prices being paid.

I think that will be the story of the start of this reflation cycle.Fractured supply chains needing on shoring that means expanded energy use worldwide that then feeds into already rising costs.

I think looking at investments its clear that all companies that use complex supply chains are going to see lower profits as although they will get higher prices for their products,their supply chain changes and input costs will be higher.

So if we think in simple terms its how many links to the consumer.A car has around 15,000 links,each part etc.A fag from BAT probably has around 15 .

An integrated oil company hardly any.

Potash probably less than 10

A telco,its it around 3? is it direct sale of product once cables are in the ground?

If my thesis on this is correct,then the winners in the cycle ahead will be the companies with the lowest numbers.They will be able to price up with the inflation everyone else is suffering,but will only be suffering a small amount of that inflation themselves.However they need to be companies where demand wont fall much and they are needed/wanted.

Some complex areas will be expanding ,yet might make no money out of the cycle.

It could be no EV car maker makes any money during the cycle for instance.

 

 

 

 

Thanks DB, insights into ideas such as 'distressed supply chain' risk etc, really help because I am currently shortlisting my reflation stocks in case we get a BK event. Ideas like that help me to screen which companies I might consider buying.

[JMD]

11 hours ago, wherebee said:

I'd say one thing to consider re inflation proofing your life are clothes.

 

I remember when a pair of jeans was a major purchase.  Noone under 40 will think of clothes as something to budget for.  If you are unlikely to change your size much, buying 3-4 pairs of good quality jeans or trousers, and a bunch of tshirts and shirts, could be very sensible.

We filled up on socks and underwear at the start of the pandemic due to supply chain fears for australia.  I think we will double dip, stick them in a suitcase, in sealed packets, and leave them until needed.  

I could see the days of cheap clothing for the west being over.

Interesting. It leads me to ask a question that I have kinda posed before, though last time it was specifically about the investment potential of 'future collectables'.                                                                                   Anyway my question this time round is: if you had a spare room at your disposal, what 'cheap/inexpensive' items would the wise people here hoard/store, in the expectation that said items would be in great demand in future years?

[Hunty]

1 hour ago, DurhamBorn said:

 

Im full to the gunnels but if i wasnt id be still buying at any price under £3.50.They are going over £10 +divis in the cycle i think.Minimum.

Agree. I'm £150k all in. Av 1.752..

HOC. £100k Av 1.925.

Gold, Black Muck.

Some you win. Some you'll lose.

I'll take that bet.

You talk sense. Same hymn sheet kidda..  

[Popuplights]

16 hours ago, stokiescum said:

No it’s fun I am a horrible cunt but even I know every decade or so we get a recession it’s been obvious we are due a big one like the 1930s.4 years ago was the wake up call to get your house in order ie brexit which was predicted at the time to decimate the uk.Covid is a black swan no one could have predicted the time of .so if you’ve got a huge mortgage 2 loaned cars on your drive and maxed out credit cards tough fucking shit .you should have thought about brexit and positioned yourself accordingly 

I think someone has Hijacked @stokiescum account, as this post only contains facts and sensible opinion, with no mention of pussy, booze or Globe-shaped drinks cabinets.

[sancho panza]

On 18/12/2020 at 16:13, Cattle Prod said:

I'm trained to spot the signal in the noise, a drop of oil in a vast amount of data that means a big field. That graph is the signal, and everything, I mean everything else that is being bandied around on testing, cases and deaths is noise. Pure and simple. All of it is contaminated data. Comparing all deaths this year to all deaths in previous years is uncontaminated. That curve does not lie: you cannot have an epidemic without excess deaths. It is impossible. I can't fathom why people can't see it, I've sent it to my MP etc etc. It's maddening, frustrating, f'n crazy making. What you've said has given me a glimmer of hope!

I agree CP,the truth lies in the death data.There are nuances behind the data but the up front count is something you jsut can't get around.

When you look at that chart,you can see that before and after the spike in Mar/Apr the line was actually below many other years.

And here's the kicker.WHen you go back to 2000,the population of the UK was 58.79 million.Currently it's 66.65 mn.............so per capita,this year may not even beat 2000 and possibly some other years as well.

I saw Julia Hartley Brewer getting interviewed on SPiked the other day and she was saying that all the conspiracy theories are undermined by the stupidity of our political class.Which I agree with.I think she's missing the fact that the Russian/Chinese politcal classes are quite astute and when you see the outcomes in the West,they do suit them.

One final covid point,Clare Craig-again....-has written an excellent paper on the fact that asymtomatic transmission is not as prevalent as claimed.If that is the case then clearly,locking down healthy people is pointless.

https://lockdownsceptics.org/2020/12/19/#has-the-evidence-of-asymptomatic-spread-been-overstated

Harmful lockdown policies and mass testing have been justified on the assumption that asymptomatic transmission is a genuine risk. Given the harmful collateral effects of such policies, the precautionary principle should result in a very high evidential bar for asymptomatic transmission being set. However, the only word which can be used to describe the quality of evidence for this is woeful. A handful of questionable instances of spread have been massively amplified in the medical literature by repeatedly including them in meta-analyses that continue to be published, recycling the same evidence base.

 

[King Penda]

9 minutes ago, Popuplights said:

I think someone has Hijacked @stokiescum account, as this post only contains facts and sensible opinion, with no mention of pussy, booze or Globe-shaped drinks cabinets.

It’s alleged that stokie was got a bit of a cough and refrained from getting hammered last night.or he has miss calculated and guzzled to much of his self imposed alcohol allowance and was sober last night due to bad maths

[nirvana]

6 hours ago, Hunty said:

Agree. I'm £150k all in. Av 1.752..

they haven't been 1.75 since 1993 so I guess you're what they call a 'long term investor'? 

[Democorruptcy]

9 hours ago, DurhamBorn said:

On the subject of BP this is another great move from the company,

https://www.bp.com/en/global/corporate/news-and-insights/press-releases/bp-acquires-majority-stake-in-largest-us-forest-carbon-offset-developer-finite-carbon.html

I think as the cycle develops natural carbon offsets will really grow.They are the lowest cost solution,and a no brainer.Planting and protecting forests is an easy sell,and provides huge bi-diversity gains on top of carbon storage.BP has made a great move here and i expect this new company to end up a great profit provider to BP.As a shareholder im very happy that my capital is seeding and taking control of this.

I was a bit worried that BP might be going all woke,but what im seeing is fantastic oil and gas finds alongside really good strategic investments in new energy.

Im full to the gunnels but if i wasnt id be still buying at any price under £3.50.They are going over £10 +divis in the cycle i think.Minimum.

As you mentioned a price.... Barclays put a note out earlier this week:

Quote

 

Analysts at Barclays upped their target price for shares of oil major BP, telling clients that the capital outlays needed to transition towards renewable energies would not come at the cost of its near-term shareholder returns.
"Long-term stewardship requires that the company evolves alongside the society that it is ultimately there to provide energy for," they said in a research note sent to clients.

"In theory, the company offers investors the vision of what a future energy group should look like - lower carbon, more stable earnings and less reliance over time on oil and gas."

Yet some investors were seemingly fretting that BP's plans to slash its output of fossil fuels by 40% by 2030, together with a ramp-up in low-carbon spend would depress cashflows in the near term.

"Our own analysis shows that an improved mix of barrels, combined with the cost-savings programme, is set to leave upstream cashflow at least unchanged to 2025, even with the disposals," they retorted.

"Add to this the growth in overall corporate cashflow from the consumer business, and the implied 13.9% [free cash flow yield] yield on which we estimate the stock trades, and we see a compelling investment case."

Barclays therefore revised its target price from 400.0p to 475.0p while reiterating its 'overweight' stance for the group's shares.

https://www.hl.co.uk/shares/shares-search-results/b/bp-plc-ordinary-us$0.25/share-news

 

 

 

[ThoughtCriminal]

If ever a graphic screamed "Short the bastard!", but then on your other shoulder the good angel, let's call him DB, is saying "Marathon not a sprint my son!". 

 

Screw you DB, screw you 😉

[Loki]

17 minutes ago, ThoughtCriminal said:

If ever a graphic screamed "Short the bastard!", but then on your other shoulder the good angel, let's call him DB, is saying "Marathon not a sprint my son!". 

After this year I am allowing myself some gambling/fun money...luckily I only put £35 on Trump as (God bless you durhamborn) I'm aware the market likes to hurt as many as possible 

It's not even about the money, it's about having some excitement and some hope.  I won't be touching my ISA.

[DurhamBorn]

@Democorruptcy looks like Barclays are using oil at $60 for their price targets,BP also used some sleight of hand over their "40% less oil and gas",it doesnt include Rosneft for one.I think their price target is a fair one if inflation stays below 2%.I think oil will average $90 to $120 over the cycle though with highs between $180 and $380 a barrel depending on if things go parabolic towards the end.`Gas should outperform oil on the average increases i think.

I really like the deal to increase ownership in Finite Carbon.I think once the world understands net zero wont all come from renewables natural carbon offsets will become a huge industry and rightly so.Its always amazed me that we chop down the worlds forests then think a windmill is the answer.Finite Carbon is one of those companies that in a parabolic rise towards the end of the cycle could be an IPO with massive valuation.

Of all the renewable energy bubbles we are likely to see,the one hardly anyone mentions is natural carbon offsetting,yet i think it will become maybe the biggest market of them all.Looks like BP think thats possible too and of course they can sell the credits as a package with their energy through their trading platform,probably the best in the industry.

[ThoughtCriminal]

6 minutes ago, Loki said:

After this year I am allowing myself some gambling/fun money...luckily I only put £35 on Trump as (God bless you durhamborn) I'm aware the market likes to hurt as many as possible 

It's not even about the money, it's about having some excitement and some hope.  I won't be touching my ISA.

Same here. 

 

Think it's time a spread betting account had my name on it. 

 

Just for a bit of fun. 

 

Fast forward two weeks and I'm on here asking if I can kip on anyone's sofa lol

[DurhamBorn]

@ThoughtCriminal Tesla is an amazing example of loose money distorting markets for a while.They keep putting out $5 billion share issues to hungry investors at prices like the above.Nuts.Those investors are really saying we are prepared to fund you and get back 10c in the $ if we are lucky.People are simply buying the dream that the company will own Mars one day and run a shuttle bus service there and back,replace all cars on the road here,take over NASA and everything else.

I think its more likely BAT will make more profit from 1 box of fags than Tesla will deliver shareholders from here in 8 years.

Im a dinosaur though,the guy at work told me his son (19) was doing well trading shares,that Tesla and Zoom were great buys now as everyone would use them in the future.

[Loki]

5 minutes ago, ThoughtCriminal said:

Same here. 

 

Think it's time a spread betting account had my name on it. 

 

Just for a bit of fun. 

 

Fast forward two weeks and I'm on here asking if I can kip on anyone's sofa lol

I'm just going to see if I can jump on the forecast rise in silver, and then open a few 'sell' CFDs once we reach all time highs.  Nothing too complicated.

That said I have a feeling the highs will last longer than anyone expects

[ThoughtCriminal]

7 minutes ago, DurhamBorn said:

@ThoughtCriminal Tesla is an amazing example of loose money distorting markets for a while.They keep putting out $5 billion share issues to hungry investors at prices like the above.Nuts.Those investors are really saying we are prepared to fund you and get back 10c in the $ if we are lucky.People are simply buying the dream that the company will own Mars one day and run a shuttle bus service there and back,replace all cars on the road here,take over NASA and everything else.

I think its more likely BAT will make more profit from 1 box of fags than Tesla will deliver shareholders from here in 8 years.

Im a dinosaur though,the guy at work told me his son (19) was doing well trading shares,that Tesla and Zoom were great buys now as everyone would use them in the future.

Not seeking trading advice, natch, but SURELY that share price isn't sustainable? 

 

Even if they became the Amazon of cars, and that just isn't going to happen.