Credit deflation and the reflation cycle to come (part 3)

[HousePriceMania]

https://www.rigzone.com/news/wire/bp_goes_on_hydrogen_hiring_spree-22-nov-2021-167084-article/

 

BP Goes on Hydrogen Hiring Spree

[planit]

1 hour ago, ThoughtCriminal said:

To the options boys on here, DB just gave me an idea.

 

If oil is going to 200ish or maybe even 3-400, doesn't that represent huge upside bet with low downside even if it doesn't come off?

 

Can't be many people out there putting 300-400 oil in their numbers.

 

Or am I talking shite??

 

@MvR

 

Not pretending I know as much as MvR (purposefully avoided putting up the Bat signal too many times) but here is my take. I am just starting to experiment in the hope that once a BK event plays out I can make my portfolio less directional and profit from the fear.

Options traders make money by selling premium (they get money when they enter the trade) and taking on risk. Buying  very out of the money calls is a gamble where on average you will lose money.

 

I believe oil will spike at some point [and the resulting shock on the economy will bring on a recession and BK type event].

But the options trades I put on were much smaller scale and nearer term, I sold out of the money Jan puts in USO (1 contract on the 16th and 2 more on the 19th). 

 

Hopefully they will reduce in value and expire worthless in Jan so I can keep the money I received. I will probably sell before expiry and re-enter a new position, rinse and repeat all the way up to $300 oil (only entering trades when I think there is a good risk/reward). 

 

[MrXxxx]

12 hours ago, sancho panza said:

Even with the rights issue,they're equity is miniscule,especially givne the losses lately.

But they are not in a capital intensive area i.e. they provide very much a service product?

[MvR]

2 hours ago, ThoughtCriminal said:

To the options boys on here, DB just gave me an idea.

If oil is going to 200ish or maybe even 3-400, doesn't that represent huge upside bet with low downside even if it doesn't come off?

Can't be many people out there putting 300-400 oil in their numbers.

Or am I talking shite??

@MvR

It depends on the timescale to get there.  @DurhamBorn What's your approximate time scale on 200+ oil price?

Based on the options on /CL futures available on TastyWorks,  the $100 strike call option on the May 2022 futures contract is trading at around $1200 right now, and would be worth $50,000 if oil went to $150 before expiry, or $100,000 if it went all the way to $200.

The $150 strike for the same date is trading at $90. 

That's the furthest date available on TastyWorks though you can go all the way out to 2032 on Interactive Brokers. ( albeit with almost zero liquidity so I've no idea what price you'd have to pay for the options.

I'm not sure how this would translate to options on the Oil ETFs, which have futures roll-over issues to deal with, but you could make a similar punt I guess.

CAVEATS : 

I'd want to look carefully at the futures margin requirements and rules before I took a bet like this in a small account though. IIRC, there comes a point nearer to expiry where the margin requirement is based on what would happen if you owned the underlying futures contract, not the just call option.

Also bear in mind the options expire before the futures contract the options are based does.. I can't recall how long before ( maybe up to a month? ) so I'd check that too.

 

[Majorpain]

13 hours ago, wherebee said:

I am with HSBC in London (not really - this is a hypothetical).  I want a personal loan for 100k in euro.  The bank creates the 100k out of thin air and credits my account.  I then use my multi-currency account to translate to USD (instant).  Has it swollen the supply of USD?

Some would say no, as the original creation was in EUR.  Others would say yes, as I have ended up with USD that I can buy stuff with (inflationary for goods sold in USD).

Whilst its in the bank it makes no difference if its Yen, Euro or Timbuktu rocks, IMO its only when its converted into goods/services that it has any real world impact.  The BOE kind of agrees with me on this, since in its (2009) opinion electronic bank deposits are not actually legal tender....

https://www.whatdotheyknow.com/request/is_electronic_money_actually_leg

Its an interesting read for "Angie of the elder family" having a go at them for assuming their gender and the BOE guy admitting that when the bank creates a loan for someone it is not legal tender money, but people are willing to accept it anyway which is an interesting rabbit hole to go down in the days of non-legal tender crypto!  Better keep it quiet that the majority of the population are already using non-legal tender £'s eh?

[AyrshireBoy]

1 hour ago, ThoughtCriminal said:

And it's not even cold yet.

 

It's like watching an exciting film where you know someone bursts in the room and blows your head off at the end.

I posted this twitter post a while back, seems more relevant now. I really need to get on Gumtree and pick up a Calor gas heater and a bottle.

[Sugarlips]

14 minutes ago, MvR said:

It depends on the timescale to get there.  @DurhamBorn What's your approximate time scale on 200+ oil price?

Based on the options on /CL futures available on TastyWorks,  the $100 strike call option on the May 2022 futures contract is trading at around $1200 right now, and would be worth $50,000 if oil went to $150 before expiry, or $100,000 if it went all the way to $200.

The $150 strike for the same date is trading at $90. 

That's the furthest date available on TastyWorks though you can go all the way out to 2032 on Interactive Brokers. ( albeit with almost zero liquidity so I've no idea what price you'd have to pay for the options.

I'm not sure how this would translate to options on the Oil ETFs, which have futures roll-over issues to deal with, but you could make a similar punt I guess.

CAVEATS : 

I'd want to look carefully at the futures margin requirements and rules carefully before I took a bet like this in a small account though. IIRC, there comes a point nearer to expiry where the margin requirement is based on what would happen if you owned the underlying futures contract, not the just call option.

Also bear in mind the options expire before the futures contract the options are based on expires.. I can't recall how long before ( maybe up to a month? ) so I'd check that too.

 

Can’t offer much help other than Erik Townsend of Macrovoices fame is an industry expert and has made a fortune doing this since the -$47 event last year, I imagine he has some info on the website but haven’t looked

[DurhamBorn]

8 hours ago, macca said:

Problem is affording the shares.. they are not exactly cheap to buy,, iv'e looked before but i would only be able to buy a few..

The shares were dirt cheap last March and then again in autumn.BP were around £2 a share.Repsol 6 Euro.Some of the US ones put on here like Matador (hat tip to Kaplan) have 8x in price and were easily available.This thread was full of people at those prices saying how much lower are they going ,im waiting etc when they should of been buying.The easy multi baggers have passed,but i think the likes of Repsol and BP still have very nice cycle upside.

The thread nabbed dozens of multi baggers at the start of the cycle,however we are at the consolidation part now where the aim is to keep all that capital made and increase it slightly ahead of inflation.There will be very sharp pullbacks along the way and they should be used to add to oilies,uranium,silver etc.

[Yellow_Reduced_Sticker]

https://uk.finance.yahoo.com/news/millions-u-k-covid-loans-050132607.html

 

@Hancock will be along shortly for an in-depth moan!

[RJT1979]

1 hour ago, HousePriceMania said:

https://www.rigzone.com/news/wire/bp_goes_on_hydrogen_hiring_spree-22-nov-2021-167084-article/

 

BP Goes on Hydrogen Hiring Spree

Helium taking out a discrimination case 

[Barnsey]

5 minutes ago, Yellow_Reduced_Sticker said:

https://uk.finance.yahoo.com/news/millions-u-k-covid-loans-050132607.html

 

@Hancock will be along shortly for an in-depth moan!

Helicopter money innit bruv, it worked?

[Sugarlips]

Just now, Barnsey said:

Helicopter money innit bruv, it worked?

How are you defining worked?!

[DurhamBorn]

Oil is a cycle high price so could be anytime,but the most likely window is 27 to 29.Gas might happen earlier.2023 shows a squeeze starting.I dont trade options,but it might be worth looking at gas later next year if it falls back,or maybe spring 23.

For people with only low amounts of capital trying to multi bag direct silver exposure might be the best option.$200 to $300 could easily happen and is mush easier to buy and hold.Im slowly building more exposure in the metal itself.

This thread has lots of people at different stages in life,and hopes/needs.A good example are me and my son.Im aiming for inflation+ ,he would like a multi bag.His £30k capital (22 years old) is 100% in silver.

The other areas for best multi bag chance is Uranium and silver miners.

If i had £20k i wouldnt buy BAT id buy silver.If £100k id buy £30k silver,then £15k BAT etc and build a portfolio.We have all been there who have built wealth from nothing.

[Hancock]

18 minutes ago, Yellow_Reduced_Sticker said:

https://uk.finance.yahoo.com/news/millions-u-k-covid-loans-050132607.html

 

@Hancock will be along shortly for an in-depth moan!

Only thing to moan about is i didn't get a contract like John Beckwith. 

I do wish they'd go back to at least trying to hide their corruption.

 

[Hancock]

10 minutes ago, DurhamBorn said:

If i had £20k i wouldnt buy BAT id buy silver.If £100k id buy £30k silver,then £15k BAT etc and build a portfolio.We have all been there who have built wealth from nothing.

If i had 20k id gamble on their being a huge stock market crash and go balls deep then!

But how do you see silver going to $200 when circa £47 is the highest its ever been and that was just briefly.

Just to play devils advocate, Asia has been on a 3 decade manufacturing and infrastructure binge, and its averaged closer to $16/17 in the last 10 years.

 https://tradingeconomics.com/commodity/silver

 

[feed]

11 minutes ago, Hancock said:

If i had 20k id gamble on their being a huge stock market crash and go balls deep then!

But how do you see silver going to $200 when circa £47 is the highest its ever been and that was just briefly.

Just to play devils advocate, Asia has been on a 3 decade manufacturing and infrastructure binge, and its averaged closer to $16/17 in the last 10 years.

 https://tradingeconomics.com/commodity/silver

 

If the ESG lot go after the miners, then anything that's already out of the ground becomes a lot more valuable. 

[Hancock]

5 minutes ago, feed said:

If the ESG lot go after the miners, then anything that's already out of the ground becomes a lot more valuable. 

Who are ESG?

[feed]

1 minute ago, Hancock said:

Who are ESG?

Environmental, Social, and Governance
ESG stands for Environmental, Social, and Governance. Investors are increasingly applying these non-financial factors as part of their analysis process to identify material risks and growth opportunities.

[planit]

I have a theory Biden might have been forced to announce the $50 SPR release.

 

US oil stocks (commercial+SPR) have declined from 1.17bn Aug 2020 to 1.04bn Nov 2021, a 118m barrel drop in little over a year.

Commercial storage is hitting a minimum and can't really fall further without there being an obvious supply problem (and Zerohedge mentioned they can't go below 20% [sic?] capacity for technical reasons).

Releasing 50m barrels over the next 6 months continues the decline and will kick the can down the road. In the mean time perhaps he believes he can get access to 1mmbpd of Iranian output as part of a 'deal'.

This might put off a price spike for the foreseeable future but it doesn't solve any of the medium term problems, if anything it makes them worse as investment in the US etc will be lowered due to market manipulation (+ the reserve release is due to be returned).

[Sugarlips]

39 minutes ago, Hancock said:

If i had 20k id gamble on their being a huge stock market crash and go balls deep then!

But how do you see silver going to $200 when circa £47 is the highest its ever been and that was just briefly.

Just to play devils advocate, Asia has been on a 3 decade manufacturing and infrastructure binge, and its averaged closer to $16/17 in the last 10 years.

 https://tradingeconomics.com/commodity/silver

 

One theory is China might have to re-peg the Yuan to gold at 5 or 10x its current price. Initially this would be a domestic revaluation but the spillover would be inevitable.

The wall st silver guys reckon they are ‘draining the comex’ and there isn’t the physical Oz left in the vaults. 

[ThoughtCriminal]

1 hour ago, DurhamBorn said:

Oil is a cycle high price so could be anytime,but the most likely window is 27 to 29.Gas might happen earlier.2023 shows a squeeze starting.I dont trade options,but it might be worth looking at gas later next year if it falls back,or maybe spring 23.

For people with only low amounts of capital trying to multi bag direct silver exposure might be the best option.$200 to $300 could easily happen and is mush easier to buy and hold.Im slowly building more exposure in the metal itself.

This thread has lots of people at different stages in life,and hopes/needs.A good example are me and my son.Im aiming for inflation+ ,he would like a multi bag.His £30k capital (22 years old) is 100% in silver.

The other areas for best multi bag chance is Uranium and silver miners.

If i had £20k i wouldnt buy BAT id buy silver.If £100k id buy £30k silver,then £15k BAT etc and build a portfolio.We have all been there who have built wealth from nothing.

This is the "problem" I'm going to have soon if and when my house sells.

 

I'm already too heavily in cash as it is, I'll have another 90k soon.

 

Other than BAT and a few oilies and gas, I don't really fancy going too heavily in stocks with it.

 

Are you meaning physical silver DB? Or ETFs?

Thanks to MvR and others for replying regarding my options question.

 

I'm very much a total novice so always appreciate chances to learn.

[DurhamBorn]

1 hour ago, Hancock said:

If i had 20k id gamble on their being a huge stock market crash and go balls deep then!

But how do you see silver going to $200 when circa £47 is the highest its ever been and that was just briefly.

Just to play devils advocate, Asia has been on a 3 decade manufacturing and infrastructure binge, and its averaged closer to $16/17 in the last 10 years.

 https://tradingeconomics.com/commodity/silver

 

Because im good at this 

Asia's expansion of production was dis-inflationary.As they turn to consumption as the west pulls back supply its hugely inflationary.

Silver might not go there,but along with uranium and natural gas its at a price that could look very very silly looking back in the future.

Its a no brainer to me to own a good chunk.£10ks worth,even £5k could be the difference between being fine and the poor house for ordinary people.Bigger holdings could provide huge capital right at the top of the cycle.

[sancho panza]

11 hours ago, JMD said:

Is Spain's BBVA a future 'RBS waiting to happen'? Bad management, devil may care upstart, though their USP seems to be tech focus... Can't make out whether they are public or private?

It's lsited

running it's Dowd Buckner ratio

it's leveraged at 20/1 so not as leveraged as Barclays which comes in at 40/1....................

However,much as I prefer that ratio as a guide to sovlency to all the capital tier 1/tier 2 BS(where they risk weight the assets using their own historical default data----skew.....meh!),it still isnt a catch all.

From the  link we can see they operate in some countires that have a lot more form for defaulting than say Germany.Spain was infamous during the 2000's as people were mrotgaging hotel rooms and the like and none of the banks noticed,well they didn't really need to as the ECB picked up the bill.

https://www.investing.com/equities/bbva-company-profile

As of December 31, 2020, it operated through a network of 7,432 branches and 31, 000 ATMs in approximately 30 countries. It operates in Spain, Mexico, South America, the United States, Turkey, the Asia-Pacific, and rest of Europe.

 

[DurhamBorn]

36 minutes ago, ThoughtCriminal said:

This is the "problem" I'm going to have soon if and when my house sells.

 

I'm already too heavily in cash as it is, I'll have another 90k soon.

 

Other than BAT and a few oilies and gas, I don't really fancy going too heavily in stocks with it.

 

Are you meaning physical silver DB? Or ETFs?

Thanks to MvR and others for replying regarding my options question.

 

I'm very much a total novice so always appreciate chances to learn.

Both,physical i view as worthless i dont even add it into my "wealth" calcs,,i bought mostly before the VAT change leaving the EU and is security.I use Wisdom tree physical silver PHSP and some Bullionvault. @Harley might be able to offer up other funds where they own the physical without counterparty,borrowing etc.

[Starsend]

On 22/11/2021 at 19:18, Cattle Prod said:

What the FAANGMAN hides ..

This is very similar to what happened the last time we had a huge tech bubble back around 2000. The smaller players tumbled first, the larger players followed a few months later.

Be looking at figures like that for Tesla by the Spring I reckon, if not before.