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

[DurhamBorn]

35 minutes ago, jamtomorrow said:

Same. I don't want remote-control anything, just a garden wall that isn't falling down. Can't even get someone out to quote. Might have to do it myself. Which would be no bad thing, in terms of learning a new and useful skill

I did my garden wall myself earlier in the year and enjoyed doing it.A few bags of blue circle ready mixed mortar ,a pointing tool and a mortar board.It looked a bit funny at first bit after a couple of weeks looked great once it weathered a bit.I actually then got my 7m ladders out and repaired all the little small bits coming away etc on my gable end re-pointing them.It gets the wind,front and back were fine.Iv got a small bit of damp coming through above one window i think its next doors downpipe blocked as it pisses out so will be splashing up under the tiles.I can clean her gutters or silicon in some pvc so mine goes down my downpipe hers splashes all over the place on her side.

[ThoughtCriminal]

4 hours ago, Harley said:

Only a Dosbodser would, in the cause of financial research, risk popping into a layby in the dark of the morning to chat to a man with his funny hanging out!

PS: "Trickle down" you say?  I would have done worse if you had collared me!

🤣

 

Yeah, he looked a bit shocked when he's stood on the side of the A19 answering the call of nature when a 6"3 skinhead with a psychotic belgian shepherd leans over the fence and says "You been busy?" 😂😂

[DurhamBorn]

16 minutes ago, Noallegiance said:

So oil companies need to buy gas infrastructure over the next few years, including hydrogen, I assume?

LNG yes,its the lag on that that forces prices up.Hydrogen is just an extra really,more to capture wasted wind power and store it.I wouldnt base investing in any of the companies based on hydrogen itself,its just a future add on to profits for the big oilies.I dont see stranded assets in oil,even out to 2050,but i do see a long slow decline in demand and output,but a very profitable industry still.Integrated are laughing though because combines prices will be much higher,and so will combined demand.

[JMD]

52 minutes ago, DurhamBorn said:

I wont have a car unless it costs me around £400,,,,,,,,,,,,a year.,,funny enough my 16 year old Pug needs some money on it next month for test,new spring,new caliper,leaking brake fluid on other caliper and maybe other bits.Im hoping i can get it through for around £400 to £500,but over the last 23 months its only cost £220.11 year ownership £5300 bought cost, £2400 spent on it so far so its cost £700 a year depreciated to zero value.

Bit off-topic maybe, but i've heard that cars, pizzas and dumpster-diving (though not much mentioned recently) have their their own dispensation?!

Anyway, my own Ford Focus will be 18 years old next year and i will be looking to replace it with a SUV - great practicality, plus really like the idea of higher ride height!

Would anyone have a recommendation for a 5-year old SUV (depreciation sweet spot?), petrol or diesel (though diesel fuel may be banned soon?). Am seeking reliability - because kinda hoping to make it last out until its 20th birthday at least!! Plus ideally looking for something under £10k, with good running costs (i.e. no huge BMW replacement-parts-markup con/expensive electronics)... Something like a Nissan Quashqai perhaps, though apparently their reliability is not great? 

[sancho panza]

On 11/10/2021 at 21:26, UnconventionalWisdom said:

Interview with our friend David Hunter: 

 

My summary: 

- Dollar tops here
- Target for S&P was 4500 in July, now it's shifted to 5300 (or possibly 5500)
- 42000 on the DOW
- 18000 on Nasdaq
- 2900 on Russel
- 80% drop in equities afterward the rise
- FAANGS, industrials, commodities all to rise together
- Big increases in airlines
- Bearish on oils- sees now as the top.
- Bonds have gone up, but will go down before going up even higher (to 2.5 on the 10 year).
- Gold to 2500 before the bust,
- silver to 50 before the bust (as stated before)
- Long consolidation for metals 
- Miners have been underperforming due to bad managers- got excited at the wrong time- speculation.
Now better run and a hated asset class.
- Metals the best asset class.
- Miners never been more profitable (See Jeff Clark Video from a couple of days ago on the same channel)
- Big crash afterwards with equities going down up to 80%
- Fragile place due to pressure of leverage combined with ecomonic difficulties due to Covid. 
- Monetary mistake will result in a big problem.
- Central banks between a rock and a hard place- either way they go will loead us to a bust.
- Recovery cycle. 
- Inflationary led recover-certain sectors will be hot.
- Bust contained in a 12 month period
- Peak to trough 6-9 months.
- Bulk of assets will be hit hard
- 2 assets to buck the trend- US treasuries and US dollar
- 80 on DXY, the bust will head to 120 (possibly 140)
- Treasuries 10 year to zero (maybe negative), 30 year 3% down to 0.5%) 
- Inflation to deflation in the bust. 
- FED will print like they have never printed before. 
- Leverage makes this the largest bust in history
- Central banks the only answer and they will do whatever to save the system.
- 20-30 trillion on the FED's balance sheet. Similar around the world.

He extrapolates a lot from hsi roadmaps and when you go through them individually in slow time,they make a lot of sense.His midn really does work at 100mph

Thanks for tkaing the time to write it down.I'm time poor this week.

On 11/10/2021 at 23:08, PrincessDrac said:

Well if you had told me BP would be 360p today a few weeks back when it touched 276p I would have looked in disbelief. The beauty of investing and the market.

Will oil go higher, part of me thinks they want cost push inflation, so yes, says the one who sold out oil today.

My brother has a much bigger pot than me, he went out of BP at 332p on 60k shares at £45k profit. I'm ribbing him now, but like he says £45k was his price out so it's done move on other position's will come and go that's the market.

I hope Hunter's correct about silver and the miner's, seems along time ago since the dizzy heights last August, it's as if the miner's (PM) are stuck in a downward wedge and the bullion banks have complete control of the gold and silver market. 

 

I loaded up on calls aroudn that 280 mark but had some XOM and RDSB trades deep in the red for two months.Two weeks and they were green but I chickened out and tookm profits with RDSB at 1540........

Having said that I really don't udnerstand thes epeople taking profits at these levels in oilies as the options are limited elesewhere.

Gold and silver do appear due a run up imho.I've bored on for a while about how cheep cheep their FCF yields are.

On 12/10/2021 at 07:39, Seacrest said:

How does the Uk post high,s from here unless there is a huge disconnect from reality.  I would expect profit warnings shortly,   N2EX for this afternoon has Electricity priced at over 40p per Kwh,  you also need to factor in the levvies imposed on Industry that will add 35% to the cost of the consumed,  so between 6pm and 8pm un hedged industry is paying somewhere around 56p per Kwh for power. 

CO2 is available from europe at almost 4 x the cost of the limited and now controlled supply  in the UK,  I could go on. profits from companies are being  eroded fast,  some Utilities will work 90 days payments  for Industry  if you are reporting out quarterly and using a yearly average as your cost base we are shortly going to see who is unhedged,  its far too late for anyone to hedge now until next autumn unless there is a huge disruption coming,  business who's suppliers have gone to the wall, cannot hedge outside of contract so the hedges have gone as well they are also now subject to next day pricing.  I guess the industry levvies  could be stopped for a while so they only pay consumed cost.    these are indeed interesting times...  

Very nuanced version of teh margin compression thesis.Hard to disagree with.All energy users are going to be feeling it to varying degrees.I wish I could udnerstand the the last bit in bold but I get the gist.

[Noallegiance]

15 minutes ago, JMD said:

Bit off-topic maybe, but i've heard that cars, pizzas and dumpster-diving (though not much mentioned recently) have their their own dispensation?!

Anyway, my own Ford Focus will be 18 years old next year and i will be looking to replace it with a SUV - great practicality, plus really like the idea of higher ride height!

Would anyone have a recommendation for a 5-year old SUV (depreciation sweet spot?), petrol or diesel (though diesel fuel may be banned soon?). Am seeking reliability - because kinda hoping to make it last out until its 20th birthday at least!! Plus ideally looking for something under £10k, with good running costs (i.e. no huge BMW replacement-parts-markup con/expensive electronics)... Something like a Nissan Quashqai perhaps, though apparently their reliability is not great? 

Suzuki Vitara. SZT.

[DurhamBorn]

44 minutes ago, Chewing Grass said:

Only yesterday in comparison the BBC said you needed £10500 to retire, I was going to read the article to see what it was based on but forgot.

Big Difference.

That was the minimum,and for the first time since they dressed Gina G in a tiny sparkly dress i agree with the BBC.I think that is do-able,but low.For myself a very comfortable amount is between £13k and £16k single,£22k couple.£1100 to £1300 a month single person.

Iv always thought its easy for an ordinary person to retire on a decent amount once they get the state pension,but for people without our experience or a final salary pension very difficult to go early.Of course thats why they keep pushing the state pension age back.Generating £6k at 67 is easy for most people who even save in a low paid job and a company scheme,but getting £13k to £16k at 55 or earlier is out of their reach.

 

[sancho panza]

On 11/10/2021 at 11:45, Cattle Prod said:

This is a good article, Platts are widely used and read in the industry and by traders etc. No one reads oilprice.com. (edit: sorry, had wrong link in)

https://www.spglobal.com/platts/en/market-insights/latest-news/oil/101121-opec-crude-oil-production-rises-in-september-but-remains-below-target-platts-survey

Short version is that OPEC+ is already struggling to bring back to market what they said they would, as discussed on here. Reading off their bar chart, and ignoring March and April when Saudi and others were unsustainably overproducing prior to the cuts, there is about 3m bpd left to go back to 2019 production levels. That's if OPEC+ can still produce at those levels, there has been cuts in drilling since then and natural decline marches on regardless. Interestingly, Platts states that there will only be 2.5mbpd sustainable spare capacity by the end of the year. That's the first time I've seen a figure close to mine (I think it's less), and one that uses the word 'sustainable'. You'll still see numbers like 5 and 6m being bandied about, which are just not accurate, so it's great to see Platts come into line with reality.

OPEC+ has quietly brought back over 6mbpd to the market since the lows, and yet we are at $84 brent, a high since the 2014 oil price crash. The futures market looks like it needs a pullback to me, and the physical market are still grumbling that there is enough oil about the place and prices are too high, but the futures market is smelling something. Dollar down, hopefully, or maybe they're just looking at the gas market and calculating in oil burn this winter. I don't know. But the idea that OPEC+ doesn't actually have that much spare capacity is now out there, officially.

 

I see we're awaiting the Oct report later today but worth noting that on Sep 13th 21 EIA states.We're jsut a functioning airline industry away from a market with a steepening deficit.

Interesting to see how wrong they were about brent at $71(I'm sure we'll pull back but jsut sayin')

Worth noting as well that the 97.4 mbpd prediction for 2021 will be heavily weighted towards year end meaning we may well start 2022 running at full tilt

https://www.theglobaleconomy.com/rankings/jet_fuel_consumption/

 

https://www.eia.gov/outlooks/steo/report/global_oil.php

Brent crude oil spot prices averaged $71 per barrel (b) in August, down $4/b from July but up $26/b from August 2020. Brent prices have risen over the past year as result of steady draws on global oil inventories, which averaged 1.8 million barrels per day (b/d) during the first half of 2021 (1H21). We expect Brent prices will remain near current levels for the remainder of 2021, averaging $71/b during the fourth quarter of 2021 (4Q21).

We estimate that 98.4 million b/d of petroleum and liquid fuels was consumed globally in August, an increase of 5.7 million b/d from August 2020 but still 4.0 million b/d less than in August 2019. We forecast that global consumption of petroleum and liquid fuels will average 97.4 million b/d for all of 2021, which is a 5.0 million b/d increase from 2020, and by an additional 3.6 million b/d in 2022 to average 101.0 million b/d, almost even with 2019 levels.

[ThoughtCriminal]

Im seeing a lot of people on twitter blaming inflation on the audacity of us working class scum wanting pay increases. 

 

Now ive always held the opinion that Milton Friedman and enoch powell settled this in the 70s: inflation is always and everywhere a monetary phenomenon, to borrow Friedmans phrase. 

 

Isnt that part of DBs roadmap? That wages increase in RESPONSE to inflation rather than vice versa? 

 

 

 

 

[JMD]

2 hours ago, jamtomorrow said:

This is what makes me chuckle about EVs - love them or loathe them, most people think they're "about" the environment (depending which side of the culture war they've fallen for).

Which of course they are not. What they're really about:

- long term structural change in energy delivery/transmission. You could put a diesel genny on the grid, charge ypur EV and get similar effective MPG to a modern ICE

- auto mfrs "resetting" margins, per DB's lament about EVs being an unaffordable luxury, which of course is merely returning us to how things used to be - it's only the decades of disinflation makes us think we're all entitled to a car

- decomplexification - the modern ICE is an over-engineered joke in a world where supply chains are falling apart (and don't get me started on hybrids, sorry "self charging")

Yes, you mention 'car entitlement' might be reversed as EV ownership becomes more and more expensive. Does make me think what other rights and privileges may also get similarly squashed in coming years?

But to keep firmly on topic and in the realm of economic phenomena, it is surprising for many to hear that it was only relatively recently, that our countryside, wildlife parks, etc. begun to be opened up - mostly only from the 70's, and due directly to mass car ownership. Prior to this the masses only 'get away' was to jump onto a train to the coast.    (a (day!?) return to 'decomplex' vacations perhaps?)

[DurhamBorn]

10 minutes ago, JMD said:

Yes, you mention 'car entitlement' might be reversed as EV ownership becomes more and more expensive. Does make me think what other rights and privileges may also get similarly squashed in coming years?

But to keep firmly on topic and in the realm of economic phenomena, it is surprising for many to hear that it was only relatively recently, that our countryside, wildlife parks, etc. begun to be opened up - mostly only from the 70's, and due directly to mass car ownership. Prior to this the masses only 'get away' was to jump onto a train to the coast. 

When i did my works experience in a clothes factory the women mostly got taken home and brought in on buses hired by the company who lived in the towns surrounding.The local women walked.One also stuck her hands down my trousers (i was 14) and said oh come back when your 16 pet i could so something with that.It was the scariest place iv ever worked 200 crazy randy women and only about 14 blokes fixing the machines etc.The blokes also used to do anything to avoid going and fixing a machine when the sad story was on for the golden hour on the radio ,they were as hard as dried shit,yet loved that soppy crap 

[sancho panza]

On 12/10/2021 at 12:58, Barnsey said:

I remain convinced the Conservatives want to hand power to Labour.

 

Sadly for the Tories Labour aren't in a position to take power even if it's put on a plate for them.

Suspect the Tories will have to eat their own dog poo sandwich over the next decade.

[DurhamBorn]

11 minutes ago, ThoughtCriminal said:

Im seeing a lot of people on twitter blaming inflation on the audacity of us working class scum wanting pay increases. 

 

Now ive always held the opinion that Milton Friedman and enoch powell settled this in the 70s: inflation is always and everywhere a monetary phenomenon, to borrow Friedmans phrase. 

 

Isnt that part of DBs roadmap? That wages increase in RESPONSE to inflation rather than vice versa? 

 

 

 

 

Yes it is,it is always monetary,when liquidity goes up faster than the productive capacity of the economy.Its the basic of what i do,the starting point.The rest is just cross market and leads and lags.Dis-inflation rewarded certain parts of society,re-flation removes that and returns it to others,the great swinging macro pendulum.

[BWW]

2 hours ago, jamtomorrow said:

This is what makes me chuckle about EVs - love them or loathe them, most people think they're "about" the environment (depending which side of the culture war they've fallen for).

Which of course they are not. What they're really about:

- long term structural change in energy delivery/transmission. You could put a diesel genny on the grid, charge ypur EV and get similar effective MPG to a modern ICE

- auto mfrs "resetting" margins, per DB's lament about EVs being an unaffordable luxury, which of course is merely returning us to how things used to be - it's only the decades of disinflation makes us think we're all entitled to a car

- decomplexification - the modern ICE is an over-engineered joke in a world where supply chains are falling apart (and don't get me started on hybrids, sorry "self charging")

Can you use red diesel?

[DoINeedOne]

54 minutes ago, JMD said:

Bit off-topic maybe, but i've heard that cars, pizzas and dumpster-diving (though not much mentioned recently) have their their own dispensation?!

Anyway, my own Ford Focus will be 18 years old next year and i will be looking to replace it with a SUV - great practicality, plus really like the idea of higher ride height!

Would anyone have a recommendation for a 5-year old SUV (depreciation sweet spot?), petrol or diesel (though diesel fuel may be banned soon?). Am seeking reliability - because kinda hoping to make it last out until its 20th birthday at least!! Plus ideally looking for something under £10k, with good running costs (i.e. no huge BMW replacement-parts-markup con/expensive electronics)... Something like a Nissan Quashqai perhaps, though apparently their reliability is not great? 

I got a Navara for you just passed its MOT slight knocking noise but goes away when you turn the radio up

[Loki]

3 minutes ago, DoINeedOne said:

I got a Navara for you just passed its MOT slight knocking noise but goes away when you turn the radio up

They snap in half, you know.  

[MvR]

19 minutes ago, BWW said:

Can you use red diesel?

As far as I can see, yes.   You can use it for non-commercial electricity generation, such as an off-grid home setup, and I haven't found any rules restricting what you can then do with that electricity.  The rules are changing next year but this seems to be the case from April 2022 onwards too.

https://watsonfuels.co.uk/news-archive/upcoming-changes-to-red-diesel-taxation/

Also, all the government guidance seems to talk about what fuel you can use IN cars etc, not what fuel provides the energy which ultimately drives the car.

 

 

[sancho panza]

50 minutes ago, ThoughtCriminal said:

Im seeing a lot of people on twitter blaming inflation on the audacity of us working class scum wanting pay increases.

Hearing well off middle class remoaner types talking about the need to rejoin the EU without even considering paying British people a fair wage.They're that conditioned to expect cheap labour from others but big salaries themselves that they can't see the irony of their position.

Brexit was about disposable income/housing costs/wages generally,tried telling these people at the time.Funny how they only like fair pay when it's theirs we're talking about.

 

[JMD]

Ok slightly anecdotal, but @DurhamBorn predicted this type of thing would happen... That the telecoms would begin receiving a slice of the 'internet economic pie'... From those up-to-now 'free-loaders' NetFlix, more to follow i'm sure...

In South Korea, the popularity of Squid Game led to a surge of network traffic which caused SK Broadband (SK Telekom subsidiary) to file a lawsuit against Netflix, seeking monetary damages to pay for increased broadband usage and maintenance costs associated with the program.

[HousePriceMania]

1 hour ago, DurhamBorn said:

A few bags of blue circle ready mixed mortar 

Splashing out were you ?

What's wrong with mixing it yourself ?  

 

[belfastchild]

2 minutes ago, JMD said:

Ok slightly anecdotal, but @DurhamBorn predicted this type of thing would happen... That the telecoms would begin receiving a slice of the 'internet economic pie'... From those up-to-now 'free-loaders' NetFlix, more to follow i'm sure...

In South Korea, the popularity of Squid Game led to a surge of network traffic which caused SK Broadband to file a lawsuit against Netflix, seeking monetary damages to pay for increased broadband usage and maintenance costs associated with the program.

Ofcom put out a request for comment about net neutrality last month. Its being packaged up as providers having to pay isps more to hog more of the bandwidth or some such rather than relegating poor people to slower bandwidth (they are one and the same).

So if you have a 100mb connection and have netflix, netflix will pay to use half of that, 1/4 etc etc.

Netflix already do that with your home wifi connection, they tie up most of the bandwidth (or used to, havent used them in a while so dont know if they still do). I ended up having to section off the bandwidth for Netflix devices.

So eventually you will be paying tiers within your broadband to access things faster - the content providers will just pass it on. If you want to watch a movie on your phone, no problem, if you want to watch it on a 50 inch screen, cough up.

Some of the footie on nowtv and amazon is just bloody unwatchable at times now when it was fine 2 years ago and thats nowtv with bandwidth boost. (on a big screen not phone).

[Barnsey]

1 hour ago, sancho panza said:

Sadly for the Tories Labour aren't in a position to take power even if it's put on a plate for them.

Suspect the Tories will have to eat their own dog poo sandwich over the next decade.

Agreed, although most of the electorate have been doing increasingly better under the Tories, and now we're in for a whole world of pain over the next 6 - 12 months. Wage inflation or lack thereof will have huge importance going forward.

[jamtomorrow]

37 minutes ago, BWW said:

Can you use red diesel?

Haha, that's a good question!

But I was thinking more along the lines of grid-scale generation. Like this absolute unit: https://en.m.wikipedia.org/wiki/Wärtsilä-Sulzer_RTA96-C

80MW, only 171g fuel per kwh at the brake (so somewhere in the region of 20kwh per gallon)

[DurhamBorn]

13 minutes ago, belfastchild said:

Ofcom put out a request for comment about net neutrality last month. Its being packaged up as providers having to pay isps more to hog more of the bandwidth or some such rather than relegating poor people to slower bandwidth (they are one and the same).

So if you have a 100mb connection and have netflix, netflix will pay to use half of that, 1/4 etc etc.

Netflix already do that with your home wifi connection, they tie up most of the bandwidth (or used to, havent used them in a while so dont know if they still do). I ended up having to section off the bandwidth for Netflix devices.

So eventually you will be paying tiers within your broadband to access things faster - the content providers will just pass it on. If you want to watch a movie on your phone, no problem, if you want to watch it on a 50 inch screen, cough up.

Some of the footie on nowtv and amazon is just bloody unwatchable at times now when it was fine 2 years ago and thats nowtv with bandwidth boost. (on a big screen not phone).

99% certain the regulators across Europe will change the regs to make big users pay more to telcos.Telcos invest on the ground in countries and they also pay tax.Its a simple way to extract more from the big tech freeloaders.Market is missing it of course,but for me that and inflation should lift ROCE by a lot over Cost of Capital.

[Hancock]

Put in an order to but £3k of Voda @ 110p the other week ... forgot about it until i got a email today! 

Should have done 3 ladders of £1300!