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

[Bricormortis]

https://www.lynalden.com/october-2021-newsletter/

[Hancock]

49 minutes ago, Noallegiance said:

I feel like getting a t-shirt printed that says "Hands up who still thinks it was a good idea to shut the economy for a year?"

By the time I break it out next summer I reckon a lot of hands would stay down.

Bunch of selfish anti-vaxxers who don't want to protect boomers!

[Barnsey]

3 hours ago, DurhamBorn said:

"this increase in the living wage means an extra £1000 in workers pay packets equal to the Universal Credit uplift,helping people out of poverty through work and higher wages not welfare"

Something like that,ignoring the threshold freeze so £200 gone already + £100 NI,council tax another £75,if allowable earnings threshold in UC not increased another 60% gone (they  might lower UC clawback from 63% to 60%)

So about a 1.2% pay increase.

Of course they will likely increase UC by Septembers CPI so 3.1%,but still below inflation.

The above would slightly cut the UC bill for full time workers.

On the housing front:

"Long-dated fixed rate mortgages are an attractive area of the market for the pensions insurer, because it needs fixed, long-term assets to match up with its fixed, long-term liabilities."

[janch]

It looks as if our old favourites the transports GOG/SGC/NEX could be about to turn.  I had a look today after the announcement over the weekend about investing public transport:

https://www.bbc.co.uk/news/business-59017503

I sold GOG and SGC some time ago at a loss as they just seemed to be going nowhere.  In hindsight we all bought too soon but of course we didn't know about the plandemic and lockdowns then.

I'm thinking I might reinvest as I did for CNA after selling it.  I prefer looking at a blue screen rather than a sea of red. 

I might even recoup the losses

This is not advice DYODD

 

[janch]

1 hour ago, Bricormortis said:

https://www.lynalden.com/october-2021-newsletter/

I really like the way she puts it all into a historical context and goes back much further than most.  The charts comparing the present to the 1940s are compelling.  It all makes much more sense when put into a long perspective.

[Chewing Grass]

1 hour ago, Heart's Ease said:

Couple of anecdotes:

I've mentioned before about my coal/log supplier seeing price increases (50p) on a bag of coal, absorbing log increases etc. Saw him yesterday: next container loads to arrive have increased in price to him by £800 which he can't absorb and will pass on. He also mentioned another one of his customers who imports metal sanding discs from Ukraine. Cost of container full increased from £4kish to £18kish (!).

Butchers; cost of aluminium pie trays increased in one month by 50 percent. Tray seller says he's been offered more than current selling price for his entire tray stock. Supply lines of farm shop essentials  breaking down at wholesalers - with many lines unavailable (only got 3/15 at last visit). Other suppliers delivering reduced amounts eg ordered 42 boxes got 9 of chutney. Butcher has put his Christmas order sheet out for customers a month early as he's had so many requests for Christmas orders already. 

Interesting to hear from real business about what we've anticipated here for some time.

I occasionally frequent booker/makro and not only has range/choice shrank they have now capped the number of boxes/packs of things you can buy at 10 on a lot of lines. This means if you are a small business increased costs and reduced profits if you run out of stuff for customers.

[sancho panza]

@Cattle Prod Berman sees 11mbpd for 2021 US prodn ,

 

[belfastchild]

14 minutes ago, Chewing Grass said:

I occasionally frequent booker/makro and not only has range/choice shrank they have now capped the number of boxes/packs of things you can buy at 10 on a lot of lines. This means if you are a small business increased costs and reduced profits if you run out of stuff for customers.

I just signed up with another cash and carry locally as I couldnt get the stuff I wanted there. I used the last receipt as business proof on signup, the girl said they had got a lot of transfers over recently as people saying they just couldnt get stuff there any more.
Thought it might just be an NI/Brexit thing with the tesco takeover as the local all ireland supplier has no real problems as most things are locally sourced.

[Chewing Grass]

5 minutes ago, belfastchild said:

I just signed up with another cash and carry locally as I couldnt get the stuff I wanted there. I used the last receipt as business proof on signup, the girl said they had got a lot of transfers over recently as people saying they just couldnt get stuff there any more.
Thought it might just be an NI/Brexit thing with the tesco takeover as the local all ireland supplier has no real problems as most things are locally sourced.

Same in England and the stuff I used to be able to get was produced a mere 60 miles as the crow flies from the warehouse so now't to do with Brexit.

[sancho panza]

2 hours ago, Noallegiance said:

I feel like getting a t-shirt printed that says "Hands up who still thinks it was a good idea to shut the economy for a year?"

By the time I break it out next summer I reckon a lot of hands would stay down.

I thinkt ehre were lots of people who fancied the idea of furlough,some free money hand outs.As you say,by the time you factor in the supply chain disruption we'll all expereince-cars/coal/energy/food-I suspect that goodwill has alreayd been burned.

As per CP's post above,this sh1t's about to get real for my money,too many people been smoking the Cathy Wood.

[sancho panza]

12 minutes ago, Cattle Prod said:

I'd ignore him Sancho, he lost the plot over Covid and has been badly wrong. I called him out on it, he blocked me. He's now a Twitter meme...

I expect US production to roll over when the DUCs are used up, March/April. I finally worked out how they managed to have such a 'technological breakthrough' in drilling over Covid, the EIA is counting the DUC production into 'per rig' numbers, even though they didn't drill the DUC wells. If they don't double the rig fleet in the next 6 months, it'll fall. You can even see that they are completing crappier and crappier wells, as the per rig rate is trailing off.

 

You can see how the 'per rig' rate jumps up in April '20, with reported DUCs nosediving a month later. Nice sleight of hand guys, I wonder will XOM get sued for what they said in the investor call about 'technological drilling breakthrough' etc etc.

Those US figures looked high to my untrained eye and the nuances you explain make a lot more sense.

I saw a Cathy Wood video earlier hence my comment,and much as she has made a lot of people a lot of moeny,she really didn't strike me as a commentator with a direct understanding of the marekts she was calling a deflationary crash for -oil and convetional cars.

Don't get me worng,leccy cars are here to stay,but Wood doesn't even gloss over the way all car production will be electric by 2030,she jsut doesn't discuss it.Focuses on the price of new leccy/diesel cars being the same in 2026 no mention of the infrastrcuture needed to refuel etc....

Here's the video-Wood predicting a deflationary collapse especially in legacy automakers.I can't say too much as I'm predicting a deflationary BK event myself,but for totally different reasons and I believe Wood will be 80% down not Volkswagen

 

[DurhamBorn]

2 hours ago, Heart's Ease said:

Couple of anecdotes:

I've mentioned before about my coal/log supplier seeing price increases (50p) on a bag of coal, absorbing log increases etc. Saw him yesterday: next container loads to arrive have increased in price to him by £800 which he can't absorb and will pass on. He also mentioned another one of his customers who imports metal sanding discs from Ukraine. Cost of container full increased from £4kish to £18kish (!).

Butchers; cost of aluminium pie trays increased in one month by 50 percent. Tray seller says he's been offered more than current selling price for his entire tray stock. Supply lines of farm shop essentials  breaking down at wholesalers - with many lines unavailable (only got 3/15 at last visit). Other suppliers delivering reduced amounts eg ordered 42 boxes got 9 of chutney. Butcher has put his Christmas order sheet out for customers a month early as he's had so many requests for Christmas orders already. 

Interesting to hear from real business about what we've anticipated here for some time.

Distribution cycle in full view.Now funny enough iv got a home made pie in the oven now.It cost me £2.40,butter pastry as well none of those crappy marg seed oils.Skills like cooking make a huge difference in these types of cycle.Things i use still go up,but much less than for others.

[Shamone]

6 minutes ago, DurhamBorn said:

Distribution cycle in full view.Now funny enough iv got a home made pie in the oven now.It cost me £2.40,butter pastry as well none of those crappy marg seed oils.Skills like cooking make a huge difference in these types of cycle.Things i use still go up,but much less than for others.

I can eat like a medieval king for very little. Whole milk, oatmeal, liver, pilchards, sardines and eggs. Still shockingly cheap.

[sancho panza]

27 minutes ago, Cattle Prod said:

I'd ignore him Sancho, he lost the plot over Covid and has been badly wrong. I called him out on it, he blocked me. He's now a Twitter meme...

 

EIA-we're looking like we'll end 2021 with monthly demand firmly back in 2019 territory without convenitonal air travel demandback on board(sorry for pun) and bouyed by the supply constraints.

I realsie you may feel you don't have much to add as you've explained a lot of these issues to us over time but have to say from myslef,have learned so much from you on these issues CP>.Still learning.

Most importantly,still long and need to get kids dinner on....laters.

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

[Loki]

39 minutes ago, Cattle Prod said:

But that's the past. I don't have a big edge to share any more, this was the last card I had ahead of the market.

I still love you bro 

[Hancock]

45 minutes ago, sancho panza said:

I thinkt ehre were lots of people who fancied the idea of furlough,some free money hand outs.As you say,by the time you factor in the supply chain disruption we'll all expereince-cars/coal/energy/food-I suspect that goodwill has alreayd been burned.

As per CP's post above,this sh1t's about to get real for my money,too many people been smoking the Cathy Wood.

Price of energy gets much higher then surely demand for "stuff" other than the necessities of life will fall off a cliff ... and then the demand/price of oil follows (to some extent).

Same with these £60,000 extensions, there can't be many outside the top 10% with funds to sponsor such prices.

Isn't what i describe as being the cause of a "deflationary bust"

..... or are we just following the 2008 to 2020 path again, where they ignore inflation and keep the ponzi going with ZIRP.

[stoobs]

29 minutes ago, Shamone said:

I can eat like a medieval king for very little. Whole milk, oatmeal, liver, pilchards, sardines and eggs. Still shockingly cheap.

Just mix them in a bowl, then into the microwave for 3 minutes for a tasty treat?

[DurhamBorn]

On energy demand remember there will be huge onshoring of production.Building up the supply chain will use much more energy,and i expect China to consume much more as well.This cycle has structural needs that wont be affected by price signals.$200 oil at some point,maybe $300.

[stoobs]

35 minutes ago, DurhamBorn said:

On energy demand remember there will be huge onshoring of production.Building up the supply chain will use much more energy,and i expect China to consume much more as well.This cycle has structural needs that wont be affected by price signals.$200 oil at some point,maybe $300.

How do we onshore stuff that’s been made abroad for a few decades? If the previous owners of those skills are retired or dead I mean.

[Hardhat]

1 hour ago, Cattle Prod said:

I don't have a big edge to share any more

 

[SpectrumFX]

8 hours ago, CVG said:

Good question. I was pondering the best way to hold a sum in dollars if the exchange rate hit 2. I did look at Revolut (hold upto 30 currencies) but I understand that your money would not be protected.

I used to have a USD account with Barclays because I was worried about GBP collapse. This was a few years back, but as I recall it, it was easy enough to set up and transact, but a clumsy way of going about it for the amount of cash I had available to transfer.

These days I'd just buy IBTL for USD exposure, although I don't have any at the moment. It's a lot less hassle.

In the event of a full on GBP collapse having some physical USD could be useful. I haven't felt panicked enough yet to pick any up though.

[Hancock]

25 minutes ago, stoobs said:

How do we onshore stuff that’s been made abroad for a few decades? If the previous owners of those skills are retired or dead I mean.

We've never made phones or computers on a grand scale in the UK, would have to pay Chinamen to come over and show how its done.

With regards to heavy industry its more a case would enough British men be willing to get their perfectly manicured hands a little dirty, if not we'd have to import more EE's ... but its also if companies are able/willing to pay say a grand a week to  dirty northerners who swear a lot ... with the management class having to take a pay cut or get the sack to subsidise this.

Most heavy industry companies i see in England seem to have a dozen office workers for each person doing the manual work.

[Animal Spirits]

8 hours ago, Shamone said:

I can only surmise that the industry is connected to council policy in some way. Not sure how a couple moving from one house to a small self-built efficient house in the same county adds to river pollution. 

O/T

They likely have better control and treatment of the wastewater sources of P.

Typically a coagulant such as Ferric Sulphate is dosed to increase the solids removal efficiency in primary settlement. This eventually leaves a residual P but also Iron in the effluent both of which usually have maximum permitted values.

[Hancock]

https://www.telegraph.co.uk/politics/2021/10/25/rishi-sunak-should-resign-budget-leaks-speaker-suggests/

[Hancock]

19 minutes ago, Cattle Prod said:

Haha and right on cue, here's Larry. Remember I suggested Larry Fink would come crawling back once he smelled the cash flows ...

You might be thinking how can one dude be so important? Well he controls something like $10 trillion in funds directly, and what's more, other funds copy him. And believe me, oil company CEOs follow what he does very closely, as they need his money.

Fink signalling this was a key prerequisite to institutional money come back to the sector. Crazy, but true I think. I note that XOP and XLE are well up today despite the spot price reversing hard. I was wondering why that happened, now I know.

So Mr Fink is like me and finks he should have bought last month!