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

[CannonFodder]

43 minutes ago, Axeman123 said:

Potential melt-up fuel?

"Could Omicron be GOOD news? Variant 'might speed up end of pandemic if it causes mild illness' as South Africa records NO hospital admissions or deaths from super strain - but scientists won't know for at least two weeks"

https://www.dailymail.co.uk/news/article-10253611/Could-Omicron-GOOD-news-Variant-speed-end-pandemic-causes-mild-illness.html

Melt up ahoy indeed if this catches on regardless of truthfulness or not.

This is increasingly bonkers world, like a carry on movir, carry on covid.

Lockdown, oh its harmless, oh Matron.

[Transistor Man]

3 hours ago, Yellow_Reduced_Sticker said:

 

@DurhamBornThe copper BT are sitting on is worth more than 40 billion alone, is that true?

 

I understand it's true. Millions of miles worth, apparently.

 

Whenever I see pictures of the early transatlantic cables, I always think:

"The sand! The sand. Melt the sand!!!"

(I guess the lasers/ LEDs would have been a problem.)

 

 

 

 

[JMD]

Jim Chanos, legendary short seller who made fortune shorting Enron. Worth listening to all 50mins (it's a two parter with 2nd part subscription only)... This part discusses mechanics of short selling, but is also instructive and entertaining - showing how dire the regulators are, Chanos says that most company accounting fraud is more 'Ponzi scheme' than outright stealing, he comments on Uber and that Tesla is a 30dollar stock if priced similar to its competitors!!                                                                                                                                https://m.youtube.com/watch?v=onXHpmOzZZk

[belfastchild]

5 hours ago, Yellow_Reduced_Sticker said:

 

 

@DurhamBornThe copper BT are sitting on is worth more than 40 billion alone, is that true?

 

 

That number just keeps on getting bigger and bigger. Every smug presentation I went to when I worked there had the quote that the copper in the ground was worth more than BTs valuation.

That may very well be true but you have to get it out of the ground (if you can). It carries stuff. It will carry stuff even when copper is switched off by the nature of BT fucking lots of stuff up. Many years ago most of the UK internet went down because BT had put the main north/south line and its backup in the same pipe. The network diagram showed them in two different places but contractor thought fuck it and put them in the same pipe which was cut by a jcb.

Think about what it would require (time, manpower, energy) to get the lines up from under central london (if they knew where all the redundant ones were). When I worked there they were very risk adverse, would fund projects that would save millions and then pull at the last minute in case it fucked up (despite testing etc).

So yes, in theory its true and its a nice talking point but doesnt really amount to much unless we go mad max.

[CannonFodder]

I think it is more about the cost of a competitor needing 40 billion to enter the market than scrapping existing tbh

Even if fibre was used throughput, the cost of labour to install that is punitive. Lots of faster rural broadband projects doing bits of counties at crazy money and crazy bad quality. 

Copper goes in a plastic pipe and picked up by metal detector, fibre needs a metal sheath, largely undetectable in plastic pipe so gets damaged a lot 8n excavations.

Rambling a bit here but an underground system is super expensive

[belfastchild]

8 minutes ago, CannonFodder said:

I think it is more about the cost of a competitor needing 40 billion to enter the market than scrapping existing tbh

Even if fibre was used throughput, the cost of labour to install that is punitive. Lots of faster rural broadband projects doing bits of counties at crazy money and crazy bad quality. 

Copper goes in a plastic pipe and picked up by metal detector, fibre needs a metal sheath, largely undetectable in plastic pipe so gets damaged a lot 8n excavations.

Rambling a bit here but an underground system is super expensive

Dont need to put new stuff in, just rent off BT/Virgin. Its done that way the world over. The days of new entrants and new kit is long gone (unless its b2b on the more profitable routes).
If you need more throughput, just upgrade the kit at the end of the fibre.

Look at all the cheapo cell providers doing the same thing.

Energy market is fecked for the same reason although dropping customers electricity is different to slowing/cutting their internet or a few dropped calls.

[Bobthebuilder]

Hate Mail piece on BP's Hydrogen plans in the North East.

https://www.thisismoney.co.uk/money/markets/article-10253905/BP-build-second-hydrogen-production-facility-North-East.html

 

 

[spygirl]

Fuck me.

German inflation of 6% adds to pressure on ECB

Annual price rises are highest in three decades but central bank resists calls to tighten monetary policy

https://www.ft.com/content/5933f31b-605b-459a-a221-59ae84685457

Inflation in Germany has surged to its highest level since 1992, increasing the pressure on the European Central Bank to explain why it thinks it would be premature to tighten its ultra-loose monetary policy.

German inflation rose 6 per cent in November from a year earlier, as measured by the harmonised index of consumer prices. The increase exceeded the expectations of most economists. German inflation was last this high shortly after the country’s reunification three decades ago.

[DurhamBorn]

1 hour ago, belfastchild said:

That number just keeps on getting bigger and bigger. Every smug presentation I went to when I worked there had the quote that the copper in the ground was worth more than BTs valuation.

That may very well be true but you have to get it out of the ground (if you can). It carries stuff. It will carry stuff even when copper is switched off by the nature of BT fucking lots of stuff up. Many years ago most of the UK internet went down because BT had put the main north/south line and its backup in the same pipe. The network diagram showed them in two different places but contractor thought fuck it and put them in the same pipe which was cut by a jcb.

Think about what it would require (time, manpower, energy) to get the lines up from under central london (if they knew where all the redundant ones were). When I worked there they were very risk adverse, would fund projects that would save millions and then pull at the last minute in case it fucked up (despite testing etc).

So yes, in theory its true and its a nice talking point but doesnt really amount to much unless we go mad max.

BTs value (and other big telcos) isnt the value of what they have in the ground,its the fact that in an inflation cycle it depreciates much slower than price increases and the cost for new entrants to replicate the network.BT is worth 2.5 times its market cap minimum on my roadmap and i think the sector suffers from structural undervaluation similar to tobacco back in the day.I dont expext 7 to 10 baggers,but 3x + divs might be just in reach.

[DurhamBorn]

1 hour ago, belfastchild said:

Dont need to put new stuff in, just rent off BT/Virgin. Its done that way the world over. The days of new entrants and new kit is long gone (unless its b2b on the more profitable routes).
If you need more throughput, just upgrade the kit at the end of the fibre.

Look at all the cheapo cell providers doing the same thing.

Energy market is fecked for the same reason although dropping customers electricity is different to slowing/cutting their internet or a few dropped calls.

BT got a price of the regulator expecting fibre to be around 30% more expensive than it will be to roll out and assuming 2% inflation.4%+ inflation is like dropping helicopter money on the incumbents.Watch free cash go through the roof mid cycle.These vultures circling are seeing what im seeing.Bastards.

[belfastchild]

1 hour ago, DurhamBorn said:

These vultures circling are seeing what im seeing.Bastards.

Had this discussion with someone in BT during the week. They couldn't understand the open reach valuations.

Its not about openreach but as you say and have said many times in the past, the hard labour/cost/energy has been put in. When I first started in fibre it was single wavelength, then multiple wavelengths, then time dividing those etc etc. Many multiples of bandwidth currently available are under development for the fibre already buried without all that cost. Just change the ends, relays etc.

Its that they are bidding for and like the time slices and redundant connections, they can sell that all off to the highest bidders and other telcos.

The copper is immaterial, the fibre already installed is the license to print money from both your point and a long way to go to reach its limitations. At some point we could go back to the companies/end users paying for all that bandwidth as we discussed before, its off to the races then.

The fallout from the energy regulation may have an effect. What concerns me, as well as you vultures point, is a move to price caps like NI where profit on companies is the price cap, not per unit. Although that might fend off vultures, unsure how it would work with divis etc.

Really is up in the air at the moment.

[Animal Spirits]

I recently listened to Jeff Booth's appearance on Hedgeye. Now whether Bitcoin or another cryptocurrency turns out to be the liefboat that Jeff suggests it might be is actually a secondary to posting the video.

• The deflationary aspect to technological improvements fighting against a credit based system which must continue to expand or it deflates.
• Resulting inequality and the theft of peoples time from inflationary policy which steals from the poor and middle class and transfers it to the rich.
• Danger of increased centralisation of power; populations will demand governments do more.
• It wasnt covered in the video but would like to see more discussion on what an alternative to the current system would look like for employment/a functioning economy aside from the WEF's dream scenario.

[DurhamBorn]

1 hour ago, belfastchild said:

Had this discussion with someone in BT during the week. They couldn't understand the open reach valuations.

Its not about openreach but as you say and have said many times in the past, the hard labour/cost/energy has been put in. When I first started in fibre it was single wavelength, then multiple wavelengths, then time dividing those etc etc. Many multiples of bandwidth currently available are under development for the fibre already buried without all that cost. Just change the ends, relays etc.

Its that they are bidding for and like the time slices and redundant connections, they can sell that all off to the highest bidders and other telcos.

The copper is immaterial, the fibre already installed is the license to print money from both your point and a long way to go to reach its limitations. At some point we could go back to the companies/end users paying for all that bandwidth as we discussed before, its off to the races then.

The fallout from the energy regulation may have an effect. What concerns me, as well as you vultures point, is a move to price caps like NI where profit on companies is the price cap, not per unit. Although that might fend off vultures, unsure how it would work with divis etc.

Really is up in the air at the moment.

Telegraph filling their business pages from here agaln

https://www.telegraph.co.uk/business/2021/11/29/decline-stock-market-has-made-bt-plaything-international-billionaires/

However the article is right,but fails to understand why.They can print it in their next column.The UK regulators and government have attacked our industries while being too busy convincing people the best place for their money is property and "growth".The city doesnt understand inflation because nobody is working there who traded through the 70s.The very assets that can protect capital and grow dividends with inflation or above are being priced as if the 39 year dis-inflation is carrying on for another decade.The reason predators are circling is because of inflation.

We are into the cycle,but the markets are still miss-pricing things by a long way.

Like you say,i think companies will have to pay for the bandwidth ,and if so 5x might be on the cards for the industry.

 

[spygirl]

10 hours ago, Yellow_Reduced_Sticker said:

 

Hmm...don't get this on gold, i bought my 1st physical gold in 2011 (at the time near the TOP what do ya expect with my timing!) then bought my final gold in 2017 as it started to go up again, so even today i'm in profit with 'em AND don't ever intend to sell other than for an emergency.

 

unless you bought gold at the peak last July can't see how you lost money?

 

 

 

@DurhamBornThe copper BT are sitting on is worth more than 40 billion alone, is that true?

 

 

No, I think that's a lot of bollocks.

Comes from this comedy-

https://www.theregister.com/2011/09/22/bt_copper_cable_theft/

Even back then the BT trunking was all fibre.

The bits of copper left are just in the cabinet to premises. A lot  of that is aluminium.

They change the copper to fibre then scrap the copper.

[spygirl]

5 hours ago, belfastchild said:

That number just keeps on getting bigger and bigger. Every smug presentation I went to when I worked there had the quote that the copper in the ground was worth more than BTs valuation.

That may very well be true but you have to get it out of the ground (if you can). It carries stuff. It will carry stuff even when copper is switched off by the nature of BT fucking lots of stuff up. Many years ago most of the UK internet went down because BT had put the main north/south line and its backup in the same pipe. The network diagram showed them in two different places but contractor thought fuck it and put them in the same pipe which was cut by a jcb.

Think about what it would require (time, manpower, energy) to get the lines up from under central london (if they knew where all the redundant ones were). When I worked there they were very risk adverse, would fund projects that would save millions and then pull at the last minute in case it fucked up (despite testing etc).

So yes, in theory its true and its a nice talking point but doesnt really amount to much unless we go mad max.

The core of BTsnetwork is fibre. And has been since 21st century network changes.

The BT trunk has always been more complex geometric than point 2 point. Typically, theres a 2nd, 3rd, 4th route between A n B.

 

 

[spygirl]

5 hours ago, CannonFodder said:

I think it is more about the cost of a competitor needing 40 billion to enter the market than scrapping existing tbh

Even if fibre was used throughput, the cost of labour to install that is punitive. Lots of faster rural broadband projects doing bits of counties at crazy money and crazy bad quality. 

Copper goes in a plastic pipe and picked up by metal detector, fibre needs a metal sheath, largely undetectable in plastic pipe so gets damaged a lot 8n excavations.

Rambling a bit here but an underground system is super expensive

Given okish terrain, you can bury a cable using a mole at very low cost per km.

It's only when you need to cross rocks n rivers that tunnelling becomes an issue.

Anywhere in England could be cabled up - if you can access to farmland.

Failing that, you'll got to go microwave for LOS links, which only make sense in cities with very tall buildings.

Mod from analogue circuit pairs to digital packets means bandwidth isnt an issue.

[Barnsey]

 

[sancho panza]

On 27/11/2021 at 00:48, Hancock said:

Do you own all them?

and them?

We own about 10 different oilies,iused to be more before I felt we had to shrink that number down and focus on thebig oilies.Telcoms about 10.These lists are of my watchlists ion Invetsing.com

On 27/11/2021 at 17:45, Axeman123 said:

The political implications are very intruiging.

Does Pedalo Joe claim his SPR release has caused the move down in oil? If so problem solved, as you say.

Does he talk up the risk of oil rising again soon, or try to talk it down further?

If OPEC quietly kick the can on raising production, does he kick up a fuss or play it down?

I think Uncle Joe has effectively telegraphed Putin/OPEC etc with his SPR games that's he terrible at 4D chess and will go back to hiding behind not being Trump as his MO.

On 27/11/2021 at 17:41, ThoughtCriminal said:

Any chart boys got thoughts on this?

Dow is a terrible thing to track.the selction criteria for inclusion are rather opaque/bollocks and it's share price weighted as opposed to market cap weighted which makes it easier to game higher.

On 27/11/2021 at 14:50, JMD said:

Isn't this what Dave Hunter predicted, a short-term correction in oilies? Or is this just part of the current general SP500 pullback? Though I think DH still expects the index to go well past 6000++ into next year.                                                                           I note Rockhopper is sometimes in your list, but sometimes it's not... are you teasing us SP!! (I own it so from here am expecting a 100x!!, though def. not advice).

I'm talking my own book here JMD,DH has made some shrot term calls on oil that I don't think he's qualified to give(particualrly referencing recent performance).His long term bull call is good imho.

AS I said to hancokc,these are my wathclists,so i list them in terms of what's risen/dropped the msot,my oikies watchlist has 40 odd things in it.

[sancho panza]

On 28/11/2021 at 23:12, Viceroy said:

https://www.armstrongeconomics.com/armstrongeconomics101/socialist/final-battle-with-socialism/
watch the video

He's mentioned in the past that SE Asia will be the least authoritarian and obviously he moved south to Florida 6 years ago cos his crystal ball computer forecast a shit show for the blue states (he's from New Jersey), plus much colder weather coming from global cooling. He says Republics are the worst form of Government as they always turn into oligarchies. The Roman Empire lasted 1000 yrs he puts down to them having no debt and no central bank.

I couldn't stand Armstrong the first time I started reading him.  He warned to stay away from Gold just as I had bought a chunk. Turned out he was right. He's not gonna be everyone's cup of tea but his macro is definitely playing out.

Today's ode to joy = 'This is a power play to prepare the world for this Great Reset where they get to default on all their debt while pretending, of course, they are doing this for you. Schwab's claim you will own nothing and be happy is a ploy. It is the government that needs to default on all its debt and to hide that objective, they will cancel all debt and pretend this is all for you - not them. The markets are taking notice and you can see that at the first hint of another mutation and Pfizer saying will have a new vaccine out in a matter of weeks forgetting long-term testing ensuring that they too will expire in 6 months necessitating a new vaccine for every mutation until our arms look like Swiss Cheese, is not going to be the future, Enough is enough and I have already warned that Pfizer stock will peak out in 2022 and will become a major short'

The work of Armstrong that interests me is the really long term stuff.He's one of the few people I've read picking out themes from Roman and Greek times that have replicated over the centuries.

This differentitaties him from people likeDH who have a more recent focus over the last one or two hundred years.

What always amazes me is how these patterns repreat with slight differences sometimes.

I've never really believed his Pye theory and I do wonder if he lays out the histrical trend and then overlays hsitorical predictions on it.We've all got to earn a living.

For the  people casting aspersions on his integrity it's all about context.I wasn't there,I didn't follow it,but I believe some of his work is really top drawer

https://en.wikipedia.org/wiki/Christine_Lagarde

Criminal Conviction of negligence in allowing the misuse of public funds

On 3 August 2011, a French court ordered an investigation into Lagarde's role in a €403 million arbitration deal in favour of businessman Bernard Tapie.^[82]

On 17 December 2015, the CJR ordered Lagarde to stand trial before it for alleged negligence in handling the Tapie arbitration approval.^[88][89][90] In December 2016, the court found Lagarde guilty of negligence, but declined to impose a penalty

16 hours ago, Cattle Prod said:

JPM has done a "bottoms up field by field" analysis of OPEC+ spare capacity. About time someone did, I did that three years ago, it's not very difficult. Anyway they see about 2.8m bbl spare capacity, about 40% below consensus. Now I'm sure they're talking their book, but they are the biggest bank in the world and are particularly influential in commodities. But this estimate looks accurate to me, and would mean 2022 is going to be a fun year, once we get past peak government stupidity that is. 

Omicron is a total red herring imo, but I'm beyond trying to predict how knee jerk governments are going to be about such things.

Edit:

They even mentioned how OPEC likes to cycle production to rest their reservoirs, they must have hired a geologist.

Also if they see a shortfall of 3mbbl/day by 2024, that would drain world inventories and cause price to rise into the hundreds of dollars and stay there till demand gets destroyed. Unfortunately, that means people starving too, it's disgrace how we've been cut off from investment capital by a) having loss making shale flood the market, a consequence of QE, and b) idiotic virtue signalling governments, pension funds and boards.

 

I've been on shift but got sent this by a friend on twatter and was wondering what your take was.Incredible to see your predictions from two years ago getting this sort of confirmation.

Absoltuely incredible.I know your in the industry but it jsut seems surreal that all these banks wiht millions to spend on salaries and bonuses got the good news after the basement dweller communtiy loaded up on cheap oilies.

DO you think this puts OPEC int eh drivers seat or does it rather reinforce the notion of their waning influence given an increasing number can't meet quota?

ALso,there seems alittle room for a supply side shock here.....could easily get squeezed and then some.

14 hours ago, DurhamBorn said:

As @Cattle Prod shows above those JPM timings are coming closer to mine now.I see 2023 as when the natural gas squeeze gets going and into 24.That then puts even more pressure on nitrogen prices for ferts.I still think that $80 average for Brent is too low for the cycle,$110 more likely as a base.

The higher prices will force onshoring to quicken as transporting goods becomes one of the biggest costs.Of course that increases energy use in the short to medium term.

In most cycles almost all of the liquidity ends up in houses/land etc,but not this time.This time it is going to go to energy and all the basics and into extra production.

Maybe we should buy a unit and start producing fuel bricks from compressed sawdust ect.

What's interesting is when two people come at an issue from two vastly different perpsectives and reach the same conclusion.Have to admit both are compelling and reinforce each other

I did sell half our pitash exposure last week,jsut the more marginal holdings eg Intrepid/Mosaic/ICL,couldn't help it given the five year highs,seemed right to take some off the table.Likely buy telcoms with it.

[sancho panza]

16 hours ago, planit said:

Normally when you analyse something you get some pluses and minuses but every time I have looked at energy it is all on the upside. Even Covid, that the market has seen as a negative, hides the shortfalls and masks the problems we are heading into pushing prices higher in the medium term. I can see a cascade coming down the line when airline travel comes back on line, oil prices shoot up, this knocks on to the next thing, increases electric car take-up, even bigger increases in electricity prices etc.

The more I've learned the more that view echoes at this moment in time.It's not jsut supply shcoks that can land either but demand too,as you say,airline travel could rocket as people try and see everyone theyve missed in the last two years and thats before we talk fridges in India.

Like you I keep looking for the downside and as per @Cattle Prod psot,aside froma paper shock,things are looking robust.

8 hours ago, Bobthebuilder said:

Hate Mail piece on BP's Hydrogen plans in the North East.

https://www.thisismoney.co.uk/money/markets/article-10253905/BP-build-second-hydrogen-production-facility-North-East.html

 

 

Some of the comments are really quite supportive,more than ..........

[sancho panza]

16 hours ago, ThoughtCriminal said:

Transitory narrative just got hit by a train

Transitory and isolated.dosn't cross borders like covid.

[sancho panza]

[BadAlchemy]

Inflation is everywhere and hurting ordinary people on low income. My wife's folks in Serbia (on low pensions before all this) now seeing prices going up in the shops...

https://tradingeconomics.com/serbia/inflation-cpi

"The annual inflation rate in Serbia climbed to 6.6 percent in October of 2021 from 5.7 percent the previous month and above market expectations of 5.95 percent. "

Mindful that I am here to fight inflation both at home and abroad. Family is family!

Portfolio has done great thanks to this thread and allocating more as opportunities arise...

[jamtomorrow]

Fascinating. I'd love to see a histogram of those deposits.

Also explains a little of that ongoing velocity droop - take USD2.5tn off the denominator and M2V is more like 1.27 (for reference, most recent print was 1.115)

[spygirl]

8 hours ago, Barnsey said:

 

They want it to impact demand, in a reducing prices.

But they obviously dont understand the economy has changed. Or Chinas impact on prices/demand.