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


spunko

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8 hours ago, The Grey Man said:

Tinfoil hat mode.

It looks like we are getting our globally co-ordinated policy error come hell or high water, right on Dave Hunter's timeline too.

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12 hours ago, nirvana said:

ALL in WTI long the 64s!!!!

up 4.5 bucks now....that's my xmas nuts sorted....

Bon courage!

 

FEeD8F_WUAQ0JtG.jpeg

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7 hours ago, DurhamBorn said:

Looking at the size of my holding i could be the swing investor and i can tell the Yanks their dollars arent doing it,talk silver il listen xD

If a takeover is allowed (and at the minute I doubt it, but after seeing the shite happening this last 2 years, who knows) then its a big signal from uk govt.
BT does a lot more than phones and internet... ...there are a lot of vested interests at the heart of uk govt/state and I doubt they would want more people listening in... ..if you know what I mean.

A lot of skills were developed down through the years on the connections between gb and ni and gb and roi. At the time I think only the israelis had better (well so I was told). 6th floor has probably been surpassed by facebook though ;-)

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ThoughtCriminal
20 minutes ago, Cattle Prod said:

He's claiming what exactly is bollocks?

He's claiming that Wiesenthal's assertion that the oil industry is reluctant to put money into production is bollocks.

 

He's using that capex intentions chart to mock him. 

 

Others on here have said that capex intentions doesn't necessarily prove anything though??

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On CAPEX renewables need 25x the CAPEX oil does for the same amount of energy.Oil has high OPEX where renewables dont.

Oil switching CAPEX $ for $ is only 1/25 of the outcome on energy,the lifecycle cost structure is much different.

So for every $ big oil removes from CAPEX you need $25 invested in renewables to equal the energy,and of course you still need baseload.

The cost of renewables is front loaded.Hence why the start to middle of the cycle sees huge price runs in oil and gas.

Big oil is more OPEX then CAPEX,renewables mostly CAPEX with much lower OPEX.Hence interest rate increases hurt renewables a lot.

Should add Exxon etc got big buying up failed drillers during downturns,but the big oilies arent this time,that is where the hit is,they arent using capital to buy up failed companies so the gap between price signal and price discovery is growing.Its likely adding 18 months onto already long cycles.

Im not an oil man,just the macro of it.

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38 minutes ago, Noallegiance said:

Can you explain this bit please?

18 months longer than usual to meet higher demand,longer lag.This will expose the fact the spare capacity isnt there,and then the market will see how long the lag is to any new production.$250 to $300 oil.That Swedish truent is going to starve to death maybe 100 million ,or at the very least put into horrific poverty.

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ThoughtCriminal
16 minutes ago, DurhamBorn said:

18 months longer than usual to meet higher demand,longer lag.This will expose the fact the spare capacity isnt there,and then the market will see how long the lag is to any new production.$250 to $300 oil.That Swedish truent is going to starve to death maybe 100 million ,or at the very least put into horrific poverty.

I was about to ask that, DB.

 

I know we're looking at this from an investing perspective but I sometimes wonder, if you and CP are correct about oil and gas then the outcome could be horrific for the poor.

 

Feels like that scene from Big Short where they start dancing and Brad Pitt tells them to stop as the outcome if they're correct is devastating for people's lives.

 

 

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3 hours ago, ThoughtCriminal said:

@Cattle Prod

 

I THINK you've said that Capex is well down, but he's claiming that's all bollocks.

 

Can you clear up my confusion??

Sorry to state the obvious but the top chart is ENERGY investment not O&G

As DB says, with renewables you need lots more up front investment as the payback is all down the line.

 

If you take renewable investment off the top chart (as the energy it will provide is small relatively) it would look very different.

There is a huge investment gap in energy and it is getting bigger, like it is defying gravity due to Woke ESG.

 

On another note some of the crap being 'leaked' or spouted by OPEC over last 2 weeks is comical. Latest one I read is leak of a report saying oil surplus predicted to be 3mbpd in 2022.

They are trying really hard to restrict non-OPEC investment and keep the balance of power to themselves. And probably preparing everyone for a delay in their production increases for Jan.

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ThoughtCriminal
31 minutes ago, planit said:

Sorry to state the obvious but the top chart is ENERGY investment not O&G

As DB says, with renewables you need lots more up front investment as the payback is all down the line.

 

If you take renewable investment off the top chart (as the energy it will provide is small relatively) it would look very different.

There is a huge investment gap in energy and it is getting bigger, like it is defying gravity due to Woke ESG.

 

Ahhhhh, so he's made a schoolboy error using that chart to try and refute the guys point about oil capex then!

 

Surprised at him as he's normally spot on. No one's infallible I suppose.

 

Cheers 👍

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45 minutes ago, ThoughtCriminal said:

 

The more and more I see his tweets the more and more I think he will end up being wrong, I personally feel there will be some upside and then cut short at the knee caps.

I respect him massively but I have went back 10 years and listened and read everything I could find and hes been wrong every time. I think people are paying attention to what he is saying now because its very very possible but it was also very possible over the last 10 years too and it never happened.

Of course as usual no one is 100% perfect or right but he might be a little off now. lets find out. Either way If anyone actually has skin in the game then hats off to them, both sides of the argument of markets shooting to the moon or crashing 90% are both plausible!

 

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Talking Monkey
3 hours ago, DurhamBorn said:

18 months longer than usual to meet higher demand,longer lag.This will expose the fact the spare capacity isnt there,and then the market will see how long the lag is to any new production.$250 to $300 oil.That Swedish truent is going to starve to death maybe 100 million ,or at the very least put into horrific poverty.

There's an immense amount of misery coming down the line due to this vilifying of oil. I doubt the virtue signalling morons who did the vilifying will ever acknowledge what they did. 

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On 30/11/2021 at 08:59, geordie_lurch said:

Well as per your signature... "it`s easier to fool people than it is to convince them that they have been fooled" ,,,Mark Twain ;)

You posted the following video in one of the Covid threads making a very good case for this very thing O.o

 

This was a fantastic video. IMO the lady nailed the root cause and the solution. I will say no more because the video has now been removed from Youtube for being "against community guidelines" (i.e. too close to the truth for the comfort of the elites). Anyone got another link or know her full name? Think it was Melissa something?

Sorry dont mean to derail the thread...

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32 minutes ago, NippyNee said:

The more and more I see his tweets the more and more I think he will end up being wrong, I personally feel there will be some upside and then cut short at the knee caps.

I respect him massively but I have went back 10 years and listened and read everything I could find and hes been wrong every time. I think people are paying attention to what he is saying now because its very very possible but it was also very possible over the last 10 years too and it never happened.

Of course as usual no one is 100% perfect or right but he might be a little off now. lets find out. Either way If anyone actually has skin in the game then hats off to them, both sides of the argument of markets shooting to the moon or crashing 90% are both plausible!

 

What most youngsters dont understand is that its a market of stocks,individual companies that are affected in different ways depending on where the pendulum is on inflation etc.David makes predictions because he is retired and enjoys the audience,but he would in the past pass the roadmap to others.Many sectors have been in a two decade bear market where disinflation slowly gutted return on capital employed.Growth companies have little capital depreciating so do much better profit wise because their investment makes bigger profits.The market then expands the PEs to levels where,in the end are way over where they should be once the cycle turns.For instance Imperial could repay all equity  with 5.6 years free cash,Tesla would take 260 years.Imps has falling volumes of course,but it also has almost zero investment,where Tesla needs lots of investment.If Imps halves in a sell off,it can repay shareholders in 2.8 years,Tesla 130.Of course in a downturn growth suffers so profits can go down much harder in growth companies to where Tesla can never repay.

The market doesnt understand inflation,David does,his call is because he thinks the derivative market might blow up and i agree that is a huge risk because almost all stocks with debts could be smashed if counterparties fail.

I bought i few Wetherspoons yesterday simply as i think they are a superb business and their debt has swaps for 10 years so rates are around 2.5%,a great fix,but id those counterparties fail then what?.CBs by bailing out governments to fund welfare have created huge risk in the debt markets.Not so much the holders,they just get stuffed on inflation,tough,but the counterparty risk on it all.

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50 minutes ago, NippyNee said:

The more and more I see his tweets the more and more I think he will end up being wrong, I personally feel there will be some upside and then cut short at the knee caps.

Maybe. His timing is awful (as you would expect for a macro contrarian forecaster) and he gets himself into needless hassle over timescales on twitter (the least suitable online space that I can imagine for what he does!). That said he has called a lot of things no-one else saw coming, the current pull back in oil for example. I know what you mean about literally anything seeming plausible right now though.

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geordie_lurch

Turkey going from bad to worse via ZH here and could knock onto EU banks?

USDTRY%202021-12-01_8-27-56.jpg?itok=pvp

and

"When swaps and other liabilities such as required reserves are stripped, Turkey’s net reserves stand at -$35 billion! Yes, negative.W

CBRT%202_0.jpg?itok=HRLuL_Zz

 

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26 minutes ago, geordie_lurch said:

Turkey going from bad to worse via ZH here and could knock onto EU banks?

USDTRY%202021-12-01_8-27-56.jpg?itok=pvp

and

"When swaps and other liabilities such as required reserves are stripped, Turkey’s net reserves stand at -$35 billion! Yes, negative.W

CBRT%202_0.jpg?itok=HRLuL_Zz

 

Yes my Turkish ETF is down 9% in a week!

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31 minutes ago, Cattle Prod said:

It will be. How much of your take home you spend on food? Me, about 10%. So a 30% rise in food inflation costs me 3% of my income, whcih will rise with inflation. Boo, hiss.

What if you spend 70% of your income on food? 30% food inflation means you spend all your money on food, or you cut back on food and go hungry. 80%? You are starving or rioting. This is the case for hundreds of millions of people.

Mass deaths and effective genocide never seemed to bother socialists before, I don't see it happening now, sadly. Capitalism, powered by cheap energy, has been the greatest force for good and lifting people out of poverty the world has ever seen. And now it's been thoroughly trashed, for some reason.

Many in the west could cut their calorie count in half and survive.

The excess in peoples lives wont make a bit of difference towards happiness.

Bowl of porridge with water costs pennies!

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Can I ask a silly question, is it ever possible they will put up interest rates? Everywhere I look they say they won't/can't as most countries wouldnt be able to service their debt so should we keep that potentional outcome completely out the way?

 

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45 minutes ago, Cattle Prod said:

There are billions of people outside of the west, it is these people I'm referring to. That said, fatties in the west can riot too. Slowly, perhaps...

That said many people medicate their unhappiness with "luxury" processed food, and this would be particularly hit by inflation. Alcohol is also made from "food", especially beer and whisky/vodka, and significant price rises there would get everyone up in arms.

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1 hour ago, Cattle Prod said:

That capex chart is meaningless, there is no Y axis label, and the x axis is marked 'energy'.

Whoever posted it chopped off the bottom of the image (most likely deliberately) where it states that the index is a composite of surveyed intentions. It's got some correlation to changes in expenditures, but it's literally worthless as part of the argument that the guy is making. Very dishonest stuff.

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