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

[BurntBread]

I don't now if this Tom Luongo video from Palisades Gold Radio has been posted yet, from two days ago:

https://www.youtube.com/watch?v=osupSwB3kNY

He's an entertaining speaker, and is arguing (amongst other things) that the financial system has split into factions, with Jamie Dimon of JPMorgan now in open opposition to the EU, and working to destroy it. His take on the Draghi affair was that Draghi was put in place (obviously as an un-elected leader) to entangle Italy legally in such a way that it would be impossible for it to leave the Euro (and that such an entanglement happened with Greece previously). However, the no-confidence and early election has foiled this dastardly plan, and the EU will probably collapse.

Maybe the globalist coordination was never as close as many people here have suspected; but if it was, then the picture he paints does look like the thrashings of a decapitated power structure. Anyway, he doesn't make that leap, and I need to listen again, but a good story of different actors operating in a less uni-polar world.

[DurhamBorn]

37 minutes ago, Starsend said:

The Russians assassinated people in the UK not so long ago, with an innocent Brit killed as well and a piggy who spent months in hospital.

Fuck 'em.

Maybe a we can do it as well thing,do you love your daughters etc ?

[Plan-b]

1 minute ago, Cattle Prod said:

One for you, @DurhamBorn those brickies should be ashamed of themselves. It's really not hard to use twine and lay a straight row of bricks, not a flying fuck is given by the trade, the builder or whoever sets the spec. Maybe they're hacked off at their neighbours on bennies getting the same money for doing nothing. Those photos are a snapshot of the country right now.

 

 

Holy Fucking Shit 

[ThoughtCriminal]

30 minutes ago, Starsend said:

She was an alcoholic, thought it was perfume she'd found - something like that.

I find the Russian love-in on this forum perplexing at times, like they can do no wrong. Most of the people on this forum despise Western governments for obvious reasons that are well covered on this forum and this seems to translate into Russian love, like a binary choice. I think we're governed by cunts but I also think the Russian leaders are a bunch of corrupt, gangster cunts.

Anyway, don't really want to get into the Russian stuff, it's not what this thread is about.

When the Russians want to jail me for my tweets, incorrect use of pronouns and tell me a man can become a woman then I'll be sure to despise them.

 

As it is I'd happily hang almost every politician and journo in this country.

[sancho panza]

40 minutes ago, Noallegiance said:

The potential for Sterling collapse before Euro collapse.....

 

Very interesting rational presentation especially with regard to possible sterling move to parity with dollar.Then we'll have huge problems as our politcal elite jsut aren't equipped to deal with a respiratory virus with the fatality rate of flu let alone a sterling crisis.

As per recent basement discussions-the possibility of that happening has changed from 0% in Jan 22 to about 15%-20% now imho.it's the trend of that trade as well that's disconcerting in that the probability is growing and as the data comes through,shows no sign of reversing.

These crises creep up on you and then explode.

 

[marceau]

50 minutes ago, HousePriceMania said:

Lmao the comments on that article. 'Why would interest rate rises reduce inflation?' You can feel the realisation creeping in.

It's a long road down from here.

[ThoughtCriminal]

3 minutes ago, sancho panza said:

Very interesting rational presentation especially with regard to possible sterling move to parity with dollar.Then we'll have huge problems as our politcal elite jsut aren't equipped to deal with a respiratory virus with the fatality rate of flu let alone a sterling crisis.

As per recent basement discussions-the possibility of that happening has changed from 0% in Jan 22 to about 15%-20% now imho.it's the trend of that trade as well that's disconcerting in that the probability is growing and as the data comes through,shows no sign of reversing.

These crises creep up on you and then explode.

 

Sneaky little sterling short against the dollar, SP?

[ThoughtCriminal]

1 minute ago, marceau said:

Lmao the comments on that article. 'Why would interest rate rises reduce inflation?' You can feel the realisation creeping in.

It's a long road down from here.

Everyone I know thinks I'm a doom monger 

 

Because I just sold both my houses I'm now getting "You've made a big mistake there. Can't lose with property. Only goes up."

 

Western complacency is limitless.

 

 

[sancho panza]

22 hours ago, ThoughtCriminal said:

Great post by Michael Burry.

 

Look at that debt line versus the GDP.

 

"That which cannot go on won't".

Picture,1000 words etc.

Simply incredible.but it's that old Hemingway quote again isn't it?

''How did you go bankrupt?''

''Gradually at first,then suddenly.''

What's deeply disturbing to me is that that is the chart of the world's reserve currency(for now).

There's no getting off that train once the politicans are on it.

20 hours ago, DurhamBorn said:

Here in Durham our drifts near me closed first,the coal was shallow,sometimes at the surface,but the seams could be very thin,more suited to the old pickaxe mining than to mechanized.The coal measures slowly dropped deeper and by Easington were deep.Those seams ran way out to sea and it took half a shift getting to and from the face.However there are places where they could still get huge amounts of coal.Unlikely the drifts,but even they could be profitable given energy prices.Mining moved to where huge pits were needed like in South Africa,but we really should of kept a small industry going that could ramp a bit.

We should have kept some.Strategically,the UK's had a shocking 30 years of mismanagement.First duty of any govt is to preotect it's people-that means economic/physical/cultural security.

Now we're heading for bankruptcy,wide open to invasion/external control,cold winters and cultural dilution.And yet to sort it out we have the people who created the crisis and didn't see it coming.

[HousePriceMania]

 

2-4 weeks.....

 

[moneyscam]

Whilst my stocks are taking a bath at least my hedge is the gift that keeps giving.

[marceau]

Just now, ThoughtCriminal said:

Everyone I know thinks I'm a doom monger 

 

Because I just sold both my houses I'm now getting "You've made a big mistake there. Can't lose with property. Only goes up."

 

Western complacency is limitless.

 

 

Lots of those FT comments suggest people at max leverage with all bets in the same direction.

Sterling just can't cover the pain, it'll just go straight into balance of payments, blast up liabilities, and the problem will spiral out of control. How has the govt ended up here? The solution was right in front of them and they've blown it.

[Democorruptcy]

New rules coming to stop finance firms trying to break ranks on the race to zero

Quote

 

Financial institutions that signed up to Mark Carney’s industry alliance to tackle climate change could be kicked out for failing to hit targets by a new independent panel, under plans set to be made public this year.

Beefed-up checks by the UN on whether finance groups meet new criteria on ending coal financing and phasing out fossil fuels from portfolios could be announced at New York Climate Week in September and launched at the COP27 climate talks to be held in Egypt in November, according to Race to Zero, the UN group behind the plans.

More than 450 finance companies accounting for $130tn of assets have joined the Glasgow Financial Alliance for Net Zero. The initiative, which was announced with great fanfare at last year’s COP summit, is spearheaded by former Bank of England governor and Brookfield Asset Management executive Carney, alongside ex-New York mayor Michael Bloomberg and former Securities and Exchange Commission chair Mary Schapiro.

Gfanz’s aim is to galvanise the world’s most powerful finance companies to commit to achieving a net zero global economy by 2050. Members are required to meet standards set by the Race to Zero, a UN-led campaign.

While the Glasgow alliance was designed as a big tent to bring together as many new members as possible, the Race to Zero recently updated its rules to make them more onerous.

https://12ft.io/proxy?q=https%3A%2F%2Fwww.ft.com%2Fcontent%2F58575db9-5670-4b2d-a555-2c3aed0fdd6d

 

 

[Noallegiance]

2 minutes ago, Democorruptcy said:

New rules coming to stop finance firms trying to break ranks on the race to zero

 

Jezuz fucking christ

[nirvana]

2 hours ago, honkydonkey said:

NINETY ONE PLC pulled back enough for me to buy it today in the ISA.

that's a clear pull back in a downtrend, what makes you think its going higher?

 

[sancho panza]

20 hours ago, Cattle Prod said:

Couple of comments there on lead times to new oil and gas, so worth saying again. And journos, just go ask any of your industry contacts and they'll tell you the same thing. It's really important to get out there and into thicko politician heads.

Lead time to new oil and gas projects is 5-10 years. 7 is a good rule of thumb. The odd one gets done in less than 5 years, if they are simple (the North sea isn't simple). Many run over ten years. 

This process cannot be speeded up with cutting paperwork, it's all about gathering information by drilling to meet investment metrics in a stable fiscal environment. So the UK North sea is effectively dead, thanks to the windfall tax. Managed decline.

Globally, we have about one more year to trigger another oil and gas investment cycle. Were almost at 7 years now of severe underinvestment, i.e. the average time for a new project from exploration. Which means weve run out of the last cycles projects.

There is currently no discernible uptick in exploration worldwide. It takes about three years of decent prices to convince people to invest in exploration, which kicks off the new project cycle. It's understandable, as you have a good 70% chance of losing your money. But you have to do it - no exploration, no new projects. About a year to go....

But I'm starting to think that won't happen this time. Shareholders want their money, and the skillset in the industry has been devastated. Exploration in particular takes high end teams, and they are mostly gone after 7 years of cuts and redundancy. They're not sitting on the shelf, they go stale after a year or two out anyway. As for the ones hanging on in the industry, there are few young people with new ideas and few old gits with the experience of how not to make stupid mistakes. They are mostly mid career. Even if investment suddenly starts pouring in, there aren't the people to do it anymore. Bad wells will be drilled, blowouts will happen. 

All that's going on really,globally, is managed decline of existing assets. 

If that doesn't do a sharp 180, what that means is an end to growth (as we are witnessing) and in turn the blowup of debt based monetary system, which requires constant growth (I.e. constant cheap energy). Even if we found a new superior energy source, we needed fossil fuels to transition to it. They're still there, but it'd take years to skill up again and trigger the next wave of projects. The university masters courses in petroleum geology and engineering, which were a basic qualification for industry entry (and pretty much guaranteed you a high paying job if you could get in) don't really exist anymore. Companies stopped hiring grads, and grads wanted renewable/ESG stuff anyway. Believe me, I went out and talked to them, and saw the ideology creeping in. The universities rebranded them as 'MSc in sustainable energy' or similar. Aberdeen still has theirs going in fairness, but that's the capital of managed decline now. BP didn't consider one of these graduates fully trained till they had around ten years experience. They literally had grad->early career training programmes for ten years. They produced superb professionals, eventually...

Can you see where I'm going with this lead time to new projects?

A point on UK gas for the journos to ask their contacts about: there are 30-50 small gas accumulations already discovered but undeveloped in the UK which were uncommercial but would make money now and help get us over this hump. But no one wants to commit to them. Get the govt to underwrite the sales price at half of current prices, say 125p a therm and they will get developed in 2-5years. The lead time is shorter as we already know where the are and they already have wells in them (information).

Edit:

Equinor is the exception wrt grad hiring, and exploration in Norway, mainly because you could claim back a cash credit for most of a failed exploration well. So they drilled lots. Problem is that the process is not very rigorous if you know the well is only going to cost you $5m instead of $30m, and so they are not very good at it outside Norway.

I know you've stated that North Sea investment is dead for some time,is that across all companies you know about or jsut one or two?

BP's Looney has stated it wouldn't affect their invesment in the UK but I can't see how it won't.As I understand,UK North Sea producers were already paying higher levels of tax even before the windfall tax.Is that correct (40% iirc as opposed to 20%).Why bother with the risk?

Also from an investment perpsective,I wee Wood Group trading back at £1.50 are they a decent way to trade the next invesment cycle,PFC at £1.20 too?Dyor natch.I'm alreayd in both of thsoe as well as a couple of explorecos

Interesting to see the price moves today in Euro area oilies desptie all round weakenss and a mild uptick in Brent

[nirvana]

1 hour ago, Plan-b said:

In context it's fine on a day where most things are down

good eyes squire, it's called a bear market......I did try and point this out on friday, n'est ce pas?

 

[sancho panza]

6 minutes ago, moneyscam said:

Whilst my stocks are taking a bath at least my hedge is the gift that keeps giving.

Have you got a view MS on the possiblity of a sterling crisis before end 2023(sterling crisis defined as cable<1).

Also have you got a take on where UK IR's will need to go to get infaltion under control and whtehr they will be succesful.No pressure jsut interested in yor take.

This mess is unfolding quicker than I expected UK wise and I'm pretty releived we've alreayd moved our allotments into USD/PM exposure/Oilies before now.I'd hate to be selling cable at $1.18 but it might be better than parity in 6 months

also @baffledbyzirp

[HousePriceMania]

1 minute ago, sancho panza said:

Have you got a view MS on the possiblity of a sterling crisis before end 2023 2022 (sterling crisis defined as cable<1).

Also have you got a take on where UK IR's will need to go to get infaltion under control and whtehr they will be succesful.No pressure jsut interested in yor take.

This mess is unfolding quicker than I expected UK wise and I'm pretty releived we've alreayd moved our allotments into USD/PM exposure/Oilies before now.I'd hate to be selling cable at $1.18 but it might be better than parity in 6 months

also @baffledbyzirp

FTFY 

[nirvana]

love the smell of burning bulls on a monday......

 

[Democorruptcy]

The Don't Pay your energy bill campaign now up to 110,855...

https://dontpay.uk/

Was it an idea by a banker, so debtors can still afford to pay their mortgages?

[moneyscam]

8 minutes ago, sancho panza said:

Have you got a view MS on the possiblity of a sterling crisis before end 2023(sterling crisis defined as cable<1).

Also have you got a take on where UK IR's will need to go to get infaltion under control and whtehr they will be succesful.No pressure jsut interested in yor take.

This mess is unfolding quicker than I expected UK wise and I'm pretty releived we've alreayd moved our allotments into USD/PM exposure/Oilies before now.I'd hate to be selling cable at $1.18 but it might be better than parity in 6 months

also @baffledbyzirp

Hey SP. I would be guessing as much as anyone else even if it's an educated guess. Bear in mind that as far as fiat fx goes it's a relative game of who is the least ugly. Can cable go below parity? Absolutely because of massive balance of payments deficit and increasing budget deficits - the dreaded twin deficits that only the US can sustain (for a time) as USD is reserve currency. It is because of this reserve currency status that as things break down further I can see further flows to the USD and thus cable being pulled below parity. End of 2023 is a realistic scenario but I wouldn't bet the house on it as there are a lot of things that can happen between now and then.

As for interest rates, normally I would argue you need positive real rates so way above where we are now. However I think the inflationary shock which leads to demand destruction and reduction of aggregate demand will do most of the heavy lifting and so rates will not need to go above current inflation to achieve this outcome.

[DurhamBorn]

49 minutes ago, Cattle Prod said:

One for you, @DurhamBorn those brickies should be ashamed of themselves. It's really not hard to use twine and lay a straight row of bricks, not a flying fuck is given by the trade, the builder or whoever sets the spec. Maybe they're hacked off at their neighbours on bennies getting the same money for doing nothing. Those photos are a snapshot of the country right now.

 

 

Its directly related to bennies and boomers pensions because there is simply little reward for work.New estates got 20% social housing on them,plus BTL bought some as well,so likely 30%.So you move in with you both working long hours with a big mortgage only to find out your neighbours arrived 5 weeks ago on a boat and or on bennies.Other side are a Brit bennie family with 3 kids out in the tiny garden pissed every night.

 

[sancho panza]

1 minute ago, Cattle Prod said:

When I say dead I mean production growth, new fields. There will still be the usual annual investment in existing fields, trying to squeeze out as much as you can. That's what Looney is talking about, those plans are unaffected. But it amounts to managed decline for the UKCS as a whole. Just look at the overall production curve, the massive investments in 2009-2015 barely arrested it. The windfall tax ensures it.

Thanks for that clairifcation CP.

Frogive me being cheeky,any industry chatter on how the divesment of BP/Shell Russian assets is going? Any chance they'll get to keep them in the end?

Also futures cruve backwardated substanially.If you go out to 2030,it's saying $60(although I'm not a futures trader don't know how liquid something that far out would be?),point is,the cash marekt is not seeing what you're saying.It's really quite lgoical that after two years of absurd rules when exploring was nigh on impossible and supply chains disrupted,that even aside from the natural decline,this alone would create a preice squeeze up.Maybe it's a Ukraine thing.

and that's before we factor in USD inflation

PS-jsut like to echo @ThoughtCriminal sentiments a few pages back about how much some of us have learned from you.I was at a barbie yesterday and Mrs P's eyes started rolling over (she's got a special look for me when I mention fractional reserve lending/oil supply side) when I briefly explained the issue of coning in conventional wells prohibiting sustained production ramps from Saudi.....bless her.

She laughs and takes the piss but I tell you this ,she's aslo well aware that her oil investments are currently on track to pay her more than her final salary pension even before reinvemesnt for next twenty years

 

[Democorruptcy]

25 minutes ago, Noallegiance said:

Jezuz fucking christ

It's entirely logical. Carney and his cronies have invested lots of money in the climate change stuff, if some of the big money loses faith in it and bails, the value of the climate change stuff could fall. Then Carney and his cronies would be left in the shit. They have to try keep the money flowing one way, to protect theirs.