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

[Castlevania]

1 hour ago, sancho panza said:

What TIT?

Yeah Telecom Italia. I’d like a higher bid. An offer at €0.60 and I’d be happy.

[ThoughtCriminal]

9 minutes ago, wherebee said:

To be fair, journalists love this 'gotcha' approach where they have a specific number and throw it at someone.  Unless they know hundreds of numbers in their head, you get to say 'actually, it is X' and make them look a fool.

However, she SHOULD have said 'the release of reserves is, whilst only a few days of use, will release pressure and enable normal market forces to re establish themselves'

she's a classic over promoted leftie.  great at  virtue points, shit at reality.

I know but this was absolute basics.

 

Even I knew the answer and I'm an ex screw from a council estate in Middlesbrough.

 

 

[DurhamBorn]

7 minutes ago, wherebee said:

To be fair, journalists love this 'gotcha' approach where they have a specific number and throw it at someone.  Unless they know hundreds of numbers in their head, you get to say 'actually, it is X' and make them look a fool.

However, she SHOULD have said 'the release of reserves is, whilst only a few days of use, will release pressure and enable normal market forces to re establish themselves'

she's a classic over promoted leftie.  great at  virtue points, shit at reality.

Thing is,as energy sec the first number i want every day is how much energy we consume.Its the very basic number.It just shows how right across the UK and US the left woke filled blob has managed to get their people into power.Great for us though because one of the things iv found in life is that almost everything left wing turns to utter shit so we invest the opposite way.Doesnt really matter though,oil is going to $200 minimum,likely $300 and a blow off top of $450 not out of the question.Nothing they can do.The lead and lag looked superb on it when reflation looked likely,now we are in big inflation and extra green noise the risk is nearly all on the overshoot.

[DurhamBorn]

2 minutes ago, ThoughtCriminal said:

I know but this was absolute basics.

 

Even I knew the answer and I'm an ex screw from a council estate in Middlesbrough.

 

 

Who likely owns more oil shares than the US energy sec  

[reformed nice guy]

Doesnt the release of these strategic reserves mainly help the huge, energy hungry country that doesnt have enough of its own reserves to power its large manufacturing base... China?

If it worked (which it wont obviously) wouldnt a lower price of oil help China more than America?

[JMD]

3 hours ago, Harley said:

There's a lot of BS spoken these days.  Those of us who've been through this before, even as kids, know better.  There was BS back then too.  I remember (later!) President Carter saying inflation was a mystery, etc. 

IMO the only deflationary fall would be in asset prices, but that's really just a normal stock market crash.  I don't know why we've started to call it something else.  Maybe anoraks splitting hairs on terminology.  Bottom line, IMO the cost of living will go up in fits and assets will lose value at some point via crash and/or through attrition. It happened many times before.  The good inflation (in assets), then the bad (in the cost of living), and then the really bad where asset (equity) prices fail to outrun inflation (Weimar, Venezuela, etc). 

KISS.  Macro to me, over the intermediate to long terms, except for true growth, is a simple zero sum game.  There's no alchemy, just snake oil.  But that's in the overall so, sure individuals can get burnt so others don't.

PS:  I like how he mentioned the 1940's, just like another goodun, Lyn Alden.

Yes definitions and time frames are important and Lacey Hunt was talking long term not just a market correction... But I suppose it's just me, as I hadn't appreciated that Hunt and many other deflationists think the current monetary system status quo will continue and so consider ratios like the money-multiplier important in highlighting the inexhaurable grinding down of productive capital. Whearas instead the future 'reset' will circumvent commercial bank money creation, and we will get a (utopian?!) command economy utilising MMT, cbdc's and other tricks to provide the required velocity of money uptick and the inflation boost in spades.

[JMD]

4 hours ago, sancho panza said:

Not sure it's small fry to a lot of Spainish banks who are exposed there.Typically,banking crises start at the margins.

Aug 15 2020

https://wolfstreet.com/2020/08/15/as-turkeys-2nd-financial-currency-crisis-in-2-years-blossoms-heavily-invested-european-banks-look-for-exit-but-not-the-most-exposed-bank/

By Nick Corbishley, for WOLF STREET:

As the Turkish lira logged fresh record lows against both the dollar and the euro on Friday, and is now down 19% this year against the dollar, attention is turning once again to the potential risks facing lenders. They include a handful of very big Eurozone banks that are heavily exposed to Turkey’s economy via large amounts in loans — much of it in euros — through banks they acquired in Turkey. And the strains are beginning to replay those of the last currency/financial crisis in 2018.

Three weeks ago, when the lira was trading within a tight band against the dollar — the result of the Central Bank of the Republic of Turkey (CBRT) pegging the lira to the dollar by burning through billions of dollars of already depleted foreign-exchange reserves and dollars borrowed from Turkish banks — no corporate bonds in Turkey were trading at these levels. Now that the CBRT has stopped propping up the lira, which has since fallen 7% against the dollar, the average risk premium demanded by investors to hold dollar-denominated notes of Turkish businesses has soared.

European Banks’ Exposure

Of all non-Turkish lenders Spanish and French banks continue to have the most loans outstanding to Turkey, according to the Bank for International Settlements. Banks in Spain, France, Italy and the UK have an estimated combined exposure of around €118 billion. Spanish lenders (read: BBVA) account for just over half of that (€61 billion) while French (read: BNP Paribas), Italian (read: Unicredit) and British (read: HSBC) banks are respectively due €24 billion, €21 billion and €11 billion.

A Big Gamble that went well for years has gone sour.

These lenders were drawn to Turkey by the country’s record of high-octane, debt-fueled economic growth and its much more favorable demographics than the ageing populations of Western Europe. For a fair while, the bet paid off. Erdogan’s economic miracle, fueled largely by a huge foreign-currency-denominated debt bubble, provided over a decade of juicy lending opportunities and bumper profits for the banks. Then, when the miracle faltered, the bubble went pop, and things went to heck.

But the foreign bank that has taken the biggest loss on its investment in Turkey so far…

One foreign bank that remains optimistic, at least outwardly, about its exposure to Turkey’s economy is the most exposed of all: Spain’s BBVA, which owns half of Turkiye Garanti Bankasi. BBVA has already written off over 75% of its investment in Garanti since buying its first chunk of the lender in 2011, under the combined influence of Garanti’s plummeting shares and Turkey’s plunging currency.

Thanks in large part to this, as well as the expansion of lending and the relatively strong performance of the lira in May and June, Garanti earned €189 million in the second quarter of 2020 — despite the loan growth, this was down from €218 million in the second quarter of 2019. And this as as of the end of June.

Is Spain's BBVA a future 'RBS waiting to happen'? Bad management, devil may care upstart, though their USP seems to be tech focus... Can't make out whether they are public or private?

[macca]

2 hours ago, DurhamBorn said:

Thing is,as energy sec the first number i want every day is how much energy we consume.Its the very basic number.It just shows how right across the UK and US the left woke filled blob has managed to get their people into power.Great for us though because one of the things iv found in life is that almost everything left wing turns to utter shit so we invest the opposite way.Doesnt really matter though,oil is going to $200 minimum,likely $300 and a blow off top of $450 not out of the question.Nothing they can do.The lead and lag looked superb on it when reflation looked likely,now we are in big inflation and extra green noise the risk is nearly all on the overshoot.

Problem is affording the shares.. they are not exactly cheap to buy,, iv'e looked before but i would only be able to buy a few..

[Phil]

8 hours ago, Harley said:

Alas, I have never said anything so sensible or prescient and don't intend starting so now! 

Apology. 

[jamtomorrow]

Interesting to see Javier diverge from one of the tenets of this thread (that only Big Oil has the Big Bollox to drive the energy transition). Albeit in a nuanced way, the thread he links is still saying O&G should be allowed to focus on O&G -

 

[ThoughtCriminal]

9 hours ago, DurhamBorn said:

Thing is,as energy sec the first number i want every day is how much energy we consume.Its the very basic number.It just shows how right across the UK and US the left woke filled blob has managed to get their people into power.Great for us though because one of the things iv found in life is that almost everything left wing turns to utter shit so we invest the opposite way.Doesnt really matter though,oil is going to $200 minimum,likely $300 and a blow off top of $450 not out of the question.Nothing they can do.The lead and lag looked superb on it when reflation looked likely,now we are in big inflation and extra green noise the risk is nearly all on the overshoot.

To the options boys on here, DB just gave me an idea.

 

If oil is going to 200ish or maybe even 3-400, doesn't that represent huge upside bet with low downside even if it doesn't come off?

 

Can't be many people out there putting 300-400 oil in their numbers.

 

Or am I talking shite??

 

@MvR

 

 

 

 

 

 

 

 

 

[ThoughtCriminal]

And it's not even cold yet.

 

It's like watching an exciting film where you know someone bursts in the room and blows your head off at the end.

[Noallegiance]

1 minute ago, ThoughtCriminal said:

And it's not even cold yet.

 

It's like watching an exciting film where you know someone bursts in the room and blows your head off at the end.

I'm thinking Titanic, but this real life movie makes that look short.

[afly]

7 minutes ago, ThoughtCriminal said:

To the options boys on here, DB just gave me an idea.

 

If oil is going to 200ish or maybe even 3-400, doesn't that represent huge upside bet with low downside even if it doesn't come off?

 

Can't be many people out there putting 300-400 oil in their numbers.

 

Or am I talking shite??

 

Trying to tag man versus recession but not coming up. Anyone know his handle on here?

 

 

 

 

 

 

 

 

 

@MvR

[ThoughtCriminal]

4 minutes ago, afly said:

@MvR

You're a gentleman! It's like putting up the bat signal, MvR we have an options emergency, another clown with a cunning plan to run past you 😂

[HousePriceMania]

https://www.rigzone.com/news/wire/bp_goes_on_hydrogen_hiring_spree-22-nov-2021-167084-article/

 

BP Goes on Hydrogen Hiring Spree

[planit]

1 hour ago, ThoughtCriminal said:

To the options boys on here, DB just gave me an idea.

 

If oil is going to 200ish or maybe even 3-400, doesn't that represent huge upside bet with low downside even if it doesn't come off?

 

Can't be many people out there putting 300-400 oil in their numbers.

 

Or am I talking shite??

 

@MvR

 

Not pretending I know as much as MvR (purposefully avoided putting up the Bat signal too many times) but here is my take. I am just starting to experiment in the hope that once a BK event plays out I can make my portfolio less directional and profit from the fear.

Options traders make money by selling premium (they get money when they enter the trade) and taking on risk. Buying  very out of the money calls is a gamble where on average you will lose money.

 

I believe oil will spike at some point [and the resulting shock on the economy will bring on a recession and BK type event].

But the options trades I put on were much smaller scale and nearer term, I sold out of the money Jan puts in USO (1 contract on the 16th and 2 more on the 19th). 

 

Hopefully they will reduce in value and expire worthless in Jan so I can keep the money I received. I will probably sell before expiry and re-enter a new position, rinse and repeat all the way up to $300 oil (only entering trades when I think there is a good risk/reward). 

 

[MrXxxx]

12 hours ago, sancho panza said:

Even with the rights issue,they're equity is miniscule,especially givne the losses lately.

But they are not in a capital intensive area i.e. they provide very much a service product?

[MvR]

2 hours ago, ThoughtCriminal said:

To the options boys on here, DB just gave me an idea.

If oil is going to 200ish or maybe even 3-400, doesn't that represent huge upside bet with low downside even if it doesn't come off?

Can't be many people out there putting 300-400 oil in their numbers.

Or am I talking shite??

@MvR

It depends on the timescale to get there.  @DurhamBorn What's your approximate time scale on 200+ oil price?

Based on the options on /CL futures available on TastyWorks,  the $100 strike call option on the May 2022 futures contract is trading at around $1200 right now, and would be worth $50,000 if oil went to $150 before expiry, or $100,000 if it went all the way to $200.

The $150 strike for the same date is trading at $90. 

That's the furthest date available on TastyWorks though you can go all the way out to 2032 on Interactive Brokers. ( albeit with almost zero liquidity so I've no idea what price you'd have to pay for the options.

I'm not sure how this would translate to options on the Oil ETFs, which have futures roll-over issues to deal with, but you could make a similar punt I guess.

CAVEATS : 

I'd want to look carefully at the futures margin requirements and rules before I took a bet like this in a small account though. IIRC, there comes a point nearer to expiry where the margin requirement is based on what would happen if you owned the underlying futures contract, not the just call option.

Also bear in mind the options expire before the futures contract the options are based does.. I can't recall how long before ( maybe up to a month? ) so I'd check that too.

 

[Majorpain]

13 hours ago, wherebee said:

I am with HSBC in London (not really - this is a hypothetical).  I want a personal loan for 100k in euro.  The bank creates the 100k out of thin air and credits my account.  I then use my multi-currency account to translate to USD (instant).  Has it swollen the supply of USD?

Some would say no, as the original creation was in EUR.  Others would say yes, as I have ended up with USD that I can buy stuff with (inflationary for goods sold in USD).

Whilst its in the bank it makes no difference if its Yen, Euro or Timbuktu rocks, IMO its only when its converted into goods/services that it has any real world impact.  The BOE kind of agrees with me on this, since in its (2009) opinion electronic bank deposits are not actually legal tender....

https://www.whatdotheyknow.com/request/is_electronic_money_actually_leg

Its an interesting read for "Angie of the elder family" having a go at them for assuming their gender and the BOE guy admitting that when the bank creates a loan for someone it is not legal tender money, but people are willing to accept it anyway which is an interesting rabbit hole to go down in the days of non-legal tender crypto!  Better keep it quiet that the majority of the population are already using non-legal tender £'s eh?

[AyrshireBoy]

1 hour ago, ThoughtCriminal said:

And it's not even cold yet.

 

It's like watching an exciting film where you know someone bursts in the room and blows your head off at the end.

I posted this twitter post a while back, seems more relevant now. I really need to get on Gumtree and pick up a Calor gas heater and a bottle.

[Sugarlips]

14 minutes ago, MvR said:

It depends on the timescale to get there.  @DurhamBorn What's your approximate time scale on 200+ oil price?

Based on the options on /CL futures available on TastyWorks,  the $100 strike call option on the May 2022 futures contract is trading at around $1200 right now, and would be worth $50,000 if oil went to $150 before expiry, or $100,000 if it went all the way to $200.

The $150 strike for the same date is trading at $90. 

That's the furthest date available on TastyWorks though you can go all the way out to 2032 on Interactive Brokers. ( albeit with almost zero liquidity so I've no idea what price you'd have to pay for the options.

I'm not sure how this would translate to options on the Oil ETFs, which have futures roll-over issues to deal with, but you could make a similar punt I guess.

CAVEATS : 

I'd want to look carefully at the futures margin requirements and rules carefully before I took a bet like this in a small account though. IIRC, there comes a point nearer to expiry where the margin requirement is based on what would happen if you owned the underlying futures contract, not the just call option.

Also bear in mind the options expire before the futures contract the options are based on expires.. I can't recall how long before ( maybe up to a month? ) so I'd check that too.

 

Can’t offer much help other than Erik Townsend of Macrovoices fame is an industry expert and has made a fortune doing this since the -$47 event last year, I imagine he has some info on the website but haven’t looked

[DurhamBorn]

8 hours ago, macca said:

Problem is affording the shares.. they are not exactly cheap to buy,, iv'e looked before but i would only be able to buy a few..

The shares were dirt cheap last March and then again in autumn.BP were around £2 a share.Repsol 6 Euro.Some of the US ones put on here like Matador (hat tip to Kaplan) have 8x in price and were easily available.This thread was full of people at those prices saying how much lower are they going ,im waiting etc when they should of been buying.The easy multi baggers have passed,but i think the likes of Repsol and BP still have very nice cycle upside.

The thread nabbed dozens of multi baggers at the start of the cycle,however we are at the consolidation part now where the aim is to keep all that capital made and increase it slightly ahead of inflation.There will be very sharp pullbacks along the way and they should be used to add to oilies,uranium,silver etc.

[Yellow_Reduced_Sticker]

https://uk.finance.yahoo.com/news/millions-u-k-covid-loans-050132607.html

 

@Hancock will be along shortly for an in-depth moan!

[RJT1979]

1 hour ago, HousePriceMania said:

https://www.rigzone.com/news/wire/bp_goes_on_hydrogen_hiring_spree-22-nov-2021-167084-article/

 

BP Goes on Hydrogen Hiring Spree

Helium taking out a discrimination case