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

[Barnsey]

5 minutes ago, Yellow_Reduced_Sticker said:

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

 

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

Helicopter money innit bruv, it worked?

[Sugarlips]

Just now, Barnsey said:

Helicopter money innit bruv, it worked?

How are you defining worked?!

[DurhamBorn]

Oil is a cycle high price so could be anytime,but the most likely window is 27 to 29.Gas might happen earlier.2023 shows a squeeze starting.I dont trade options,but it might be worth looking at gas later next year if it falls back,or maybe spring 23.

For people with only low amounts of capital trying to multi bag direct silver exposure might be the best option.$200 to $300 could easily happen and is mush easier to buy and hold.Im slowly building more exposure in the metal itself.

This thread has lots of people at different stages in life,and hopes/needs.A good example are me and my son.Im aiming for inflation+ ,he would like a multi bag.His £30k capital (22 years old) is 100% in silver.

The other areas for best multi bag chance is Uranium and silver miners.

If i had £20k i wouldnt buy BAT id buy silver.If £100k id buy £30k silver,then £15k BAT etc and build a portfolio.We have all been there who have built wealth from nothing.

[Hancock]

18 minutes ago, Yellow_Reduced_Sticker said:

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

 

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

Only thing to moan about is i didn't get a contract like John Beckwith. 

I do wish they'd go back to at least trying to hide their corruption.

 

[Hancock]

10 minutes ago, DurhamBorn said:

If i had £20k i wouldnt buy BAT id buy silver.If £100k id buy £30k silver,then £15k BAT etc and build a portfolio.We have all been there who have built wealth from nothing.

If i had 20k id gamble on their being a huge stock market crash and go balls deep then!

But how do you see silver going to $200 when circa £47 is the highest its ever been and that was just briefly.

Just to play devils advocate, Asia has been on a 3 decade manufacturing and infrastructure binge, and its averaged closer to $16/17 in the last 10 years.

 https://tradingeconomics.com/commodity/silver

 

[feed]

11 minutes ago, Hancock said:

If i had 20k id gamble on their being a huge stock market crash and go balls deep then!

But how do you see silver going to $200 when circa £47 is the highest its ever been and that was just briefly.

Just to play devils advocate, Asia has been on a 3 decade manufacturing and infrastructure binge, and its averaged closer to $16/17 in the last 10 years.

 https://tradingeconomics.com/commodity/silver

 

If the ESG lot go after the miners, then anything that's already out of the ground becomes a lot more valuable. 

[Hancock]

5 minutes ago, feed said:

If the ESG lot go after the miners, then anything that's already out of the ground becomes a lot more valuable. 

Who are ESG?

[feed]

1 minute ago, Hancock said:

Who are ESG?

Environmental, Social, and Governance
ESG stands for Environmental, Social, and Governance. Investors are increasingly applying these non-financial factors as part of their analysis process to identify material risks and growth opportunities.

[planit]

I have a theory Biden might have been forced to announce the $50 SPR release.

 

US oil stocks (commercial+SPR) have declined from 1.17bn Aug 2020 to 1.04bn Nov 2021, a 118m barrel drop in little over a year.

Commercial storage is hitting a minimum and can't really fall further without there being an obvious supply problem (and Zerohedge mentioned they can't go below 20% [sic?] capacity for technical reasons).

Releasing 50m barrels over the next 6 months continues the decline and will kick the can down the road. In the mean time perhaps he believes he can get access to 1mmbpd of Iranian output as part of a 'deal'.

This might put off a price spike for the foreseeable future but it doesn't solve any of the medium term problems, if anything it makes them worse as investment in the US etc will be lowered due to market manipulation (+ the reserve release is due to be returned).

[Sugarlips]

39 minutes ago, Hancock said:

If i had 20k id gamble on their being a huge stock market crash and go balls deep then!

But how do you see silver going to $200 when circa £47 is the highest its ever been and that was just briefly.

Just to play devils advocate, Asia has been on a 3 decade manufacturing and infrastructure binge, and its averaged closer to $16/17 in the last 10 years.

 https://tradingeconomics.com/commodity/silver

 

One theory is China might have to re-peg the Yuan to gold at 5 or 10x its current price. Initially this would be a domestic revaluation but the spillover would be inevitable.

The wall st silver guys reckon they are ‘draining the comex’ and there isn’t the physical Oz left in the vaults. 

[ThoughtCriminal]

1 hour ago, DurhamBorn said:

Oil is a cycle high price so could be anytime,but the most likely window is 27 to 29.Gas might happen earlier.2023 shows a squeeze starting.I dont trade options,but it might be worth looking at gas later next year if it falls back,or maybe spring 23.

For people with only low amounts of capital trying to multi bag direct silver exposure might be the best option.$200 to $300 could easily happen and is mush easier to buy and hold.Im slowly building more exposure in the metal itself.

This thread has lots of people at different stages in life,and hopes/needs.A good example are me and my son.Im aiming for inflation+ ,he would like a multi bag.His £30k capital (22 years old) is 100% in silver.

The other areas for best multi bag chance is Uranium and silver miners.

If i had £20k i wouldnt buy BAT id buy silver.If £100k id buy £30k silver,then £15k BAT etc and build a portfolio.We have all been there who have built wealth from nothing.

This is the "problem" I'm going to have soon if and when my house sells.

 

I'm already too heavily in cash as it is, I'll have another 90k soon.

 

Other than BAT and a few oilies and gas, I don't really fancy going too heavily in stocks with it.

 

Are you meaning physical silver DB? Or ETFs?

Thanks to MvR and others for replying regarding my options question.

 

I'm very much a total novice so always appreciate chances to learn.

[DurhamBorn]

1 hour ago, Hancock said:

If i had 20k id gamble on their being a huge stock market crash and go balls deep then!

But how do you see silver going to $200 when circa £47 is the highest its ever been and that was just briefly.

Just to play devils advocate, Asia has been on a 3 decade manufacturing and infrastructure binge, and its averaged closer to $16/17 in the last 10 years.

 https://tradingeconomics.com/commodity/silver

 

Because im good at this 

Asia's expansion of production was dis-inflationary.As they turn to consumption as the west pulls back supply its hugely inflationary.

Silver might not go there,but along with uranium and natural gas its at a price that could look very very silly looking back in the future.

Its a no brainer to me to own a good chunk.£10ks worth,even £5k could be the difference between being fine and the poor house for ordinary people.Bigger holdings could provide huge capital right at the top of the cycle.

[sancho panza]

11 hours ago, JMD said:

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?

It's lsited

running it's Dowd Buckner ratio

it's leveraged at 20/1 so not as leveraged as Barclays which comes in at 40/1....................

However,much as I prefer that ratio as a guide to sovlency to all the capital tier 1/tier 2 BS(where they risk weight the assets using their own historical default data----skew.....meh!),it still isnt a catch all.

From the  link we can see they operate in some countires that have a lot more form for defaulting than say Germany.Spain was infamous during the 2000's as people were mrotgaging hotel rooms and the like and none of the banks noticed,well they didn't really need to as the ECB picked up the bill.

https://www.investing.com/equities/bbva-company-profile

As of December 31, 2020, it operated through a network of 7,432 branches and 31, 000 ATMs in approximately 30 countries. It operates in Spain, Mexico, South America, the United States, Turkey, the Asia-Pacific, and rest of Europe.

 

[DurhamBorn]

36 minutes ago, ThoughtCriminal said:

This is the "problem" I'm going to have soon if and when my house sells.

 

I'm already too heavily in cash as it is, I'll have another 90k soon.

 

Other than BAT and a few oilies and gas, I don't really fancy going too heavily in stocks with it.

 

Are you meaning physical silver DB? Or ETFs?

Thanks to MvR and others for replying regarding my options question.

 

I'm very much a total novice so always appreciate chances to learn.

Both,physical i view as worthless i dont even add it into my "wealth" calcs,,i bought mostly before the VAT change leaving the EU and is security.I use Wisdom tree physical silver PHSP and some Bullionvault. @Harley might be able to offer up other funds where they own the physical without counterparty,borrowing etc.

[Starsend]

On 22/11/2021 at 19:18, Cattle Prod said:

What the FAANGMAN hides ..

This is very similar to what happened the last time we had a huge tech bubble back around 2000. The smaller players tumbled first, the larger players followed a few months later.

Be looking at figures like that for Tesla by the Spring I reckon, if not before.

 

[sancho panza]

3 hours ago, MrXxxx said:

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

You pay yer money MrX,I'm a 'spray n pray' er ,I look at a lot of balance sheets annually.Theirs is probably in the worst 2-3%.This company isn't for widows and orphans imho.I'm a gambler,so appreciate some of us like a punt,but this needs a warning marker on it for any people new to the thread imho.

It wouldn't tka e alot to go wrong for the recovery to get derailed.

Key thing,equity as at 2020 year end was $433mn over total assets of $4201mn=10.3%

Then take away the goodiwll and intagibles(there might be some patents actually worth something,but probably not)

we get $433mn-$182mn over total assets $4201mn which =5.9%

 

As of Q2 2021 that equity is down to $359mn but goodwill =intagibles is still circa $180mn

In terms of the income statement,even when time swere good they didn't make much

 

zooming in,recent Qs are covered by the corruption scandal,but still,the equity raise looks like small beer

 

 

As part of the refi it's raising $275mn in equity of which $104mn goes straight out as a fine payment.It's also taking what looks like a $500mn loan out,so equity up but then immediately liabilities up....net net?

https://www.investorschronicle.co.uk/news/2021/10/26/petrofac-to-tap-investors-for-275m/

Oil & gas contractor Petrofac (PFC) attempted to put a long-running corruption scandal behind it, as it announced plans to tap equity investors for $275m (£199m), with some of the proceeds earmarked to meet a £77m fine imposed on the company earlier this month,

The $275m equity raise is part of a broader refinancing that will see Petrofac borrow $500m in a bridging loan being taken out ahead of an imminent bond issue, for which it expects a below-investment grade BB- rating. It has also agreed a two-year, $180m revolving credit facility, a new, $50m bilateral loan and an amendment to an existing $50m loan.

 

 

 

 

 

[sancho panza]

14 hours ago, Castlevania said:

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

In all hoensty I jsut wanted to say 'Tit' in context on thread.......

[planit]

53 minutes ago, ThoughtCriminal said:

This is the "problem" I'm going to have soon if and when my house sells.

 

I'm already too heavily in cash as it is, I'll have another 90k soon.

 

Other than BAT and a few oilies and gas, I don't really fancy going too heavily in stocks with it.

 

Are you meaning physical silver DB? Or ETFs?

Thanks to MvR and others for replying regarding my options question.

 

I'm very much a total novice so always appreciate chances to learn.

 

I have thought through the same problems as you - if I ended up with a lump sum (which would have been at least 2x my existing equity holdings), I would not be comfortable sticking it all in self managed equities.

The conclusion I came to was I would split it up into funds including

Vanguard 80 which is very diversified and designed for pensions with 80% equities and 20% bonds (you can pick the percentage)

Emerging markets/ commodities fund

Energy fund

There are literally mixtures of everything.

 

The thinking being that cash has to be the worst and you can just pick percentages and allocations that you are happy with. You could even keep a percentage as cash, whatever you feel safe with that is not just being stuck in the headlights.

 

For this kind of safe thinking I really like the pensioncraft youtube channel, he explains things really simply and there is loads there. Generally it is a bit lower level than the thinking on here.

 

Obviously this is not advice, just what I thought.

 

[geordie_lurch]

5 minutes ago, sancho panza said:

You pay yer money MrX,I'm a 'spray n pray' er ,I look at a lot of balance sheets annually.Theirs is probably in the worst 2-3%.This company isn't for widows and orphans imho.I'm a gambler,so appreciate some of us like a punt,but this needs a warning marker on it for any people new to the thread imho.

It wouldn't tka e alot to go wrong for the recovery to get derailed.

Key thing,equity as at 2020 year end was $433mn over total assets of $4201mn=10.3%

Then take away the goodiwll and intagibles(there might be some patents actually worth something,but probably not)

we get $433mn-$182mn over total assets $4201mn which =5.9%

 

As of Q2 2021 that equity is down to $359mn but goodwill =intagibles is still circa $180mn

In terms of the income statement,even when time swere good they didn't make much

 

zooming in,recent Qs are covered by the corruption scandal,but still,the equity raise looks like small beer

 

 

As part of the refi it's raising $275mn in equity of which $104mn goes straight out as a fine payment.It's also taking what looks like a $500mn loan out,so equity up but then immediately liabilities up....net net?

https://www.investorschronicle.co.uk/news/2021/10/26/petrofac-to-tap-investors-for-275m/

Oil & gas contractor Petrofac (PFC) attempted to put a long-running corruption scandal behind it, as it announced plans to tap equity investors for $275m (£199m), with some of the proceeds earmarked to meet a £77m fine imposed on the company earlier this month,

The $275m equity raise is part of a broader refinancing that will see Petrofac borrow $500m in a bridging loan being taken out ahead of an imminent bond issue, for which it expects a below-investment grade BB- rating. It has also agreed a two-year, $180m revolving credit facility, a new, $50m bilateral loan and an amendment to an existing $50m loan

Great details @sancho panza - I sold all of mine at a slight profit and stuck it into more BP but wish I'd done it a few weeks ago but better late than too late

[Harley]

5 hours ago, Phil said:

Apology. 

Nor have I ever deserved such a thing!  

[sancho panza]

3 hours 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 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.

 

I think it's worth pointing out that the futures are expensive to play and that playing the single company options in the USA is a more reasonable way of gaining exposure to oil volatility.It'll offer less leverage on the whole,but that's no bad thing.

With these single co. calls you won't have any margin requirements unless you write them.

 

Also I think you highlight a real issue ref lqiuidity if you go further out in terms of the bid offer spread on purchase and sale.I generally trade 6-12 months out(nowhere near as sophisticated as MvR) and i jsut trader directioanlly with out hedges in place.

Saxo has BP 360 Dec 22 calls are 28.75p so £287.50 to buy 1000 calls

BP 440 calls Dec 22 are 8.5p.

If BP goes to £6 you get paid out at 7.3/1 on the 360 and 17.8/1 on the 440's.

[planit]

23 minutes ago, geordie_lurch said:

Great details @sancho panza - I sold all of mine at a slight profit and stuck it into more BP but wish I'd done it a few weeks ago but better late than too late

I also bought BP last week but I am keeping my relatively large PFC holding for the time being.

The stock overhang should be temporary and my take on the situation was they raised more than they needed to.

I took that as the directors being confident they needed to ramp up capacity for the contracts coming down the pipeline.

I trust the directors, Schroders and Asfari are not piling in loads of money unless they are expecting 50%+ return.

 

But as Sancho says, this is not for widows and it all could go wrong.

Price looks crazy now when you think it was 110 before anything was known on the fine and the capital situation. I too should have sold at 180.

 

 

@sancho panza, why did you take intangibles off equity instead of assets in your calculation? 

[RickyBacker]

1 hour ago, Sugarlips said:

One theory is China might have to re-peg the Yuan to gold at 5 or 10x its current price. Initially this would be a domestic revaluation but the spillover would be inevitable.

The wall st silver guys reckon they are ‘draining the comex’ and there isn’t the physical Oz left in the vaults. 

I'm in that reddit group as well and it has grown to almost 170,000 people in one year. A growing number of apes worldwide are banging the drum about sound money. More and more people are questioning how the Government have ponied up all this money when for years we have been told that there wasn't any magic money tree. If (when) the silver derivative market pops then expect to see major fireworks.  
The investable physical silver market is tiny... recommend to have some insurance before the house catches fire.

[Harley]

3 hours ago, Yellow_Reduced_Sticker said:

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

 

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

All that sweat, hard work, sacrifice, and commitment of descent folk, each individual precious pound of it, frittered away by the entitled who, due to the lack of anything required to acquire it, treat it as worthless and by implication those earning it too.  There is so much evil being perpetrated on the decent atm.

[sancho panza]

1 hour ago, planit said:

I have a theory Biden might have been forced to announce the $50 SPR release.

 

US oil stocks (commercial+SPR) have declined from 1.17bn Aug 2020 to 1.04bn Nov 2021, a 118m barrel drop in little over a year.

Commercial storage is hitting a minimum and can't really fall further without there being an obvious supply problem (and Zerohedge mentioned they can't go below 20% [sic?] capacity for technical reasons).

Releasing 50m barrels over the next 6 months continues the decline and will kick the can down the road. In the mean time perhaps he believes he can get access to 1mmbpd of Iranian output as part of a 'deal'.

This might put off a price spike for the foreseeable future but it doesn't solve any of the medium term problems, if anything it makes them worse as investment in the US etc will be lowered due to market manipulation (+ the reserve release is due to be returned).

The SPR sale looks like an act of depseration whichever angle you look at it from.50mn barrels inot a worldwide demand of 100mbpd?

I've tried looking at it rom different angles but every which way looks bullish for oil and bearish for 'Uncle' Joe.

They msut be seeing some awful data coming through.Worth noting the folowing from Wolf St the otehr day ref Powell/Brainard.Fed is taking a left turn but promsing to fight inflation.Mood music has defineitly changed at the Fed.The intrernals msut be dire and goes to reaffirm that this thread has been ahead of teh curve..yet again.. under the leadership of our charismatic Sect leader @DurhamBorn

https://wolfstreet.com/2021/11/22/powell-brainard-suddenly-make-inflation-1-priority-in-their-thank-you-statements/

As you would expect, both Powell and Brainard released thank-you statements about their nomination.

But as you would not expect, fighting inflation was suddenly the number one priority in both their statements – after they’d driven inflation to a three-decade high through record gigantic money printing and interest rate repression, and then had stubbornly brushed off this inflation as something that would quickly go away on its own.

There wasn’t a word in their statements about this inflation being “temporary” or “transitory,” and about the Fed needing to be “patient,” and waiting for it to go away on its own. But inflation was suddenly a real problem that needed to be dealt with.

Powell’s first priority is now to “prevent higher inflation from becoming entrenched,” he said:

“The unprecedented reopening of the economy, along with the continuing effects of the pandemic, led to supply and demand imbalances, bottlenecks, and a burst of inflation. We know that high inflation takes a toll on families, especially those less able to meet the higher costs of essentials like food, housing, and transportation. We will use our tools both to support the economy and a strong labor market, and to prevent higher inflation from becoming entrenched,” he wrote in his statement.

“Other key priorities include…,” he said, well, the laundry list you’d expect, from “guarding the resilience and stability of the financial system” on down.

Brainard’s first priority is now “getting inflation down”:

“I am committed to putting working Americans at the center of my efforts at the Federal Reserve. This means getting inflation down at a time when people are focused on their jobs and how far their paychecks will go,” she wrote in her statement.

This looks like the beginning of a U-Turn on inflation.

 

https://mishtalk.com/economics/bidens-foolish-effort-to-reduce-oil-prices-by-tapping-reserves-will-fail