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

[CannonFodder]

31 minutes ago, ThoughtCriminal said:

Fucking mental.

Agreed, plus no one will use less so the brake on energy prices is gone. Eg, prices gone up so we use less, less demand so prices level off.

With 80 % subsidy, its particularly free so why bother using less. Why cut back, why put on another jumper.

I.m overegging a bit but price relief isnt wise

[JMD]

3 hours ago, Harley said:

Apologies for not being clear. 

That first table shows the number of potential opportunities (number of stocks) by stock exchange.  It highlights the dearth of opportunities, according to how I personally rate things, in say the US versus say some Asian countries. 

I produced tables (not posted) showing the % of opportunities based on the number of "value" type stocks (i.e. excluding any technical filters) and the number of total stocks (i e. excluding any filters save market cap) for each exchange which further drew the point home.

I was also separately also looking at Asian orientated funds and they looked oversold.  Of course oversold things could sell off even more!  But this is the pool I like to fish in - primae facia value companies currently oversold, all according to my own preferred metrics (others available!).

The screens are wide nets so only take me so far, requiring a manual look at the charts to see if they're on the turn.  If so, I do a deeper dive on their financials.  But those wide nets (like a debt to equity ratio up to 150%) shows just how bad things are in some markets!

Takes a few hours and I'm easily bored and distracted, hence my trips here!

PS:  Given we seem to be in a more volatile tail end I'm very tempted to drop the value bit and sprint for some profitable trades before any pop.

Oops! No problem...  just 'confirmation bias' on my part (modern age non-critical thinking), or maybe just plain old 'leaping before looking' (ancient wisdom)... either way I still think if we got a meaningful BK pullback on their prices some of the exchanges would look good buys.

[Sugarlips]

 

 

[MrXxxx]

https://www.reuters.com/markets/europe/shrink-fit-year-big-oil-starts-become-small-oil-2022-01-10/

A tale of two approaches...but which one will 'win'?

[leonardratso]

8 hours ago, Sugarlips said:

 

 

they could at least burn it for heat.

[geordie_lurch]

.

[Axeman123]

10 hours ago, CannonFodder said:

I.m overegging a bit but price relief isnt wise

With a sovereign wealth fund it is difficult for a govt to just say no. There is always a pot of gold.

16 minutes ago, Cattle Prod said:

To add: just by saying "windfall tax", you deter investment

49 minutes ago, MrXxxx said:

https://www.reuters.com/markets/europe/shrink-fit-year-big-oil-starts-become-small-oil-2022-01-10/

A tale of two approaches...but which one will 'win'?

I suspect the two are linked, ie big oil has no fear of windfall taxes in the US but does in Europe. However it likely has no fear of being punished for deliberately under investing in future supply here, like it might in the US. So drill in the US and return capital in Europe, and garauntee stratospheric oil prices for a whole cycle +. Who wins? Big oil.

29 minutes ago, leonardratso said:

they could at least burn it for heat.

Overnight low in Caracas was 15c, which isn't surprising considering Venezeula's southern tip almost touches the equator. Still, I doubt they will ever have queues for toilet paper!

[JMD]

22 hours ago, Democorruptcy said:

Insurers could start making a lot more out of health insurance.

In terms of actual policy holders, for the UK the biggest 3 are - Bupa, Aviva, AXA... Aviva seems to be a favourite of this thread so might be a good one to own? Obs not advice, please dyor, etc. But does anyone have some US/global ones they'd like to bring attention to? ...or European ones because after all, all governments are doing the same - 'build back better!', etc, etc - policies.

[CannonFodder]

A shame really as those residual life assets will be closed early once risk is monitised on a probalistic basis.

But once any area accounts for less than 5 percentage of your profits but over 50% of your headaches, stress and workload..  well I can see where the recommendation if the risk boys come from.

Then there is the aspect that penalties for safety and environment incidents tend to be connected to a mutiple of global company revenue so big boys pay more for an incident skewing the cost benefit return of an aging asset. Whether a rig or a human, both more likely to have a fall or spill in their pants in old age.

The Alex Kielland shows just how unexpected a failure can be, weld a sonar sensor badly and over time the metal fatigue did its work and the rig and crew were lost. Makes you think what has gone on and is going on in older rigs.

Then the risk of decommissioning. Far better to sell on, leave some money on table and avoid that.

I know people work hard to avoid these things, but in these huge operations, the law of averages means it will never be eliminated completely and is somewhat inevitable over an infinite amount of activities and time.

A small company would have paid less for deepwatwr horizon as it simply doesnt have the money to pay more before failing.

IRONICALLY, this means old assets pass to smaller companies perhaps less capable to manage them than big boys with their excellent safety and ops teams as their size of penalties is less, fines are less or they just go bust. Courts want fines to be painful but not necessary drive a company out of business. Revenue in terms of production is fixed so a smaller company may see a better risk reward.

Some smaller players good, some less so.

Probably more for others reading  but at some point the risk boys say fuck it, sell it or close it and this tax talk doesnt help them keep it.

[wherebee]

3 minutes ago, CannonFodder said:

IRONICALLY, this means old assets pass to smaller companies perhaps less capable to manage them than big boys with their excellent safety and ops teams as their size of penalties is less, fines are less or they just go bust. Courts want fines to be painful but not necessary drive a company out of business. Revenue in terms of production is fixed so a smaller company may see a better risk reward.

 

this is a great point that many people don't get.  Selling an asset in modern western societies can often be about evading future regulatory pain, not the lost income stream or other financial items.  Not many company analysts get that - they will look at an asset purchase and map out the cost/income, not the lost management time and remediation when the inherent fuckups start coming home to roost.

[CannonFodder]

At risk of going off piste, Give it 40 years for skyscrapers, most countries design codes are 50 to 100 years. They dont last forever, metal fatigue in structural steel from wind forces .These assets will be the liabilities of the future.

They are closely packed normally in central cities so controlled explosion not an option.

Think of the cost of taking down a 200m skyscraper, some property funds will be hosed for sure. Then think about a 500m or 800m

Record is 187 demolition according to google . Haha. Over 1300 above 200m, no whole life cisting here, they will be sold on to some patsey.s property fund. Guessing retail investors.

[JMD]

1 hour ago, Cattle Prod said:

To add: just by saying "windfall tax", you deter investment: "opposition party has threatened windfall tax" will literally go into the risk report that is done before every major investment, and the score for UK risks will have gone up. Taxes are the major component of this risk profile, and the big no-no is tinkering or grandfathering taxes, because companies have to make multi decade investments, and require fiscal stability to make the investment, and plan the project life. We will run an economic model for 20,30,40 years before even drilling the first well.  The UK has tinkered with taxes a lot over the last ten years, and is one of the reasons the supermajors have been divesting. Put simply, they will be happier working in a country with a high risk of coups etc, as long as the fiscal regime stays stable. And there are many 'unstable' countries out there who keep their fiscal regime stable for this exact reason. The other point is that the time to grab taxes, if you really have to, is when the countrys production is rising. Then new entrants will swallow it. UK production is in decline, and has been for 20 years. It's totally pointless, but you can count on labour to make it worse.

As for Labour wanting to extract more tax from the bad/polluting oil companies... Makes me wonder how the energy companies are taxed in the so called 'socialist' Nordic countries - at least that's what the left would have us believe those countries are - but do the left really believe that 'convenient fiction' I wonder. And anyway in reality Sweden etc are corporatist (very closely knit) societies...Tbh I'm rather jealous of them, but then again as @Cattle Prodhas pointed out previously - without their energy resources, the Nordic peoples would not be so wealthy.

[Plan-b]

1 hour ago, MrXxxx said:

https://www.reuters.com/markets/europe/shrink-fit-year-big-oil-starts-become-small-oil-2022-01-10/

A tale of two approaches...but which one will 'win'?

From the article, are BP really gonna be able to or want to cut 40% by 2030? Can't see it happening..  

"Britain's BP has said it will cut its oil output by 40%, or roughly 1 million barrels per day, by 2030 from 2019 levels. Shell has said its oil output peaked in 2019 while Eni said its output will plateau in 2025."

More windmills and unicorn farts it is then

[geordie_lurch]

21 minutes ago, CannonFodder said:

At risk of going off piste, Give it 40 years for skyscrapers, most countries design codes are 50 to 100 years. They dont last forever, metal fatigue in structural steel from wind forces .These assets will be the liabilities of the future.

They are closely packed normally in central cities so controlled explosion not an option.

Think of the cost of taking down a 200m skyscraper, some property funds will be hosed for sure. Then think about a 500m or 800m

Record is 187 demolition according to google . Haha. Over 1300 above 200m, no whole life cisting here, they will be sold on to some patsey.s property fund. Guessing retail investors.

I would suggest the technology to demolish large skyscrapers, say something like the Twin Towers (one standing 1,368 feet tall and the other rising only to 1,362 feet tall) has been around since at least 2001 @CannonFodder

https://www.ae911truth.org/evidence/near-free-fall-acceleration where they question how the towers collapsed at least free-fall speed and actually accelerated

According to the National Institute of Standards and Technology (NIST) — which is the U.S. government agency that investigated the World Trade Center’s destruction — the Twin Towers came down “essentially in free fall.”

NIST’s theory of the collapses hinges on the idea that the upper section of each tower could continuously accelerate through the lower stories at nearly the rate of gravity, while in the process completely dismembering the steel frames and pulverizing nearly all of the concrete to a fine powder.

They have done a very recent video on it:

 

[Harley]

10 hours ago, JMD said:

Oops! No problem...  just 'confirmation bias' on my part (modern age non-critical thinking), or maybe just plain old 'leaping before looking' (ancient wisdom)... either way I still think if we got a meaningful BK pullback on their prices some of the exchanges would look good buys.

Sure worth looking at if they come into my cross hairs!  Companies positioned like that are good, although like with funeral directors, etc others seem to have been there already and hollowed them out.

[Harley]

I rather enjoyed this as a good potential heli-view of where we are while out walking the dog.  Frank Barbara was very interesting and kicked things off well.

https://www.financialsense.com/podcast/20153/2022-annual-forecast-inflation-induced-slowdown-brewing-constitutional-crisis

PS: Podcasts are such an excellent alternative to the MSM.

 

[CannonFodder]

5 minutes ago, geordie_lurch said:

I would suggest the technology to demolish large skyscrapers, say something like the Twin Towers (one standing 1,368 feet tall and the other rising only to 1,362 feet tall) has been around since at least 2001 @CannonFodder 

it.s the cost not the possibility

Even price of aviation fuel is rising.

Seriously though, dropping a cooling tower at a disused plant or radio mast in middle nowhere is fine, but vibrations in a dense urban area that can damage other buildings, underground utilities or metros is hard to control

[Axeman123]

26 minutes ago, CannonFodder said:

At risk of going off piste, Give it 40 years for skyscrapers, most countries design codes are 50 to 100 years. They dont last forever, metal fatigue in structural steel from wind forces .These assets will be the liabilities of the future.

I am mildly obsessed by the Singer building. It is widely thought that a big part of the decision to demolish it was the costs and risks associated with the top being clad in stone, and a lack of specialist skills/knowledge of how to maintain and risk assess this material at extreme height.

I would imagine more modern buildings being designed with dismantling in mind to some degree.

They don't make 'em like this anymore...

[JMD]

58 minutes ago, Cattle Prod said:

Punishing for underinvestment assumes supply is there! You're probably right that they would see it that way, but would be utterly retarted by the pols. I've read a lot of "we need to invest more in the North Sea and get fracking" from all sorts in the last week or two, for some reason. Clearly a narrative change has been authorised from on high, but the North Sea ship has sailed long ago and fracking in the UK just won't work. What are they going to do when they figure it out? 3 day week suits me fine fwiw, and I suspect many many other people. 3 day week plus UBI to help alleviate the coming energy crisis?

But did energy usage actually go down when a chunk of the country was WFH?

Ive always thought a 3 day week would help transform society in many many ways. Not just in terms of employment. But also socially, and crucially also encourage more equal sharing of resources over the long term. Its a big topic and I know by just saying these things it makes me sound socialist, but I'm really not. It's what should have begun to happen back in the 70's when it was clear then that the capitalist model was running out of steam, instead the 'can was kicked' and we got financialisation and globalisation... The thing is that changes like 3 day week, could still help prevent UBI being implemented, but today I fear it is very apparent that politicians actually want policies like UBI because these are methods of control, and control seems to be the end goal. 

[CannonFodder]

Gov wouldnt like the 3 day week as days 4 and 5 taxed at higher rates. I wouldnt put it past them to move to 6 days so they can tax us more into oblivion.

Companies wouldnt as cost of laptops and rent divided over fewer hours, more employees to cover shifts, greater HR burden.

I would love 3 days .

[Democorruptcy]

12 minutes ago, Cattle Prod said:

The industry loves drilling in Norway. If you drill an exploration well in Norway, and it comes in dry, you get refunded about 72% of the cost, IIRC. Not a credit, or offset, but cash. So you're a small company with a big idea, and the well costs $30m? Not to worry, you really only have to raise ~$9m. Now, would you call that...socialist, or capitalist?! Can you imagine the backlash here if that was suggested?!

Have we to do a joint £30m project? 17 of us about £1/2m each to raise the £8.4m 28% required. If we spend say £3.8m of the extra funding faffing about pretending to look for oil, we've spent £12.2m but they then give us £21.6m when we come up dry. Net profit £9.4m, so we each double our money and there's a spare £1m for whoever thought of this idea.  

[AWW]

18 hours ago, Axeman123 said:

The future isn't legions of self-sufficient dog-walkers etc, IMO.

Dog walking businesses and the like (cake baking, nail painting etc) are only viable when there are people without sufficient free time to walk their dogs. There will be a critical mass of antiworkers where these microbusinesses no longer work.

[DoINeedOne]

10 hours ago, Sugarlips said:

 

 

Actually bought some that currency on eBay a few years back when it was becoming worthless,

just for fun it was around £1.5 for all the notes

 

[DoINeedOne]

Brussels Airlines has operated 3,000 flights without passengers this winter to avoid losing take-off and landing slots.

The airline’s parent company, Lufthansa Group, confirmed that 18,000 flights had been flown empty, including 3,000 Brussels Airlines services, according to a report in The Bulletin.

EU rules require that airlines operate a certain percentage of scheduled flights to keep their slots at major airports.

Under these “use it or lose it” regulations, prior to the pandemic carriers had to utilise at least 80pc of their scheduled take-off and landing slots.

This was revised to 50pc as coronavirus saw travel become increasingly difficult – but airlines are still struggling to hit this target.

As a result of Lufthansa Group’s latest figures, the Belgian federal government has written to the European Commission, calling for a change to the rules on maintaining slots.

Lufthansa Group, which owns the carriers Lufthansa, Swiss International Airlines, Austrian Airlines, and Eurowings in addition to Brussels Airlines, has already axed 33,000 flights in January and February.

[JMD]

1 hour ago, CannonFodder said:

A shame really as those residual life assets will be closed early once risk is monitised on a probalistic basis.

But once any area accounts for less than 5 percentage of your profits but over 50% of your headaches, stress and workload..  well I can see where the recommendation if the risk boys come from.

Then there is the aspect that penalties for safety and environment incidents tend to be connected to a mutiple of global company revenue so big boys pay more for an incident skewing the cost benefit return of an aging asset. Whether a rig or a human, both more likely to have a fall or spill in their pants in old age.

The Alex Kielland shows just how unexpected a failure can be, weld a sonar sensor badly and over time the metal fatigue did its work and the rig and crew were lost. Makes you think what has gone on and is going on in older rigs.

Then the risk of decommissioning. Far better to sell on, leave some money on table and avoid that.

I know people work hard to avoid these things, but in these huge operations, the law of averages means it will never be eliminated completely and is somewhat inevitable over an infinite amount of activities and time.

A small company would have paid less for deepwatwr horizon as it simply doesnt have the money to pay more before failing.

IRONICALLY, this means old assets pass to smaller companies perhaps less capable to manage them than big boys with their excellent safety and ops teams as their size of penalties is less, fines are less or they just go bust. Courts want fines to be painful but not necessary drive a company out of business. Revenue in terms of production is fixed so a smaller company may see a better risk reward.

Some smaller players good, some less so.

Probably more for others reading  but at some point the risk boys say fuck it, sell it or close it and this tax talk doesnt help them keep it.

I wonder if this is another end-result practical example of 'risk aversion', which some commentators say is responsible for 'poisoning' large swathes of modern society? Perhaps it's why our politicians are like frozen rabbits in the headlights, instead of tackling problems head on. Perhaps even the OTT global lockdown reaction was emergent, Ie just typifying how leaders now think, and so not evidence of some dark grizzly conspiracy? There is a lot to the theory, macro and micro, including mental health approaches actually causing more mental health problems! Anyway I mention this end-of-cycle 'risk aversion aberrational type thinking', because i think it offers hope of sudden change, and kinda fits with Neil Howes 4th Turrning theory. Unfortunately still much pain to come but as they say forewarned is forearmed.