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

[MrXxxx]

6 hours ago, M S E Refugee said:

Germany proposes historic Autobahn measure https://www.rt.com/news/555506-germany-speed-limit-fuel-use/

Asthmatics in UK torn between new inhalers and heating bills – media https://www.rt.com/business/555508-rising-cost-uk-health-service/

Well if they hadn't 'encouraged' the government to 'spunk' all that money on Covid tests, you know the ones that were "Free so we may as well take as many as we can", then they could have got them as a free prescription on the NHS.

[MrXxxx]

6 hours ago, DurhamBorn said:

Indeed,but if you go back to Blair and Brown the printing since is almost equal to the working age welfare bill since.Most welfare goes into direct consumption,and this inflation is because we are consuming too much,and not investing in producing.I would say to any government,reducing the welfare budget is critical.Of there are never ending levels of waste elsewhere,but welfare is the constant one.

OK, rather than justifying one or the other through successive posting can we just agree that they  are a) all fuc£ing useless, and b) that the average person 'off the street' could do a better job as they probably have more life experience/common sense! :-)

[MrXxxx]

5 hours ago, invalid said:

Thoughts on this short article in the Times?

We may have a glut but surely its going to be more expensive? Short term fix or long term solution?

 

https://12ft.io/proxy?q=https%3A%2F%2Fwww.thetimes.co.uk%2Farticle%2Fglut-of-gas-in-uk-drives-wholesale-price-down-to-pre-crisis-levels-pd5s5shzk

 

Wholesale gas prices for next-day delivery in Britain have tumbled to pre-energy crisis lows that are a fifth of the price in Europe because of an unprecedented glut of liquefied natural gas.

Demand for gas in Britain has dropped with warmer weather and there is not enough pipeline capacity to transport all the gas that has arrived in the country to mainland Europe where it is needed, analysts say.

Europe is seeking liquefied natural gas to replace piped supplies from Russia and fill up storage facilities before winter but does not have enough terminals to import all its needs.

LNG cargoes have been arriving at terminals in Britain with the aim of transferring them through the national network and on to Europe via subsea pipelines.

 

No, we will probably give it to the Germans at a knockdown price, like we did recently with the wind electricity to the French...afterall, they both behave impeccably during the Brexit negotiations, so we 'owe them one'! :-)))

[MrXxxx]

5 hours ago, JMD said:

Some postulate that it is covert subversion, others think that Eurovision is wholy totally unaware of the dangers it runs by displaying to Joe Public the difference in outcomes between operating 'direct democracy' (ie that voting system gave Ukraine the song contest win) and 'representative democracy' (ie that system gave UK the song contest win)....   or am I overthinking this?

I think you give 'Joe Public' too much credit for the ability to think critically! :-)

[leonardratso]

Just now, Cattle Prod said:

He chases the stick, picks it up, then gets distracted with something on the way back and drops it. I think I'll start calling him Bank of England.

bark.

or bailey.

or as i call our stupid cat 'dickead'.

[Starsend]

8 hours ago, Cattle Prod said:

What man doesn't reckon up this percentage?! What's the point of us otherwise? Oh yeah sorry I forget we have the police to cover that off nowadays 🙄

Do an 8 week course in Krav Maga and you'll increase that to 99.9%. It's sole purpose is to teach ordinary people how to maim and kill attackers, no faff.

Or just get one of these and get it effortlessly up to 100%. I always keep one handy under the bed.

[Harley]

4 hours ago, Bobthebuilder said:

When I used to live in Hackney a few shops catered for the local Africans, Nigerian Star lager is a top tipple.

Is there any beer futures we should be buying?

 

Now you've got me thinking!  I've been working on a spec for my "Fortress Portfolio" which I hope to share for comment.  One idea was to hedge some costs with shares, etc (e.g. heating oil with the O&G majors).  Now beer would be a good one too!

[Plan-b]

Looks like the pound is in for trouble, For those BK watchers with excess cash I'm thinking as Hedges - Commodities, IDTG, IBTL, Gold

https://12ft.io/proxy?ref=&q=https://www.telegraph.co.uk/business/2022/05/15/traders-bet-5bn-against-pound/

[Harley]

6 hours ago, invalid said:

Thoughts on this short article in the Times?

First thought - no wonder we came second in the Eurovision! 

The post Brexit British, as they see us?

[Harley]

1 hour ago, MrXxxx said:

Yeah right, have you seen the state of them recently?...too much driving around in cars and eating on their overtime shifts!...most of the ones i've seen wouldn't be able to keep up with me running down the road, and I am 20 yrs older....but then I suppose that's what the helicopters are for i.e when they actually have to chase someone without using a car!

They used to have something called the "Colonel's Run" which I guess was the BFT but they was posh.  Fecking did lazy old me in the first time.  The Police should have the same (gas masks optional!).

[Harley]

1 hour ago, MrXxxx said:

and he/she is probably more effective at chasing a stick than they are at 'chasing' [and catching] inflation! :-)))

[MrXxxx]

43 minutes ago, Cattle Prod said:

He chases the stick, picks it up, then gets distracted with something on the way back and drops it. I think I'll start calling him Bank of England.

..or Boris!....does he sniff around every Bitch as well? :-)))

[Chewing Grass]

On 10/05/2022 at 22:29, Chewing Grass said:

I have never had as many seller offers as I've had in the last couple of days on ebay.

Lenovo low energy PC, was £120 down to £70.

Bike component was £7 down to £4.50.

CNC machined derailleur hanger was £19 down to £14

Brake Levers he just offered them at half price, but they are not the right ones they were just in my list.

Its like everyone is desperate for cash all of a sudden.

Update, I have watched a few items over the weekend (3 or 4), two were whole bikes (one disappeared the other one I was outdid on) the other items were rear gear Cassettes.

One in a battered old box has already been bid up to £10 the other was a £20.31 buy it now.

Just had an offer of 20% off, so just sitting and waiting got it for £16.08 with free postage.

Retailers are getting very desperate and this is a big company https://sdjsports.com/

So if you want anything from there just watch it.

[MrXxxx]

28 minutes ago, Harley said:

They used to have something called the "Colonel's Run" which I guess was the BFT but they was posh.  Fecking did lazy old me in the first time.  The Police should have the same (gas masks optional!).

Yeah, but they don't do the 'Colonels Run' in boots, they do it is slippers and a pipe! :-)))

[Juniper]

I found this podcast with Jeff Currie really good. His position as head of commodities research at Goldman must give him access to more information than we’ll ever see and surprisingly his perspectives are very similar to those on here. There’s loads of nuggets but two I’ll highlight here. 

Firstly he talks about ‘the volatility trap’ where commodity prices become volatile, making producers less likely to invest, which in turn causes volatility. He advocates contracts like @Cattle Prod

Another interesting section for this thread is his thesis around dollar strength. His says that during all previous oil price shocks exporters have increased their prices accordingly, resulting in them receiving more dollars. The dollars would then be put into financial assets like treasuries that could be used as collateral to further increase the amount of dollars, leading to dollar weakness. So this would be his explanation for the dollar drop that you’re expecting pre-BK @sancho panza

Now we are in an inflationary period real assets are attractive so he thinks exporters will invest in them instead. A slightly different take on the move away from treasuries and to me it suggests we might not see the dollar drop until the BK is in full swing (caused by a lack of collateral?).

I’ve probably mangled his points but even in the glut of good podcasts right now I’d recommend listening to this one. I don’t subscribe so everything I got was from the first hour

https://hiddenforces.io/podcasts/commodity-supercycle-jeff-currie/

[Noallegiance]

[leonardratso]

quantum of solace already covered that didnt it, with that hydrogen powered hotel, that did well in the desert there. hahaha it burned real good, and the oil in the little bad guys stomach saved him for a few miles before he conked out.

[Castlevania]

Turns out Etisalat paid a small premium for their stake in Vodafone. £1.29 a share compared to the sub £1.20 the shares have been trading at the past few weeks.

[jamtomorrow]

Interesting thread - says the Fed now has an EM problem (inflation "memory" i.e. entrenched inflation) which will require an EM solution sooner or later: something like 8% neutral rate, maybe one or more 100bps hikes later this year. Ouch.

 

[DurhamBorn]

On 14/05/2022 at 19:26, reformed nice guy said:

I think for a lot of middle class people they need the 50 k for their lifestyle and their kids.

I'm always amazed when people admit they still pay for things for their adult kids. Not birthday gifts, I mean things like their mobile phone subscriptions, holidays, car payments, etc apparently private school fees are rarely paid by British parents, it's mainly grandparents

This is probably the last mass generation that has sufficient pension and housing wealth for the middle classes to do that to this extent

Agree,and i think its what people miss,a lot of the spending is bailing out from grandparents because many are loaded in income.Just two normal factory jobs with decent pensions,say £500 a week a couple minimum,then £380 state pensions.Then even low savings might pull in another £100 a week.Grand a week with no mortgage,no work costs etc,drowing in money.Pensions in NEST and renting is going to be a different story.Its one of the great themes of the cycle.Mass pensioner wealth one side,mass bennie scroungers the other and a smaller and smaller middle.

[DurhamBorn]

10 hours ago, Cattle Prod said:

Bezos has realised inflation is destroying his business model, and that he should have hired a certain consultant from Durham:

 

Incredible isnt it.Inflation will smash their business model from every side.They will still be a big company of course,but their market cap implied they would get to $160 billion free cash flow.BAT,gets around $9 billion.Amazon will likely go down 75%+,but even then the value will be eroded by inflation because of the lack of divis.

I did think there might be some job offers landing in DMs on here,but not a sniff.I guess they just read it for free,i would 

[snaga]

19 hours ago, DurhamBorn said:

The UAE move into Vodafone might be the start of the consolidation of the industry.Countries making huge amounts from energy are looking to invest in other solid inflation proofed areas as well.Sterling falling gives them a perfect time to load up.Hopefully with big pocket shareholders being added,if there ever was a bid for the company at least they would force a high price.I suspect they might also fancy merging some areas with VOD in Africa as well.

While looking at VOD this morning, I took a look at Telefónica. They seem a little unloved, but with 6% divi and just 3.5 PE ratio?

 

[DurhamBorn]

https://news.sky.com/story/minister-says-people-should-work-more-hours-or-move-to-a-better-job-to-protect-themselves-from-cost-of-living-surge-12614360

Its starting,but the government created a system (kept Browns) where there is no point working,or more hours.You lose free bennies.The truth is the bennies go way too high up the income scale and are far too generous when you have children.Its a problem that nobody want to try to solve,only Osborne would of done it,but backbenchers lost their bottle.

[DurhamBorn]

10 minutes ago, snaga said:

While looking at VOD this morning, I took a look at Telefónica. They seem a little unloved, but with 6% divi and just 3.5 PE ratio?

 

Im up nearly 50% on TEF including divs,the PE isnt correct,it includes profit from the O2 merger in the UK.I suspect their PE is around 7 or 8,still dirt cheap even with the 19% Spanish withholding tax.

[kibuc]

On 14/05/2022 at 11:01, kibuc said:

Haha, you're right, I guess I'm a bit defensive right now as for all the tough talk about picking undervalued explorers and rinding them to the moon, this recent carnage left my portfolio dead flat compared to 2018 while more diverse portfolios of DB and the like made a killing, so I don't feel like I'm in a position to preach

I'm on my way to California* for the weekend so I'll provide a review of my portfolio today or tomorrow.

*the one in Norfolk.

OK, so here's what I've got:

Top 3 positions:

Abrasilver (explorer, silver & gold, Salta Argentina): 90Moz silver + 1Moz gold in an open pit with PEA in place and still expanding, with some spectacular step-out drills recently. C$200mil mcap. As per PEA, NPV changes by $75mil with every $1/oz Ag & $100/oz Au change. Should provide great leverage to PM prices as it is, but I think markets are also asleep about their step-outs, we're talking about widths of 100m and 67m at 300AgEq as far as 800m outside the PEA pit! Surely a takeover target at some point.

Alexco (producer, silver, Canada): it's difficult to talk about them without repeating yourself. Keno Hill ramp-up is behind schedule and the Wheaton deal makes it impossible for them to make money at current prices... which to me makes them a fantastic way to leverage silver, assuming that the mine starts operating to its full potential. They are burning through some serious cash and might have to raise once again but I'm prepared to absorb that as I have confidence in the management to eventually overcome the issues and hit that consistent 400 tonnes per day.

Santacruz (producer, polymetalic - primarily zinc & silver, Mexico & Bolivia): their acquisition of Glencore assets puts them firmly in the mid-tier-trying-to-break-major category but they are priced as an emerging junior. We're talking about a company that will be* churning out 1/2 of First Majestic's pure silver production and 2/3 of AgEq at less then 4% of their mcap.

*forward looking statement! grab your children and run!

Medium positions, in oder of confidence:

Cassiar Gold (explorer, gold, US): 1.4Moz of open-pittable gold and that resource will keep expanding. The management's target is 3Moz which will surely take a lot of doing, but with the upcoming definition drilling this summer I can certainly see 2Moz within the defined pit shell with strip ratio falling down significantly from the current 4.5:1. Mineralistaion starts literally just below the surface. $60mil mcap surely has some digits missing.

Avino (producer, silver & copper, Mexico): their Avino mine is a low-grade open pit operation which they've been trying to expand with varrying success in 2021, and as many low-grade operation it tens to grow in economical ounces and value as the spot price goes up. This one really tends to jump when silver expldoes. However, what truly elevates it above its peers (looking at you, Impact!) is their recent acquisition of La Preciosa -  another 100Moz of almost exclusively silver, which instantly doubles their resources and upps their average grade, too.

Summa Silver (explorer, silver & gold, US): they hit wide high-grade intercepts for fun. Management holds a whooping 30% (retail only 27%). A longer-term play as I'm not expecting any resource estimates until 2023 but this baby is getting taken over at much higher than its current $70mil mcap.

Impact Silver (producer, silver, Mexico): another low-grade open pit... ha! surprise! Impact actually operates 4 mines - 3 of the underground and one open-pit so there's some diversification of risk. A very unusual situation for such a small producer. It's not massively exciting but they simply get work done, don't get in trouble with the locals, get decent hits in expansions drilling and make money, albeit small, at current prices. Oh, and just like Avino, they fly when silver does.

Defiance Silver (explorer, silver, Mexico): used to be my top holding alongside Abra delivering great drills throghout Spring 2021 but then it all went quiet, with only one result reported for the rest of 2021, and not a particularly exciting one at that.  They have, however, started drilling their second target and the first drill reported in April shows promise. This one is living on a borrowed time a little bit, but I knew exactly why I held them in 2021 so I'm prepared to give them a chance to rebound.

What are thoooose?

Guanajuato Silver (producer, silver, Mexico): they came to be after they bought an exhausted El Cubo mine from Endeavour for peanuts. I bought this one completely against my own judgement as I happened to know the asset rather well after following Endeavour for years but there was tons of excitement about it amongs some of the fellow junior investors I follow and it seemed to provide solid leverage to silver. It's priced almost as Avino without getting anywhere near its production and I honestly don't see what should be so special about it, but for now I'm prepared to hold one asset that I don't understand if - and only if! - it works. However, even if it eventually does some magic, it will surely be the first one to go once I decide to start cashing in.

GR Mining (explorer, silver, Mexico): it was one of my speculative plays that seemed to have had not worked out, with narrow intercepts reported in a surprisingly triumphant tone. We were literally on our way to the woodshed with a loaded gun and a bodybag when they pulled out the very best result I have seen, ever (mentioned here the other day). It bought them stay of execution but they'll have to follow up on it, and soon.

Recently sold:

GoGold (producer, silver & gold, Mexico): what a company! A glowing example of how a mining operation should be run - although it always helps if you're sitting on a good resource. 100km (!) of successful drilling in 2021, another 100km this year, they'll soon dig their way to China and it's all funded by cash flow from their Parral operation which just keeps going from strength to strength. I was extremy reluctant to let it go and only decided to do so to take advantage of firesale in Alexco, but I think this one should be a cornerstone of any junior portfolio.

Discovery Metals (explorer, polymetalic, Mexico): another one that I think is just absurd value, their problem was they didn't drop anywhere near as much as some of the others  so I decided to redistribute it among my high-conviction picks. Might go back to that one after Alexco and the like bounce back.

Minaurum Gold (explorer, polymetalic, Mexico): a similar story to GR Mining, where drills were rather underwhelming for some time until it pulled something special in recent weeks. However, their March drill wasn't anywhere near as spectacular as that of GR Mining, their mcap is already 3x higher and someone had to go. Retail seem to like them, tho, and they can be very springy at times - they bounced 16% on Friday.

CopAur (explorer, gold, US): it was another one of my speculative plays on small gold explorers (alongside Cassiar and Grande Portage), but unlike Cassiar this one has never delivered. People seem to be very excited about their recent acquisition of another small explorer in Nevada, New Placer Dome, with 500koz of defined resource, but I'm not. Not at all. I look at them at $40m mcap, then at Cassiar with their consitently good driils and three times the resource at $55m and I have no problem figuring out which one of them is more likely to make it.

There were also some failed speculative minicap plays like Strikepoint, Equity Metals, Canasil or the aforementioned Grande Portage. I'm keeping an eye on them and I think I might even consider taking another look at Strikepoint one day if it reaches single digits in mcap, but the reality is they are in a graveyard where they most likely belong.