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

[MrXxxx]

10 hours ago, Harley said:

But then a massive red hammer like candle.  Like "hang on, are we sure?"

The 'we' being and individual [that gave the tail] with the majority shouting "Yes, but not quite as much as yesterday" [and so giving a slightly lower close]....and then the rest as they say 'is history' [or historic!] :-)

[Animal Spirits]

Goehring & Rozencwajg on Top Traders Unplugged:

00:00 - Intro

05:12 - Adam’s background and the history of Energy

13:58 - The Dark side of Renewable energy

29:11 - Moore’s Law

36:54 - Malinvestment and creative destruction

44:33 - The renewable energy debate

52:34 - Nuclear energy

01:04:54 - De-globalization and its consequences

01:09:42 - Link between energy prices and GDP

01:13:00 - Rounding off

[AWW]

6 hours ago, belfastchild said:

The extra energy needed to cycle/walk to work had a sweet spot after which it was more environmentally friendly to take the petrol or pile 4 people into a diesel.
The walking/cycling was broken down into vegan vs meat eater diet (of course it was!).

I just can't see this study not having a major flaw. How can it possibly take more energy to move 100kg of person and bike at 20mph than 2 tons of car and people at driving speeds?

Just the basic physics of it says the study has made a catastrophic assumption somewhere.

[MrXxxx]

10 hours ago, Harley said:

Probably more Barbara Cartland than a Haynes manual! 

:-)))...or do you mean Dame Sally Markham?

 

[MrXxxx]

7 hours ago, Transistor Man said:

 

I think, as long as it's a UK legal ebike, (pedal assist, 250 W, 15.5 mph) -- then it's a bicycle in law.

Therefore, it's a case of being able to cycle in a reasonably straight  line after a few pints.

 

 

Probably the same charge as being "Drunk and in charge of a pizza oven"?...so 10 years in prison, a £10k fine [well that's what they were all for anything Covid], and a 'battering'...sorry, couldn't resist! :-)

[Axeman123]

35 minutes ago, AWW said:

I just can't see this study not having a major flaw. How can it possibly take more energy to move 100kg of person and bike at 20mph than 2 tons of car and people at driving speeds?

Just the basic physics of it says the study has made a catastrophic assumption somewhere.

But the calorific energy in grain or beef (for example) has been produced using many times as much energy in the form of deisel and potash.

[snaga]

38 minutes ago, AWW said:

I just can't see this study not having a major flaw. How can it possibly take more energy to move 100kg of person and bike at 20mph than 2 tons of car and people at driving speeds?

Just the basic physics of it says the study has made a catastrophic assumption somewhere.

Not least, humans of all levels of activity consume about the same daily calories when in a stable state .... ie if you live a very active life  you burn fewer calories when at rest. Rural Africans burn same amount of calories as sedentary westerners.

If you start burning an extra 500 calories a day commuting, after a few months  your metabolism will alter to save 500 calories elsewhere. 

 

[Chewing Grass]

Looks like half of North Africa will be heading to Europe by the start of September.

 

[sancho panza]

8 hours ago, kibuc said:

I hope people don't mistake my verbal diarrhea here for proper due diligence  You now better than most that those newsletter guys can simultaneously assess geology, operations and financials with great attention to detail while adding intimate knowledge of executives, and they still get it wrong just as often as not. Meanwhile, you can ask me why I prefer Cassiar to Revival Gold and you'll only get long and uncomfortable silence. I may know just a smidgen more about selected miners than other posters here but it's still very superficial nonetheless.

That's why I'm a confirmed 'spray n pray'er............

Reality is that I know people who were inside Lehamn/RBS back in 07/08,helped create the crisis and still failed to see it coming.Even insiders get it wrong.

Having said that,the simple reality of life is that some traders,for whatever reason,jsut have that gift of knowing what to buy/sell and when to buy/sell.The'yre not necessairly from the best schools/unis(some of em don't even have an O' level to their name),they jsut have that skill and academics can't really explain where it comes from.

My point is that I've been floating around this here basment for some time and I've noted who has a nose for value/opportunity/skewed risk reward set up etc etc..Don't get me worng,I 100% own all our trades but I do take inspriation and creative ideas from people I perceive to have the skill outlined above either on a sectoral or macro basis.

I have no shame when it comes to stealing good ideas.

4 hours ago, DurhamBorn said:

Food prices shot up after WW1 due to lack of manpower so farmers bought more land and tractors with loans to chase the higher prices.When they fell they were stuck with the loans etc.The dust bowl was just one in a series of lost crops etc.The banks loans going bad made most regional banks go close to being bankrupt so couldnt absorb more losses.Food and energy prices tend to be the front run of a depression hence the risk factor being elevated now.

Interesting to see that the Fed isn't going to make the same mistaek this time,looking at the leerage ratios in US banks compared to ours.ALthough this time,the irony may be that it's entirely possible that having done too much they will create GD2 in the same way that doing too little  created GD1

https://www.investopedia.com/articles/economics/08/federal-reserve.asp

The Great Depression

The government soon came to regret the freedom it had granted the Federal Reserve as it stood by during the crash of 1929 and refused to prevent the Great Depression that followed.

 

Even now, it is hotly debated whether the Fed could have stopped the depression, but there is little doubt that it could have done more to soften and shorten it by providing lower interest rates to allow farmers to keep planting and businesses to keep producing. The high interest rates may even have been responsible for the unplanted fields that turned into dust bowls. By restricting the money supply at a bad time, the Fed starved out many individuals and businesses that might otherwise have survived.6

 

1 hour ago, Cattle Prod said:

It was also one long human life ago, and these things tend to repeat when the last person to experience them is dead. Reason being, is that our brains evolve slowly, and despite the fancy world we live in, we are identical to people over any period of human civilization, and so keep repeating the same mistakes without some elders around to knock sense into us. They had debt jubilees every 50 years (long human life then) or something in biblical times apparently, because they were wise enough to recognise this. We are simply not as sophisticated as we like to think we are despite iPhones (a modern day Coliseum) and Kim Kardashian's arse (Cleopatra). They even got obsessed about gender variants toward the end of past civilizations, it's fascinating. 

Same as it ever was.

So true,I'm a big fan of cylce theory eg Knodratiev although I think it makes more sense to time of generetaional changes rather than absolute numbers of years.

It's no coincidence that Glass Steagall was repealed in 1998 jsut after the last US politiciains who lived through GD1 left office and retired.

Funny thijg is that I studied economic history back in the day and it really appals me how little I actually learned and how narrow the vision of my lecturers was.

Even now,if you want to read a nuanced anssessment of the economy aside from Profs Keen and Dowd for two,you really need to be frequeenting obscure corners of the web lie this thread or Shaun Richards.State of UK uni's is shocking.It's now odner we're headed into GD2

[Axeman123]

Another item ticked off the thread checklist:

 

[Yadda yadda yadda]

42 minutes ago, Cattle Prod said:

This chap from Sky might have read or LNG discussion the other day. He misses that most LNG arriving is pre sold, which is why I think futures remain high, but overall a decent explainer. The few spot cargoes arriving getting the old 50p a therm price because of full pipelines won't make that mistake again and will sell it on the high seas to Europe for 250p like the rest.

It also highlights how helpful the UK is being to Europe, as any decent country would do. But let's not forget that Micron recently threatened energy supplies to Europe. Why don't our politicians highlight what's going on??

 

 

Someone is making a lot of money on this temporarily cheap gas and electricity. Who is it? Shame the consumer isn't seeing a temporary respite.

I suspect the Government is keeping quiet about the export of gas and electricity because people would get angry about our energy being exported whilst we pay record prices.

The UK needs to build gas storage ASAP. It is clearly a strategic asset.

[sancho panza]

1 hour ago, JimmyTheBruce said:

Where are you guys getting Japan Tobacco from?  I can't find it on ii.

You can get it via Saxobank or Interactive Brokers or a boutiquey type of Broker

1 hour ago, Chewing Grass said:

This tells me more than I knew before...

 

Fascianting insight into teh Chiense property bubble.Absoutely terrifying whrere this could end up when those Chinese investors start taking haircuts.

Xi has created an economci powerhosue built on a base of sand and the people will pay hte price for it

[Yadda yadda yadda]

29 minutes ago, Chewing Grass said:

Looks like half of North Africa will be heading to Europe by the start of September.

 

Not enough dinghies.

Is that mainstream TV in India? Way more detail than UK TV.

The world is fucked.

[sancho panza]

hattip Steve Kapaln

 

 

Gold bullion barely held above 1800 and may or may not break below that level one or more times over the next several months. Gold mining shares including funds like GDXJ had been underperforming gold and silver bullion and recently began outperforming; this is exactly how previous major rallies usually began. In each of the five previous growth-stock bubbles, gold mining shares began rallies of hundreds of percent within roughly a half year following the growth-stock bubble peak; it is possible that QQQ may have completed a historic zenith on November 22, 2021. The previous growth-stock bubble peaked in March 2000 while gold mining shares began a huge surge in mid-November 2000. Ditto in 1972 and 1929.

[Castlevania]

36 minutes ago, sancho panza said:

That's why I'm a confirmed 'spray n pray'er............

Reality is that I know people who were inside Lehamn/RBS back in 07/08,helped create the crisis and still failed to see it coming.Even insiders get it wrong.

Having said that,the simple reality of life is that some traders,for whatever reason,jsut have that gift of knowing what to buy/sell and when to buy/sell.The'yre not necessairly from the best schools/unis(some of em don't even have an O' level to their name),they jsut have that skill and academics can't really explain where it comes from.

My point is that I've been floating around this here basment for some time and I've noted who has a nose for value/opportunity/skewed risk reward set up etc etc..Don't get me worng,I 100% own all our trades but I do take inspriation and creative ideas from people I perceive to have the skill outlined above either on a sectoral or macro basis.

I have no shame when it comes to stealing good ideas.

Interesting to see that the Fed isn't going to make the same mistaek this time,looking at the leerage ratios in US banks compared to ours.ALthough this time,the irony may be that it's entirely possible that having done too much they will create GD2 in the same way that doing too little  created GD1

https://www.investopedia.com/articles/economics/08/federal-reserve.asp

The Great Depression

The government soon came to regret the freedom it had granted the Federal Reserve as it stood by during the crash of 1929 and refused to prevent the Great Depression that followed.

 

Even now, it is hotly debated whether the Fed could have stopped the depression, but there is little doubt that it could have done more to soften and shorten it by providing lower interest rates to allow farmers to keep planting and businesses to keep producing. The high interest rates may even have been responsible for the unplanted fields that turned into dust bowls. By restricting the money supply at a bad time, the Fed starved out many individuals and businesses that might otherwise have survived.6

 

So true,I'm a big fan of cylce theory eg Knodratiev although I think it makes more sense to time of generetaional changes rather than absolute numbers of years.

It's no coincidence that Glass Steagall was repealed in 1998 jsut after the last US politiciains who lived through GD1 left office and retired.

Funny thijg is that I studied economic history back in the day and it really appals me how little I actually learned and how narrow the vision of my lecturers was.

Even now,if you want to read a nuanced anssessment of the economy aside from Profs Keen and Dowd for two,you really need to be frequeenting obscure corners of the web lie this thread or Shaun Richards.State of UK uni's is shocking.It's now odner we're headed into GD2

Professor John Hearn is on Twitter. A monetarist. He was banging on about inflation from all the money printing in 2020. Worth following and will usually answer your questions (and sent me a PDF copy of his book after I asked nicely).

I thought it was quite telling that Niall Ferguson as an economic historian was the most negative voice on MMT when it was all the rage (history repeats and all that).

[DurhamBorn]

24 minutes ago, Axeman123 said:

Another item ticked off the thread checklist:

 

 they are funding it to go into reverse,its why their policy is as it is.The way they create the roadmap then years later drop hints to the polos and people that its happening but nothing to do with them.Yanks might as well of kept King George.

[Yadda yadda yadda]

33 minutes ago, sancho panza said:

Even now, it is hotly debated whether the Fed could have stopped the depression, but there is little doubt that it could have done more to soften and shorten it by providing lower interest rates to allow farmers to keep planting and businesses to keep producing. The high interest rates may even have been responsible for the unplanted fields that turned into dust bowls. By restricting the money supply at a bad time, the Fed starved out many individuals and businesses that might otherwise have survived.

Our Government, and others, are encouraging land to be planted with wildflowers. Or rewilded. Or covered with solar panels. In fucking England. Fertiliser loans won't do much good if the land is no longer farmed.

At best it is incompetence. At worst it is evil. Then you have the likes of Bill Gates buying huge tracts of farmland. I suspect he intends to profit from higher prices. He might just intend to leave it fallow to create conditions that favour artificial meat. Either way he is greedy beyond the line where it becomes evil.

[Castlevania]

8 minutes ago, Cattle Prod said:

Most oil and gas companies are hedged at much lower prices, 40/50/60p a therm for the next couple of years, check their trading updates! The money is going straight to the City of London on the other side of those hedges, and they are keeping very very quiet about it. They have lamp posts outside their houses too.

The other side will largely be industrial companies and the energy suppliers who hedged.

Also most energy trading is done by the large producers. BP’s trading arm has been making bank.

[Plan-b]

18 minutes ago, Cattle Prod said:

Fair enough, makes sense. BP need to shut up about making bank then, hide it under the mattress somewhere

Yes and Shell are awash with cash too, after months they are still doing this every business day, the total amounts involved are staggering ...

[sancho panza]

Here comes the debt deflation

in bold for skim readers.

Interestingthat Wolf says CRE LL's arehiking asking retns regardless of rising vacnacy rates

https://wolfstreet.com/2022/05/16/from-abysmal-to-just-terrible-23-major-office-markets-commercial-real-estate/

My List of 23 Major US Office Markets, by Vacancy Rates Ranging from Abysmal to Just Terrible

by Wolf Richter • May 16, 2022 • 100 Comments

Commercial Real Estate hit by construction boom, oil bust, pandemic, working from home, now hiring freezes and layoffs. Older office towers dish out huge losses.

By Wolf Richter for WOLF STREET.

The news for the office sector of commercial real estate just keeps getting worse. Some tech and social media companies have announced hiring freezes, including Facebook and Twitter. Others have made cutting costs suddenly a priority, promising very constrained hiring, such as Uber. Numerous startups are laying off people, included used-car online dealer Carvana, which fired 2,500 workers last week. Mortgage lenders from Wells Fargo on down have started laying off significant portions of their employees as mortgage lending is now in the dumps.

In addition, there is the shift working from home for office employees, and hybrid models where employees show up at the office only every now and then.

All this follows years of office construction booms. New office towers are being completed and put on the market with the latest and greatest amenities, and these trophy towers are competing with older office towers for shrinking office needs.

A widespread flight to quality has set in: When leases in older towers terminate, the tenants move to the trophy towers, and leave the older towers vacant. And landlords cannot lower the rents enough because they wouldn’t be able to meet their mortgage payments. So, the office sector of commercial real estate is facing an ugly reality.

Availability rates, which sounds a less bad than vacancy rates, have shot up during the pandemic, and in many cities have continued to rise through Q1 2022, and are now in the astronomical zone.

The worst four office markets in terms of availability rates are Chicago Suburban (31.7%), Houston (30.5%), Dallas-Fort Worth (30.9%), and San Francisco (26.8%), according to data from Savills.

In San Francisco, for example, the availability rate of 26.8% was a new record worst in the data, and was up from an availability rate of 7.3% in Q3 2019. In 2017 and 2018, San Francisco was the hottest tightest office market in the US. It was called “office shortage,” where companies were leasing or buying office space they didn’t need, and to hog this space, before anyone else could get it, so that they’d have space to eventually grow into.

 

This is how the market in San Francisco turned from an endlessly hyped office shortage to an endless office glut that no one knows what to do with.

But San Francisco isn’t the worst office market. That honor goes to the Chicago Suburban market, Houston, and Dallas-Fort Worth – all of them with availability rates above 30%, according to Savills.

It’s not the new office towers that get in trouble; They attract tenants by offering them the latest and greatest, and a flight to quality sets in that leaves older office towers vacant, and they default on their debts and dish out huge losses to the holders of this debt, usually investors in Commercial Mortgage Backed Securities (CMBS) that these mortgages were rolled into; or banks, insurance companies, and other investors that hold mortgages outright.

For example, in Houston, two office towers, built in the 1980s on the same campus, recently were sold in a foreclosure sale, first Three Westlake Park, and then Two Westlake Park. After fees and expenses, investors ate losses on the mortgages of 81.9% and 88.3% respectively, as the value of these older office towers has collapsed due to lack of demand.

There were hopes in the second half last year that the sublease space had seen the peak, as companies were either finding tenants for the sublease space or taking it off the market. But in Q1, the sublease space grew again by 3.6% from Q4, to 159 million square feet, according to CBRE, cited by the Wall Street Journal.

Despite the astronomic availability rates, landlords have not broadly cut their asking rents, and in many markets have raised them. There are some exceptions, including San Francisco, where asking rents have fallen.

But whatever asking rents may be, landlords are negotiating and making deals, and are offering all kinds of incentives, from periods of free rent to large build-out allowances, in order to sign tenants for their empty space.

So here are 24 major office markets in the US (update: I just added Nashville to the original 23 after Savills released the data a few hours after this was published), and their availability rates in Q1 2021 (green) and Q1 2022 (purple), in order from abysmally worst to just terrible, with the least worst on this list, Boston, having an availability rate of 15.3%.

In six of the 24 markets, availability rates fell year-over-year, and the most in Boston (by 2.0 percentage points).

In 18 of the 24 markets, availability rates worsened year-over-year, and they worsened the fastest in San Francisco (by 3.2 percentage points), in Nashville (by 2.7 percentage points), in Charlotte (by 2.5 percentage points), in Chicago Downtown (by 2.4 percentage points), and in Tampa Bay (by 2.3 percentage points):

[AWW]

2 hours ago, Axeman123 said:

But the calorific energy in grain or beef (for example) has been produced using many times as much energy in the form of deisel and potash.

Ah I see. So, the study didn't consider the energy expended to produce a car vs a bike, nor the fact that fit people burn fewer calories than unfit people when not exercising. It was a simple energy cost to produce, say, 1 litre of diesel vs 1 Mars Bar (or whatever).

[wherebee]

4 hours ago, Chewing Grass said:

This tells me more than I knew before...

 

The ghost cities in China is one of the main reasons I reject utterly the bullshit ESG movement and the climate change religion.

If western governments really saw there was a problem that needed to be acted on quickly, they could have spoken up about the massive waste of resources and CO2 generation in China for these piles of shit.  Concrete for example - CO@ hungry; china used more concrete in the ten years 2001-2011 than the US did for the whole of the 20th century.

They said nothing.

It's a scam.

[MrXxxx]

9 hours ago, Chewing Grass said:

Looks like half of North Africa will be heading to Europe by the start of September.

 

So much for 'Free market economies'.....if these systems were left they would rebalance organically/naturally, but there are a select few somewhere in the world who are fuc£ing about with every countries economy and orchestrating wars, famine, civil collapse/disorder and more....this is pure manipulation and the 'Common man' is the expendable pawn.

[Plan-b]

2 minutes ago, MrXxxx said:

So much for 'Free market economies'.....if these systems were left they would rebalance organically/naturally, but there are a select few somewhere in the world who are fuc£ing about with every countries economy and orchestrating wars, famine, civil collapse/disorder and more....this is pure manipulation and the 'Common man' is the expendable pawn.

Yes, and the only way we get to know about it these days is through reports like this on the net/social media.

Prior to this ingorance was bliss.

[Bobthebuilder]

A few thread points in this aunty beeb piece. Inflation at 9% highest in 40 years, that will be 1982 then. Funny how you chaps on here were saying this a few years ago.

https://www.bbc.co.uk/news/business-61483175