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

[Animal Spirits]

MacroVoices #328 Dr. Anas Alhajji: There Is No Escaping The Coming Energy Crisis

A number of themes already discussed in this thread.

[Lightscribe]

6 minutes ago, Eventually Right said:

Are you tempted by the streamers/royalty cos at all DB?

I listened to a Lyn Alden podcast the other day, and something she said struck a chord-to paraphrase: "if you're bullish precious metals, and bearish energy, look at the miners, if you're bullish on energy look at the royalty companies"

If silver (and gold) go nuts, then I figure energy, or any other costs, won't matter-silver at $40 or $50 will overpower all that, and make miners multi-bag. But if energy/skilled labour costs etc also balloon, margins won't expand by as much as expected.  Plus, miners have additional risks (accidents/labour strikes/permitting problems/revised resource estimates/potential windfall taxes etc).

When I look at Wheaton's share price performance over the last 5 years (96% up) compared to some of the mining etfs (GDXJ 10%, SILJ -13%, SIL -17%) it does make me wonder whether the risk/reward is better in the royalty cos.  But I guess the other way to look at the figures above would be, "If we do get a bull run in PMs, and money finally starts to move to the sector, are the miners so beaten down that they go parabolic?"

Certainly I’d say in some. I can’t see Alexco selling much more down than the 0.90 mark it’s already nudging. FRES not below 700 possibly 600 in an almighty sell off.

Basically I think we’re seeing the bottoms in some and possible room for some over-selling in the continued stock market rout i.e some real bargains to be had should we get there. Physical price hasn’t really moved, just the paper shenanigans. 

Gold tends to find a new high drop back down to a level (I would say $1500-$1600 in a panic sell-off crash) then a parabolic run up to a new high before tailing off to a new support level where it stays. (We haven’t had that 2008 run yet) 

At Gold price at the current level, there are some miners at very good value.

 

[Democorruptcy]

Credit risk indicator is up a bit but only at the highest since May 23. The article also mentions the CDS for the major banks are at a 2 year high but doesn't say how much they have gone up.

Quote

 

An indicator of credit risk in the U.S. banking system may be showing signs of stress, as the Federal Reserve's aggressive rate hike path ratchets up expectations of economic pain.

The so-called FRA-OIS spread , which measures the gap between the U.S. three-month forward rate agreement and the overnight index swap rate, increased to 29.55 basis points on Thursday, its widest since May 23, according to data from Refinitiv. The measure was at -11.66 bps earlier in the week.

Widely viewed as a proxy for banking sector risk, a higher spread reflects rising interbank lending risk.

"The recent spike in the spread between forward rate agreement and overnight index swap rate is concerning," said Jordan Jackson, a global market strategist at J.P. Morgan Asset Management. "As the Fed turns more hawkish, there is a rise in recession concerns and that is increasing the underlying credit risk."

https://www.reuters.com/markets/us/us-banking-stress-indicator-could-worsen-after-fed-hike-2022-06-16/

 

 

[Eventually Right]

44 minutes ago, Lightscribe said:

Certainly I’d say in some. I can’t see Alexco selling much more down than the 0.90 mark it’s already nudging. FRES not below 700 possibly 600 in an almighty sell off.

Basically I think we’re seeing the bottoms in some and possible room for some over-selling in the continued stock market rout i.e some real bargains to be had should we get there. Physical price hasn’t really moved, just the paper shenanigans. 

Gold tends to find a new high drop back down to a level (I would say $1500-$1600 in a panic sell-off crash) then a parabolic run up to a new high before tailing off to a new support level where it stays. (We haven’t had that 2008 run yet) 

At Gold price at the current level, there are some miners at very good value.

 

I certainly hope that that's where were are on the chart.

And I'd agree that given how far AXU has fallen, it shouldn't fall much further-but this is mining, and from what i understand they're falling further behind schedule, and need to raise money again.  $40-50 silver in 24 months time fixes that, but if silver meanders around the low $20s for another year or so...would it really be a surprise for the share price to be cut in half again?

[MrXxxx]

Thought I would share this GOG image from today; let me know if you are getting sick of GOG and I will put it elsewhere. It seems to be 'all over the place', as if both Bulls and Bears cannot decide who has the upper hand, what do others make of it?

[Axeman123]

2 hours ago, Lightly Toasted said:

I fear we've hit "peak complexity", the point at which our ability to manage and fund (resource) the complex and inter-dependent systems we've created, is no longer equal to the task

...

I wonder how clever these landlords have been in terms of creating personal protective structures.

Firstly, I do wonder if future generations will wonder at artifacts like supermarkets offering fresh limes from the other side of the world for pennies in the same way that a medieval peasant might have wondered at the "race of giants" that "must have" built the (roman) aquaducts.

Aditionally: most landlords aren't even using a limited liability wrapper, let alone complicated trusts or offshore etc.

[M S E Refugee]

Russian president warns of ‘elites change’ in West https://www.rt.com/russia/557334-putin-warns-of-elites-change/

[geordie_lurch]

10 minutes ago, M S E Refugee said:

Russian president warns of ‘elites change’ in West https://www.rt.com/russia/557334-putin-warns-of-elites-change/

I can't find fault with what he says, especially this

"The European Union has completely lost its political sovereignty, and its bureaucratic elites are dancing to someone else’s tune, accepting whatever they are told from above, causing harm to their own population and their own economy,” Putin said.

 

[Lightly Toasted]

20 minutes ago, Axeman123 said:

Firstly, I do wonder if future generations will wonder at artifacts like supermarkets offering fresh limes from the other side of the world for pennies in the same way that a medieval peasant might have wondered at the "race of giants" that "must have" built the (roman) aquaducts.

Aditionally: most landlords aren't even using a limited liability wrapper, let alone complicated trusts or offshore etc.

"How was it. do you think, that all these things..." he gestured widely
with his hands, "how was it that the world happened to be made?"

The answer came quickly. Weston was the spokesman, although apparently any
of the children could have answered: "Why, the Americans made
everything."

Ish caught his breath. Yet, immediately, he saw how the idea had arisen.
After all, if a child asked who made the houses or the streets or the
canned food, any of the older ones would have said naturally that the
Americans did. He followed up with another question.
"And the Americans--what about them?"

"Oh, the Americans were the old people."

This time Ish found it a little harder to adjust quickly. In "the old
people" he sensed not merely a reference to time, but also something close
to superstition. "The old people"--that had once meant fairies, people of
the Other-world. That might be its meaning now again. Here was something he
should work to counteract.

"I was..." He began simply. Then he paused and corrected himself, seeing no
reason to use the past tense.

"I am an American."

When he spoke, though they were the simplest of words, he had a curious
feeling of pride come over him, as if flags were flying and bands playing.
It had been a great thing, in those Old Times, to be an American. You had
been deeply conscious of being one of a great nation. It was no mere matter
of pride, but also there went with it a profound sense of confidence and
security in life, and a comradeship of millions. Yet now he had hesitated
to speak in the present tense.

-- George R Stewart, "Earth Abides"

 

Edit: reading too much of that kind of stuff as a teenager, might possibly have given me an unjustifiably gloomy civilisational outlook 

[Democorruptcy]

Taking a windfall tax off the oil sector and then making sure people who can't really afford to switch from ICE to Electric cars get easy credit. Some people have no shame!

Quote

UK commits to reform of the Consumer Credit Act

.....

The reforms will allow lenders to provide a wider range of finance whilst maintaining high levels of consumer protection. For example, we will ensure that the information a consumer receives throughout the lending process is easy to understand and will be both screen and print-friendly. We will also ensure that lenders are able to more easily provide credit for emerging and new technologies such as electric cars, helping millions of people embrace technological innovation.

https://www.gov.uk/government/news/uk-commits-to-reform-of-the-consumer-credit-act?

 

 

[ThoughtCriminal]

Softening us up for the end of dollar supremacy 

[snaga]

32 minutes ago, Democorruptcy said:

Taking a windfall tax off the oil sector and then making sure people who can't really afford to switch from ICE to Electric cars get easy credit. Some people have no shame!

 

and just a couple of days after scrapping the £1,500 EV subsidy.

[reformed nice guy]

Got ladders in Enel Americas, LyondellBasell, Synthomer, Celanese and CEMIG.

Not terribly sexy but low P/E and decent divis

[Democorruptcy]

The Governbankment's Contingency Fund is looking a bit low, down to £105bn from £266bn. The authorised expenditure will be recycled money, so as long as they keep getting it back again, £105bn might do.

Quote

The total cash supply expenditure authorised for 2020-21 was £874,601,001,000 (2019-20: £532,681,952,000) and accordingly the maximum capital, including the permanent capital, available to the Contingencies Fund in 2021-22 was £104,952,120,000 (2020-21: £266,340,976,000).

Still it's nice to know that Rothchild & Co have one of the 3 members on the Audit & Risk Committee, so we know they will be doing the right thing with the money:

Quote

 

Sir Peter Estlin – Peter is an Alderman of the City of London Corporation. He is also an Independent Director at Rothschild & Co and Chair of the Association of Apprentices. Peter was also previously Group Financial Controller and acting Group CFO at Barclays.

https://www.gov.uk/government/publications/contingencies-fund-account-2021-to-2022/contingencies-fund-account-2021-22

 

 

 

[BWW]

Why are oilies continuing to crash the way they are the last few days. Main story for weeks - huge energy crisis and high oil prices with prospect of a horrendous winter of shortages. Nothing changed with that. Other story - an inadequate interest rate hike may cause a recession and that means oilies share prices should crash.

Seems to me the latter would usually have an effect for a day or two but traders would then look at the long term and we'd be back to stability / towards where we were.

[BWW]

Also unreported story on our main news anyway: Russia cutting by 40% how much gas it sends towards Germany.

Random thought: Is it technically possible to replace the gas that German industry doesn't get from Russia anymore [because they're playing silly buggers with the gas tap] with oil? Or is there too long a lead time/lack of the right infrastructure to burn oil rather than gas?

Oil is easier to transport and more available from elsewhere.

[JMD]

19 hours ago, Eventually Right said:

FFS harp, look what you’ve done…

 

Did Steven Hawking's nurse leave him outside in the rain again! 

[HousePriceMania]

> BP plc

381.60 GBX−22.80 (5.64%)today

 

BP Just shit itself

 

Should I buy now ?

Market Summary > Shell PLC

2,029.50 GBX−114.50 (5.34%)today

[HousePriceMania]

Exxon Mobil Corp

86.38 USD−5.01 (5.48%)today

[Transistor Man]

22 minutes ago, BWW said:

Why are oilies continuing to crash the way they are the last few days. Main story for weeks - huge energy crisis and high oil prices with prospect of a horrendous winter of shortages. Nothing changed with that. Other story - an inadequate interest rate hike may cause a recession and that means oilies share prices should crash.

Seems to me the latter would usually have an effect for a day or two but traders would then look at the long term and we'd be back to stability / towards where we were.

Politics I would guess.

Exxon making the Biden letter look daft. 

What crazy proposal will they come up with in response?

 

[DurhamBorn]

Maybe the market expects governments to tax all the profits so they can keep high prices,get the tax for themselves,kill the industry longer term and force everyone onto a bus if they cant afford an EV.

[moneyscam]

2 hours ago, Democorruptcy said:

Credit risk indicator is up a bit but only at the highest since May 23. The article also mentions the CDS for the major banks are at a 2 year high but doesn't say how much they have gone up.

 

Below a longer term chart of FRA-OIS spread. We are no where near historical SHTF levels yet but bears keeping an eye on.

 

[Calcutta]

1 hour ago, Lightly Toasted said:

"How was it. do you think, that all these things..." he gestured widely
with his hands, "how was it that the world happened to be made?"

The answer came quickly. Weston was the spokesman, although apparently any
of the children could have answered: "Why, the Americans made
everything."

Ish caught his breath. Yet, immediately, he saw how the idea had arisen.
After all, if a child asked who made the houses or the streets or the
canned food, any of the older ones would have said naturally that the
Americans did. He followed up with another question.
"And the Americans--what about them?"

"Oh, the Americans were the old people."

This time Ish found it a little harder to adjust quickly. In "the old
people" he sensed not merely a reference to time, but also something close
to superstition. "The old people"--that had once meant fairies, people of
the Other-world. That might be its meaning now again. Here was something he
should work to counteract.

"I was..." He began simply. Then he paused and corrected himself, seeing no
reason to use the past tense.

"I am an American."

When he spoke, though they were the simplest of words, he had a curious
feeling of pride come over him, as if flags were flying and bands playing.
It had been a great thing, in those Old Times, to be an American. You had
been deeply conscious of being one of a great nation. It was no mere matter
of pride, but also there went with it a profound sense of confidence and
security in life, and a comradeship of millions. Yet now he had hesitated
to speak in the present tense.

-- George R Stewart, "Earth Abides"

 

Edit: reading too much of that kind of stuff as a teenager, might possibly have given me an unjustifiably gloomy civilisational outlook 

When my. Goddaughter was around 8 we were talking to her about religion. When she said she didn't believe in God somebody asked her "So who to you think made everything?" 

She thought about it, looked around and said, "The Council" 

[Transistor Man]

27 minutes ago, BWW said:

Also unreported story on our main news anyway: Russia cutting by 40% how much gas it sends towards Germany.

Random thought: Is it technically possible to replace the gas that German industry doesn't get from Russia anymore [because they're playing silly buggers with the gas tap] with oil? Or is there too long a lead time/lack of the right infrastructure to burn oil rather than gas?

Oil is easier to transport and more available from elsewhere.

 

The easy option will be too tempting: burning more brown coal.

 

[AlfredTheLittle]

30 minutes ago, BWW said:

Why are oilies continuing to crash the way they are the last few days. Main story for weeks - huge energy crisis and high oil prices with prospect of a horrendous winter of shortages. Nothing changed with that. Other story - an inadequate interest rate hike may cause a recession and that means oilies share prices should crash.

Seems to me the latter would usually have an effect for a day or two but traders would then look at the long term and we'd be back to stability / towards where we were.

We're still in the day or two phase, probably bounce back next week and if not there are the next sets of results coming in 6 weeks.