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

[JMD]

1 hour ago, sancho panza said:

I take your point NA but it's a bit like criticizing Raoul Pal for having a successful spell at Goldmans or reflecting that Lyn alden works for GG on his website.

Key thing is that GG did well and swam with the tide from 2000 on.We did and we didn't and are the poorer for it.I used to allow my emotional reaction to monetray policy and to colour how we invested.That was a mistake Geroge didn't make.Fair play to him.

I think it's entirely relevant.This thread nurtures a healthy scepticism of govt experts and their data,and is the better for it.My particualr bete noire is the poverty of the inflation datas we're fed but I welcome any education on covid especailly given teh scale of the damage the lockdown has done.

SP, you mention our duff inflation figures, I posted this recently but in case you missed it... It's US based, but Its got comparative inflation stats, etc, might be useful?                                              http://www.shadowstats.com/alternate_data/inflation-charts

[Loki]

42 minutes ago, JMD said:

Ok maybe the link below is only a minor financial podcast, but I like to imagine that this is how Grant Williams and Luke Gromen talk between themselves when they are off camera!!                                                                                                 The interesting/scary(?) thing is that these podcast guys are currently very much part of the financial establishment, partners/directors at two different finance outfits (price-value asset managers/think trading.com). Here they interview an ex Best-Invest VC guy who's 'gone sole trader' and now just invests his own money, so real skin the game... walking his own talk so to speak. Please ignore the pod-cast crypto title, it was only a small part of the content. For me it was fascinating to hear the frustrations/fears/predictions of these people, who as i say are all currently operating at relatively senior levels within our ossified financial system. It's a long podcast, but I think very refreshing to hear from people within the industry, who's thinking chimes with this thread.                                                                                                                 https://m.youtube.com/watch?v=EVKW-M4HKHk

Well worth a listen

[M S E Refugee]

Anyone know why the price of Coal has collapsed?

I'm nursing a decent loss on Thungela at the moment.

[Loki]

4 minutes ago, M S E Refugee said:

Anyone know why the price of Coal has collapsed?

I'm nursing a decent loss on Thungela at the moment.

I thought it was just a normal bullish pullback, we're not even into winter yet.

[DurhamBorn]

Great thing on oil is the structural issues in re-shoring etc will see elevated energy use.I still see $200 to $300 oil at some point in the cycle.

One thing though is BP paying down debt with their other 40% spare free cash,for me they should be using that all for more buybacks and pay debt down with with disposal money as it comes in.Lower priced hedges should be running off so they wont be getting full benefit yet from prices.

 

[Hancock]

11 minutes ago, Loki said:

I thought it was just a normal bullish pullback, we're not even into winter yet.

Voila

https://tradingeconomics.com/commodity/coal

[Loki]

3 minutes ago, Hancock said:

Voila

https://tradingeconomics.com/commodity/coal

Ah, price controls.  They always work.  A sight for sore eyes! 

[DurhamBorn]

"Some investors are pushing energy firms to split off their green energy arms, with Shell under pressure from the activist Daniel Loeb.

Looney said he had faced no such calls from BP’s investors but claimed some renewables-only firms are struggling to fund their growth. In contrast, oil and gas companies can divert their vast financial reserves into green power."

https://www.telegraph.co.uk/business/2021/11/02/oil-gas-price-surge-turns-bp-cash-machine/

[Loki]

That sounds familiar from somewhere @DurhamBorn...

[Majorpain]

I would like to say that our gas supplier (wholesaler) at work went bust today, but that would probably come under "dangerous misinformation" in the new online safety bill, so lets just say that our current supplier has decided to rebrand the same as one of the other market participants.  4 other consumer side utilities have also decided to rebrand.

Electric is from "that company" for all you sufferers!

[HousePriceMania]

I dunno if anyone agrees but we seem to be at an inflection/turning/pivotal point in the madness we have witnessed since 2000.

The CBs are all stopping QE/tightening ( or claiming to ) in Unison, some have started to push up IRs, inflation is no longer being seen as transitory, the private jet brigade are all lecturing us on green issues, the self appointed queen will be dead shortly, bitcoin heads to the moon, squid coin heads to 0, share prices that make no sense, rich men flying their rockets to the moon...

What comes now ?

 

[M S E Refugee]

6 minutes ago, HousePriceMania said:

I dunno if anyone agrees but we seem to be at an inflection/turning/pivotal point in the madness we have witnessed since 2000.

The CBs are all stopping QE/tightening ( or claiming to ) in Unison, some have started to push up IRs, inflation is no longer being seen as transitory, the private jet brigade are all lecturing us on green issues, the self appointed queen will be dead shortly, bitcoin heads to the moon, squid coin heads to 0, share prices that make no sense, rich men flying their rockets to the moon...

What comes now ?

 

The Rapture?

[Bobthebuilder]

9 minutes ago, HousePriceMania said:

I dunno if anyone agrees but we seem to be at an inflection/turning/pivotal point in the madness we have witnessed since 2000.

The CBs are all stopping QE/tightening ( or claiming to ) in Unison, some have started to push up IRs, inflation is no longer being seen as transitory, the private jet brigade are all lecturing us on green issues, the self appointed queen will be dead shortly, bitcoin heads to the moon, squid coin heads to 0, share prices that make no sense, rich men flying their rockets to the moon...

What comes now ?

 

A house price crash?????

[Loki]

Just now, Bobthebuilder said:

A house price crash?????

Be sensible Bob, this isn't off topic. 

[Bobthebuilder]

1 minute ago, Loki said:

Be sensible Bob, this isn't off topic. 

Sorry Loki, couldn't resist.

[Option5]

1 hour ago, DurhamBorn said:

"Some investors are pushing energy firms to split off their green energy arms, with Shell under pressure from the activist Daniel Loeb.

Looney said he had faced no such calls from BP’s investors but claimed some renewables-only firms are struggling to fund their growth. In contrast, oil and gas companies can divert their vast financial reserves into green power."

https://www.telegraph.co.uk/business/2021/11/02/oil-gas-price-surge-turns-bp-cash-machine/

In today's Norwegian newspaper.

 

[jamtomorrow]

18 minutes ago, HousePriceMania said:

if anyone agrees but we seem to be at an inflection/turning/pivotal point in the madness we have witnessed since 2000.

The CBs are all stopping QE/tightening ( or claiming to ) in Unison, some have started to push up IRs, inflation is no longer being seen as transitory, the private jet brigade are all lecturing us on green issues, the self appointed queen will be dead shortly, bitcoin heads to the moon, squid coin heads to 0, share prices that make no sense, rich men flying their rockets to the moon...

What comes now ?

 

[HousePriceMania]

8 minutes ago, Bobthebuilder said:

A house price crash?????

I think the horsemen of the apocalypse are more likely.

I'm hoping I live to see this fella proved right

 

 

[Castlevania]

1 hour ago, Cattle Prod said:

Yes that's one to watch, I've heard of some horrendous hedges out there where people grabbed 40 or 50 a barrel when things were really bad. Thing is, with this backwardation, you can't hedge next year or 2023 because you're getting 5,6,7 dollars below current spot. I bet there are very few hedges in 2022 and 2023. If the price has structurally shifted and stays in this range, cashflow will explode. That's probably why share price is lagging.

If BP is hedged at say $60 average and prices averaged $75 over 2022 on oil and gas equivalent, those rolling off end 2021 would add $11bn cash. Numbers for illustration, their hedges should be in their reports.

11bn is a lot of cash, buys a lot of windmills  And as you say, renewable companies would have to raise that on the debt markets at increasing interest rates. O&G companies are part of the solution, and it's dangerous to trash them like they have been. Because I wouldn't mind that $11bn in divi either 

Edit

Just read your post above!

BP lost US$ 6 billion in the quarter from valuing their gas hedges (I assume what they’ve forward sold) to market. 

[Bobthebuilder]

5 minutes ago, HousePriceMania said:

I think the horsemen of the apocalypse are more likely.

I think they are already staying in an Airbnb in Cornwall, at this present time.

[HousePriceMania]

8 hours ago, wherebee said:

"In an unscheduled press conference after Tuesday’s meeting, Dr Lowe said the RBA’s more bullish economic outlook meant “borrowers need to be aware that rates will rise again – not quickly, and not next year; the most likely case is 2024, but it’s possible it’s 2023”."

Shit, time to get out of cash.

That is frightening.

This is pretty much what I expect the BoE to do.

 

[Hancock]

Boris and the GreenTories couldnt give a fuck as they're rich!

https://www.telegraph.co.uk/business/2021/11/02/oil-gas-price-surge-turns-bp-cash-machine/

Consumers will be threatened with even higher energy prices if the Government backs a "premature" ban on oil and gas drilling in the North Sea, the chief executive of BP has warned.

Ministers will simply increase Britain's reliance on imports if they bow to pressure from activists and block all new fossil fuel projects, with no impact on carbon emissions, Bernard Looney said.

Speaking as BP unveiled a jump in profits driven by the global economic recovery, Mr Looney said that halting all new domestic oil and gas extraction would “not necessarily help” Boris Johnson in his drive to reach net zero.

"If you take away supply but demand does not change, the only thing that happens is prices go up. "So we need to be very careful about prematurely taking away supply from the market," he said.

Energy prices are a matter of increasing concern for the Government as it confronts the cost of reaching net zero carbon emissions by 2050.

The wholesale cost of gas has surged as much as sixfold since the world reopened, triggering the collapse of 18 UK energy providers since September.

Omni Energy, MA Energy, Zebra Power and Ampoweruk became the latest small players to collapse on Tuesday, meaning their domestic customer base of around 20,000 people will be moved to new providers.

The Prime Minister is this week seeking to secure approval from world leaders to halt global warming at the COP26 conference in Glasgow.

UK Prime Minister Boris Johnson and India's Prime Minister Narendra Modi at Cop26 CREDIT: Pool/Getty Images

Fossil fuel producers have been blocked from a formal role in the meeting but are keen for the government to recognise the importance of energy resilience and the risk of cutting too fast.

The oil and gas industry is waiting to see if approval will be granted for drilling at the Cambo oil field in the North Atlantic, thought to contain more than 800 million barrels of crude, with a decision expected before the end of the year.

Climate groups claim the scheme risks undermining Mr Johnson’s promise to lead the charge in cutting carbon emissions globally.

BP recently faced its own controversy over plans to extract oil from the Vorlich field, in the North Sea. 

The company faced a legal challenge against the scheme from Greenpeace but successfully fought it off last month.

Mr Looney said BP is still trying to convince experts that it can be part of the green energy transition, following complaints by the boss of Shell that his company was told it was not welcome at Cop26. 

But he pointed to a string of investments in electric car charging points, hydrogen plants and wind farms as evidence that BP is taking the matter seriously.

Mr Looney said: “That is what a company like ours can do. So I understand there are some people who think we are not part of the solution, but I disagree with them."

He also argued that the company’s traditional fossil fuels business was helping to provide the financial firepower needed to make the long-term switch to renewables.

Some investors are pushing energy firms to split off their green energy arms, with Shell under pressure from the activist Daniel Loeb.

Mr Looney said he had faced no such calls from BP’s investors but claimed some renewables-only firms are struggling to fund their growth. In contrast, oil and gas companies can divert their vast financial reserves into green power.

BP said on Tuesday that its profits had boomed in the third quarter as a jump in demand from reopening economies caused oil and gas prices to surge.

Mr Looney said demand had turned the business into a "cash machine", with the company's power trading business delivering a “strong” performance.

The FTSE 100 business made pre-tax profits of $6bn (£5bn) in the period, compared to $1.2bn a year earlier when demand had slumped due to the pandemic. 

It announced a further share buyback scheme worth $1.25bn and said that buybacks should now amount to around $1bn per quarter, with oil above $60 per barrel. 

BP said it expects gas markets to remain tight during the winter and oil prices to stay high as more crude is used for power generation rather than gas.

Shares fell 2.3pc to 348.9p, valuing the company at £70bn.

[Axeman123]

23 minutes ago, HousePriceMania said:

That is frightening.

This is pretty much what I expect the BoE to do.

 

For context:

https://www.zerohedge.com/markets/rba-abandons-yield-target-due-economic-improvement

RBA seems to be going for taper then rate rises, as is the US. Here we are expecting rate rises with continued printing, I think.

[reformed nice guy]

For all my fellow Drax holders:

02 Nov 2021, 6:53 pm	High offer accepted Drax 6 accepted at £4050/MWh
02 Nov 2021, 6:53 pm	High offer accepted Drax 5 accepted at £4000/MWh

https://thecurrent.lcp.uk.com/

[Hancock]

About a month ago Davey was saying the bust will be 3/6 months ... now its 2nd half of 2022.

Maybe he missed the bust in 2020, and is like one of those Japs still fighting WW2 in the early 80s.