Credit deflation and the reflation cycle to come (part 5)

[belfastchild]

@Cattle Prod Question for you if you dont mind.

Was doing some stuff on DECnet today and accidently came across DEC (Diversified Energy Company). Its listed on the LSE but US gas production and infrastructure. 13% divi but dont know of the withholding info (may need to be in a sipp)

Know anything about them? Just missed the ex-divi and yearly results are out next week.

[sancho panza]

7 minutes ago, reformed nice guy said:

Gold is now about 3.5% above its 2020 covid panic peak

Great minds etc,came on to post these charts.Gold peak in 2020 on monhtleis was 1974

first chart shows other monthly peaks-assuming march ends around this level

second/3rd charts GDXbarrick with the time lines in place as per gold chart.

 

Edited March 17, 2023 by sancho panza

[No One]

14 hours ago, Long time lurking said:

 

Good on them, but now, as has been discusse din many a podcast, AA, Morgoth, Curtis Yarvin, you have got to clean house. Any civil servant that is aligned with WEF or NGO, or ESG or any of that shit needs to be P45d ASAP. 

 

Trump didnt drain the swamp, he got drained by it, and it can be argued he is also swampy. In order to drain a swamp you have to do it from outside and needs to be done completely.

[MrXxxx]

29 minutes ago, HousePriceMania said:

Language is about communication.

Grammar is about snobbery

"Yes" and "No". I must admit I 'squirm' a little when I see poor grammar, but I read/think beyond this to the quality of the argument [and evidence] provided....someone can use perfect grammatical syntax, but it doesn't mean what they are saying is worthy/robust.

[Cattle Prod]

4 minutes ago, MrXxxx said:

So do you feel this is where the likes of PFC and WG. will/are struggling, and why they may not be a future fossil fuel 'play'?

I don't know tbh, I don't follow them, sorry. I thought PFC made a lot of money drilling wells for companies that didn't know how to themselves, which only kind of happens in a capex rich environment. If the capex cycle ever turns, I suspect they'll make a lot of money. But no sign of that yet.

[Cattle Prod]

6 minutes ago, belfastchild said:

@Cattle Prod Question for you if you dont mind.

Was doing some stuff on DECnet today and accidently came across DEC (Diversified Energy Company). Its listed on the LSE but US gas production and infrastructure. 13% divi but dont know of the withholding info (may need to be in a sipp)

Know anything about them? Just missed the ex-divi and yearly results are out next week.

Sorry I don't know tham either. Quick google tells me they are late life well specialists, but gas wells don't tend to have a long production tail like oil wells do. So I'd check their reserves, and reserves:production ratio. And check that their reserves are audited!

[Plan-b]

1 hour ago, Cattle Prod said:

We call this "The Great Crew Change"

I find the Oil & Gas industry fascinating and have spent some time recently studying its engineering and history. Given my time again I would have been grateful to have been involved in it.

Thanks for the awesome post CP.

[Long time lurking]

1 hour ago, CannonFodder said:

 

Saudi finding a new friend - not putting its hand in pocket to sort out bank problems of old friend.

New friend gives peace with iran and yemen and cash gifts - loan wont be repaid. It a gift voucher for china goods.

Old friend wants cheap oil and money for banks then throws tantrums.

 

 

 

China has been doing the same with Iran for a long time by issuing gold backed bonds for oil which Iran then converts on the Shanghai stock exchange 

[Eventually Right]

When the PMs went on a run from spring to summer 2020, Gold was approximately at the current price of $1960 at the end of July

Silver was $2 higher than now, GDXJ was $60 Vs $35 today, and GDX was $43 Vs $30 today, and SILJ was $15 vs $10 today.

I'm trying to decide whether that means:

1) the miners are significantly undervalued today, and due to catch up

2) the miners just don't believe the current spike in Gold/Silver will last

3) the July 2020 miner prices had huge expectations of $2500-3000 gold etc built into them

4) something else/all of the above

[kibuc]

3 minutes ago, Eventually Right said:

When the PMs went on a run from spring to summer 2020, Gold was approximately at the current price of $1960 at the end of July

Silver was $2 higher than now, GDXJ was $60 Vs $35 today, and GDX was $43 Vs $30 today, and SILJ was $15 vs $10 today.

I'm trying to decide whether that means:

1) the miners are significantly undervalued today, and due to catch up

2) the miners just don't believe the current spike in Gold/Silver will last

3) the July 2020 miner prices had huge expectations of $2500-3000 gold etc built into them

4) something else/all of the above

GDJ/GDXJ reflects (outside things like sentiment) margin levels amonst producers. While the metal prices might be flat compared to last summer, operating costs increased significantly, reducing profitability.

This chart suggests that miners are still undervalued (probably due to aforementioned sentiment) but not as much as it might first seem.
 

It also affects developers, for whom projected economics of their projects take a hit due to increased capex & opex.

[Plan-b]

8 minutes ago, Eventually Right said:

When the PMs went on a run from spring to summer 2020, Gold was approximately at the current price of $1960 at the end of July

Silver was $2 higher than now, GDXJ was $60 Vs $35 today, and GDX was $43 Vs $30 today, and SILJ was $15 vs $10 today.

I'm trying to decide whether that means:

1) the miners are significantly undervalued today, and due to catch up

2) the miners just don't believe the current spike in Gold/Silver will last

3) the July 2020 miner prices had huge expectations of $2500-3000 gold etc built into them

4) something else/all of the above

Number 2 gets my vote

[We Live In A Society]

Surprised nobody picked this up, but it is could have, or should have.  Not could of, should of, etc.

https://www.lawlessenglish.com/english-mistakes/could-have-vs-could-of/

The example somebody gave of the "correct" spelling was itself incorrect.

[PatronizingGit]

1 hour ago, Plan-b said:

I find the Oil & Gas industry fascinating and have spent some time recently studying its engineering and history. Given my time again I would have been grateful to have been involved in it.

Thanks for the awesome post CP.

 

 

 

 

 

Interesting. If I google that image it comes up with 'hidden oilfields of LA'

Reminded me of an archive footage video I saw the other day, I was thinking, my, LA had a lot of pylons!

 

About 4 minutes in. Interesting how the Oil derricks were crammed in amongst houses, quite nice houses, some of them. You literally could imagine the beverley hillbillies building a mansion beside their back garden oil well.

 

[Axeman123]

1. On the subject of spelling/grammar as a benchmark of intellect, I always think that is the quintessential mid-wit* criteria to use: assessing mastery of a rote learned technique. The mid-wit can only judge the world on mid-wit criteria, which mid-wits themselves excell at meeting, hence they are often so bloody smug. Spelling and grammar is no different to memorising scripture or times tables IMO. Generating novel Ideas and synthesis of diverse sources is IMO a far better benchmark and nearly impossible to learn, and hence something mid-wits instinctively shy away from.
2. Danielle Di Martino Booth is stating on twitter that this new BTFP facility isn't QE, and won't stimulate credit. Her basis for this is that the interest charged on these loans are above market yield, and hence uneconomical for the bank concerned. Only banks with no alternative will resort to this expensive source of borrowing, and they certainly won't be using it to go on a lending spree. AIUI the bank will be forced to burn shareholder equity to prop up their regulatory capital, and this may even be QT like. I haven't fully decided where I stand on this, but it is interesting. Does anyone else have any thoughts on this? (There isn't a single tweet I can readily link to)
3. On the matter of PM prices and the miners, I think we are simply emerging from a long grueling consolidation for both and this price action is just a sign that we are early in the move. Sentiment has been thoroughly reset from the August 2020 highs, and this will enable the move to have real legs once it gets going.

(*not an attack on you personally @Stuey)

[Long time lurking]

On 16/03/2023 at 08:54, M S E Refugee said:

If the Trustees holding my investments go out of business what happens to my investments that they hold on my behalf?

I just heard something regarding this ,if they are in stocks allocated to you in your name they are safe ,but do your own research 

[Bobthebuilder]

I can't spell, never been able to, can't tell which way round I and e or ght should be in word's. Have a problem remembering left from right, and it wasn't until I was 51 that I realised when talking about oneself that I should be a capital letter. I can recall from memory all my old phone numbers, all my friends numbers, bank accounts etc, etc. If I was 10 years old these days I would have every ism under the sun. It's never held me back, although I will never be a journalist. 

Things move in waves just like the tide and gravity, that's all you need to know. 

[Long time lurking]

15 minutes ago, Axeman123 said:

Danielle Di Martino Booth is stating on twitter that this new BTFP facility isn't QE, and won't stimulate credit. Her basis for this is that the interest charged on these loans are above market yield, and hence uneconomical for the bank concerned. Only banks with no alternative will resort to this expensive source of borrowing,

H`mm from recollection this expensive leading as they put it is IIRC 0.01 or 0.1% above the fed fund rate on the day of application,is that expressive to the point of restricting lending  ? it don`t seem that way to me 

[F150]

23 minutes ago, PatronizingGit said:

Interesting. If I google that image it comes up with 'hidden oilfields of LA'

Reminded me of an archive footage video I saw the other day, I was thinking, my, LA had a lot of pylons!

 

About 4 minutes in. Interesting how the Oil derricks were crammed in amongst houses, quite nice houses, some of them. You literally could imagine the beverley hillbillies building a mansion beside their back garden oil well.

 

i watched that video last night, came up in recommended

interesting that all the 1920s vids of american cities had people and trams everywhere, and then you search a few decades later and they are completely DESERTED

even in that vid by the 40s you still have people walking on the highway, easy when cars go 20mph

Edited March 17, 2023 by F150

[Long time lurking]

3 minutes ago, Bobthebuilder said:

I can't spell, never been able to, can't tell which way round I and e or ght should be in word's. Have a problem remembering left from right, and it wasn't until I was 51 that I realised when talking about oneself that I should be a capital letter. I can recall from memory all my old phone numbers, all my friends numbers, bank accounts etc, etc. If I was 10 years old these days I would have every ism under the sun. It's never held me back, although I will never be a journalist. 

Things move in waves just like the tide and gravity, that's all you need to know. 

I`m in a similar boat ,but it get`s better the more you write,that`s half my problem ,as for most of my adult life writing was very rarely required 

[Chewing Grass]

53 minutes ago, PatronizingGit said:

Interesting. If I google that image it comes up with 'hidden oilfields of LA'

Reminded me of an archive footage video I saw the other day, I was thinking, my, LA had a lot of pylons!

 

About 4 minutes in. Interesting how the Oil derricks were crammed in amongst houses, quite nice houses, some of them. You literally could imagine the beverley hillbillies building a mansion beside their back garden oil well.

 

Interesting, managed to do a then and now on a bit of this one.

https://youtu.be/8GK0CwIOGHw

 

[Axeman123]

19 minutes ago, Long time lurking said:

H`mm from recollection this expensive leading as they put it is IIRC 0.01 or 0.1% above the fed fund rate on the day of application,is that expressive to the point of restricting lending  ? it don`t seem that way to me 

Yeah, that was my stumbling block.

My best guess was that since banks can no longer blow up without rate cuts, the Fed can raise a little further or pause and hold current rates as previously planned instead of having to cut aggresively like some banks would have probably wanted.

The afflicted banks are now stigmatised by acessing this scheme and won't find willing counterparties for further borrowing regardless of the quality of their collateral (I assume use of BTFP facility will be an open secret for other banks).

Afflicted banks will still have to pay higher interest rates on deposits in order to retain them, which will destroy profitability hence eroding shareholder equity over time and eventually down to zero. If a bank cannot hold onto customer deposits they will presumably end up borrowing against all their collateral at par to pay out withdrawals, and then fold in an orderly manner without any depositors losing a penny.

The spread the bank will pay on the BTFP scheme loan over the federal funds rate may be small, but so is the spread of the yield on the new bond they can buy over the cost of the borrowing from this scheme to pay for it. This small but favourable spread will presumably be consumed paying higher depositor interest anyway. 

Still not sure TBH.

[Plan-b]

.

Edited March 17, 2023 by Plan-b

[Plan-b]

1 hour ago, PatronizingGit said:

Interesting. If I google that image it comes up with 'hidden oilfields of LA'

Reminded me of an archive footage video I saw the other day, I was thinking, my, LA had a lot of pylons!

 

About 4 minutes in. Interesting how the Oil derricks were crammed in amongst houses, quite nice houses, some of them. You literally could imagine the beverley hillbillies building a mansion beside their back garden oil well.

 

Very nice remastered Vid it felt almost recent. The Pic from my post was Huntington Beach looks like the later part of the vid was shot there, Interesting the wells look to be in late state using pump jacks inside the bottom of the derricks surprising so many were left standing. Different attitude during those times that people were happy to live amongst them perhaps they were purchased reasonably cheaply from the oil co's and gave a decent income.

To look at the place today it's hard to believe it ever happened.

Edited March 17, 2023 by Plan-b

[Yadda yadda yadda]

57 minutes ago, PatronizingGit said:

Interesting. If I google that image it comes up with 'hidden oilfields of LA'

Reminded me of an archive footage video I saw the other day, I was thinking, my, LA had a lot of pylons!

 

About 4 minutes in. Interesting how the Oil derricks were crammed in amongst houses, quite nice houses, some of them. You literally could imagine the beverley hillbillies building a mansion beside their back garden oil well.

 

The Philip Marlowe books by Raymond Chandler are set in that era. He does some detective work for rich people that have lots of oil wells at the bottom of their land whilst they live in mansions at the top. I didn't realise that the oil wells went right down to the coast. LA comes across as an exciting but rough city in those novels. Infinitely better than today. I didn't realise how much space the roads had back then. All the better for drink driving, which appeared to be the expected mode of transport. The rich people with the land will have made a second fortune developing it by now. The land those seaside wells were on must be worth a fortune today.

[Yadda yadda yadda]

11 minutes ago, Chewing Grass said:

Interesting, managed to do a then and now on a bit of this one.

https://youtu.be/8GK0CwIOGHw

 

So much better then. Look at those stylish street lights. The tall building has been allowed to deteriorate. Ok it is unfair to compare buildings with building sites but the only visible improvement is the palm trees.