Credit deflation and the reflation cycle to come (part 8)

[Mandalorian]

9 minutes ago, Jesus Wept said:

@Mandalorian I’m pretty much with you on this above. Global trackers or certainly regional so you can “dial them up and down as required”. The global trackers are holding a little bit too much S&P for my liking. 

SEMA will be my emerging market play.

Just waiting for entry points into the market.

SEMA has 20% allocation in China (includes some Alibaba and JD.com which I thought about buying direct the other day and decided against it).

 

Will be holding CSH2 (4.4% net yield) until the time comes. 

I am going to allocate:

....

What makes you think you can time the market?

Friend of mine sold EVERYTHING about 18 months - 2 years ago.  'It's overvalued.  Going to crash.'

It didn't.

Maybe it will.  But what if it doesn't?

This is why I buy in my SIPP every month - like clockwork.

FWIW.  I want a market crash.  I'll be buying stuff cheap.

[Mandalorian]

10 minutes ago, Jesus Wept said:

Surely these two statements above are contradictory? the second one is “timing the market”.

Then you get back in when you think it’s ’Rock bottom’’

Getting out when you have made enough isn't timing the market.

It's realising when you've had enough out of a share rather than trying to get the absolute most out of it.

I.e.  Don't be greedy.

[Mandalorian]

27 minutes ago, Jesus Wept said:

I did it once before in March 2000.

I was subcontracting for ENRON in Puerto Rico and told the “big Texan boss” - who was constantly bragging about his shares in Enron and his 401k - that it was all about to come crashing down and the Nasdaq was approaching 5000pts and that would be it - all over - reckoned a 50% collapse. (I had just sold my biotech shares and moved to cash).

He laughed and took the piss out of this “naive young limey Brit”. 

The rest is history…

My life will continue exactly as before. 

If I was fully invested and it did crash 50% I’d struggle with that. 

Downside for me of the potential of a crash greatly outweighs the upside of getting 10% - 20% a year for the next 3 years or so. Not worth it for me.

Everyone’s journey is different - good luck ! 

I once scored a bullseye in the pub.  Doesn't make me Luke Littler!

 

See.  That's a difference.

If the market collapses by 50% then great.  I'll be there buying it.

It fell by a third during covid.  I did nothing except put in my regular monthly orders.  It's now WAY up on what it was before covid.  I've made most of my money by doing nothing.

The global stock market always comes back.  And if it doesn't then there is blood in the streets and we have better things to worry about.

[Mandalorian]

9 minutes ago, Jesus Wept said:

I think we are on the same page.

I am just a little late to this game and still learning. If I start to invest now in global trackers as sure as night is day it will come crashing down and put me off for life .

I am going to “HOLD” for now and risk waiting until there is a crash. 

And what if there isn't?

[Mandalorian]

13 hours ago, baffledbyzirp said:

 or the US, which is in a massive bubble

 

Is it?  How do you know?

You say about their currency having difficulty.  Why do you think the US stock market keeps going up?  Those two things are linked.

1 minute ago, Jesus Wept said:

There nearly always is, and if not I will be happy to sit out and celebrate your gains ! 

Nearly always isn't.  The general pattern is upwards with occasional blips downwards, not the reverse.

[DurhamBorn]

1 hour ago, Mandalorian said:

Definitely not

Think of those Chinese banks and Chinese coal miners churning out divis sending you your capital back during the dollar weakening cycle.Think of how exciting it will be to outperform the S+P.Watching the UK economy collapse into a welfare driven vortex knowing pulp makers in Peru were doing just fine.

You would be like my mate who used to always say "i would never pay for it",100% certain he was,that was until Amsterdam and i sat him down on a bench opposite a window with a beautiful Croatian girl in a silver bikini.Once he broke you could not get him out of those places,he was in love 10 times a day.If we can just get you to into SEDY you will be buying BAT next and asking when the divi is due.Give in.

[JMD]

6 hours ago, ThoughtCriminal said:

This is absolutely fascinating. Much watch if you're interested in China.

He's been going to china for a long time, goes to factories etc and he says the change in the last five years is astounding regarding everything from automation to manners, air quality, public transportation and even public toilets! His conclusion is that China is far ahead of most western countries and, most importantly, he says it's the trajectory: China feels like the future whereas the west feels like the past.

It's only 11 minutes and just him doing a walk and talk to camera in Shanghai. That's his twitter account so well worth a follow I think.

 

 

In reference to China becoming more polite. I recall an article of a few years back that said Western media was falsely mis-characterising the Chinese social credit system as a CBDC for government control, when in fact it was more a nudge system to encourage social cohesion and trust between the various Chinese ethnicities that had migrated into the cities. 

[JMD]

5 hours ago, Red Debt Redemption said:

Just put them in general nothing happens. Hear the neighbours bins clinking like fuck when tipped into lorry.  Alot of things you're 'supposed' to do like get a paye job and pay 40% tax doesn't meant you have to.

Yea, like the Soviet Russian workers (sort of) used to say... We pretend to recycle and they pretend to achieve their recycling targets!

[Bobthebuilder]

2 hours ago, Mandalorian said:

What's in your portfolio

Loads of boring divi paying stocks.

[JMD]

3 hours ago, leonardratso said:

ive managed to get rid of a fridge, a double bed including mattress and a single bed including mattress via the normal bin, obviouslyhad to cut them up and disguise them over several bin cycles every 2 weeks. But its fine, cutting them up is good exercise for me, especially the springs in the mattresses, doesnt half give you hand ache.

PS. have used some of the neighbours underutilized bins as well to help out (bin out to help out as rishi would say).

You cut up a fridge? But what about the CFC's? Please think of the hole in the atmosphere...  Oh the HUMANITY!!

[Axeman123]

I got rid of a concrete tiled fireplace, some bathroom tiles, and some bricks in a wheely bin once.

When we moved it was plastic sacks only at the new house, but that didn't stop me putting a ancient broken Flymo out in bagged up pieces.

I doff my cap to a double mattress though.

[SpectrumFX]

We've just moved to a new recycling system. We used to just put all of the recycling into a single bag. Now we've got to separate it out into metal and plastic, cardboard, and glass. It's a right pain in the arse.

I happened to see the bin men come around this week, and watched them empty it all into the same fucking lorry.

Turns out the council haven't had their new lorries yet with separate compartments for the different stuff. Fucking clown world.

[leonardratso]

27 minutes ago, JMD said:

You cut up a fridge? But what about the CFC's? Please think of the hole in the atmosphere...  Oh the HUMANITY!!

thats why i threw it out, it had already all leaked out at some point, so when i split the pipe there was nothing in it.

yeah the mattress was a problem - both times, pretty tough the springs, the joining wires were easier to cut, bolt cutters were useless, ended up doing it with wire cutting pliers, a real hand/forearm  workout.

Edited April 7 by leonardratso

[JMD]

2 hours ago, Mandalorian said:

What makes you think you can time the market?

Friend of mine sold EVERYTHING about 18 months - 2 years ago.  'It's overvalued.  Going to crash.'

It didn't.

Maybe it will.  But what if it doesn't?

Timing?

Perhaps you're unaware that this thread has it's own fiduciary 'Uncle'? Some say he was the original contrarian!

I believe his thesis is 'Watch and Learn'. But if that is a bit esoteric for some non-contrarians, in practical terms it usually translates as him prophesising that a meltup/crash is 6-8 months into the future. He is very consistent and has been saying this for at least the past 7 years.

Edited April 8 by JMD

[sancho panza]

ANotehr in a fine list of recent 'no sh1t sherlock' moments

https://www.telegraph.co.uk/business/2024/04/07/death-of-north-sea-oil-disaster-for-britain/

The decline of the North Sea has implications not just for energy policy and tax income, but public finances more broadly.

We face a huge bill – potentially up to £60bn – to clean up the North Sea.

The energy companies are responsible for decommissioning, but tax breaks mean much of that money will be reclaimed from the Exchequer - and ultimately taxpayers.

Last year alone more than 200 oil and gas wells were plugged, eight platforms were removed and 8,000 tonnes of subsea structures were taken out of the ocean – with another 250km of seabed pipelines being decommissioned. Another 180 of the UK’s 284 oil and gas fields will close down by the end of the decade.

Mass closures are not the result of eco-protests, nor because of a lack of demand.

Supply isn’t dwindling either. Over the last five decades oil and gas equivalent to 47 billion barrels of oil have been extracted, but seismic surveys suggest another 25 billion remain.

Instead, operators blame punitive taxes for the rapid pullback, with some facing levies of more than 100pc on their profits. 

Production is now in rapid decline.

Over the five decades to 2020 the offshore industry poured around £400bn of taxes into the Treasury’s coffers.

The contrast with now could hardly be greater. Last year the UK produced just 38 million tonnes of oil, down by 74pc from its peak and about 20 million tonnes less than we need. Gas production was 30 billion cubic metres – less than half our needs.

Employment has fallen to 130,000. So too has the tax take, to around £3bn.

Meanwhile, the UK’s reliance on oil and gas has hardly changed. We still get 75pc of our total energy from oil and gas – just like two decades ago.

Fossil fuels may be warming the climate but they are also essential to heating the 27 million homes reliant on gas or oil-powered boilers. Around 30 million vehicles still run on diesel or petrol and gas-fired power stations provide over a third of our electricity.

We still consume 77 billion cubic metres of gas a year or 1,100 cubic metres per person, the volume of 14 double-decker buses. We also consume about 60 million tonnes of oil – nearly a tonne per person. Imagine several wheelie bins of oil for each citizen, including children.

Whatever the green lobby claims and whatever politicians promise, the fact is that the UK remains a fossil-fuelled nation.

Will that change? Fossil fuel consumption has declined a little and should fall faster if the Government can persuade us to install heat pumps, buy electric cars and change our lives in all the other ways required by net zero.

But what’s becoming all too clear is that our consumption of fossil fuels will never fall as fast as the decline in our North Sea supplies.

It means that for at least the next few decades the UK will be increasingly reliant on imports – with all the vulnerability to global markets, price shocks and the whims of dictators such as Putin that this implies.

Two decades ago we were producing enough oil and gas for the nation and exporting some. Now we face energy poverty and reliance on other nations to keep our homes warm, our lights on and our vehicles moving.

How did it come to this?

Politicians knew at the time they had a cash cow, and successive chancellors have been milking it ever since.

Labour’s Gordon Brown introduced a 10pc “supplementary charge” on North Sea profits in 2002, effectively raising tax on the region’s production to 40pc from 30pc. He launched a second raid on profits in 2005 by doubling the supplementary charge in what the SNP branded a £2bn “smash and grab”.

George Osborne tinkered with North Sea taxes further, launching a £2bn raid in 2011 to pay for a one penny cut in fuel duty as oil prices soared above $100 a barrel.

Jeremy Hunt’s windfall levy in the wake of Russia’s invasion of Ukraine helped to plug a hole in the public finances.

Countries such as Norway have taken a very different approach to managing their oil and gas wealth.

Denis Healey, the former Labour chancellor, admitted in one of his final interviews that the government did “underplay the value of the oil to the country because of the threat of nationalism”.

Sukhdev Johal, accountancy professor at Queen Mary University, London, estimates that if the UK had set up a similar fund to the Norwegian it would be worth £850bn. Given the UK’s much larger population, that would work out to £13,000 per person – a smaller haul, but still significant.

The UK’s mature fields are now one of the most expensive places in the world to extract oil from. It costs $26.20 to produce a barrel of the stuff today, compared with $5.50 in Saudi Arabia and $7.30 in Norway, according to Rystad Energy.

The warning prompted the Treasury to put pressure on the NSTA to cut the cost of decommissioning. Its latest predictions show an astonishing reduction in the total cost from £60bn to £40bn, which combined with increases in oil prices and profits has reduced the Treasury’s predicted liability to £4.5bn.

 

These “gravity-based structures” were built from concrete reinforced with steel bars at a time when the main thought was how to survive the 200mph winds and 80-foot waves found in the Atlantic seas north east of Shetland.

No-one thought about their eventual removal. The resulting structures each weigh 300,000 tonnes, the same as New York’s Empire State Building.

They also served as oil storage tanks and so contain thousands of tonnes of toxic oily sludge.

Energy insecurity

What does the future hold? For offshore contractors, pulling apart oil and gas installations is becoming the most reliable source of income.

Spending on decommissions has risen from £1.39bn in 2019 to £2bn this year and there will be far more spent in future especially if, as expected, the NSTA’s £40bn predicted total proves too optimistic.

Increased spending on decommissioning comes as investment in exploration for new oil and gas fields tumbles - from £800m in 2019 to just £330m this year.

Only a handful of new wells have gone into production in the last five years compared with the many hundreds that have shut down.

Some believe there is still money to be made in the North Sea. The NSTA has approved 51 new exploration licences in the last year with up to 60 more pending. Energy secretary Claire Coutinho has argued for more, saying the domestic oil and gas industry is vital to the UK’s energy security and economy.

However, energy companies are not impressed by such blandishments. Few are investing and some are walking away – for reasons that have nothing to do with geology and everything to do with politics.

The current government’s windfall tax has raised the levy on oil and gas production profits from 40pc to 75pc. The vagaries of the tax system mean some operators have in fact faced tax rates in excess of 100pc.

Harbour Energy, the UK’s largest oil and gas producer, blamed the tax burden for halting its investment in the UK.

The likely next government has only added to the uncertainty. Labour has pledged to halt all new licensing, add another 3pc to the windfall tax and potentially even backdate it.

The impacts of those policy swings from the UK’s two main political parties are proving disastrous for both the industry and the country, argues Chris Wheaton, an analyst with Stifel who specialises in the offshore industry.

In a recent note, he estimated that the UK Government would lose out on £20bn of tax income if investment is “effectively being shut down by higher taxes or stopping any future developments”.

Energy security would also suffer, he argues. “UK gas production would see an accelerated decline, forcing more gas to be imported… with impacts on energy costs for consumers. We estimate the UK would be importing 80pc of its gas demand as early as 2030.”

Mike Tholen, policy director at Offshore Energies UK, the oil, gas and wind industries trade body, said shutting down UK oil and gas without first building the low-carbon systems to replace them, would leave the UK exposed to global price spikes and the whims of dictators.

“Over 23 million homes rely on gas boilers for heat and hot water and gas provides 40pc to 60pc of our electricity depending on wind strength,” he says.

“We can choose an energy transition where [oil and gas] infrastructure continues to offer opportunities for UK companies and workers. Or we can choose increasing reliance on energy from other countries.”

These arguments appear to be falling on deaf ears in Westminster, with no meaningful proposals to reduce the tax burden. Instead, decommissioning is the new name of the game.

This year’s general election will roughly coincide with Brent Charlie being cut away and melted down for scrap.

[Libspero]

2 hours ago, sancho panza said:

These arguments appear to be falling on deaf ears in Westminster, with no meaningful proposals to reduce the tax burden. Instead, decommissioning is the new name of the game.

Devils advocate..   perhaps they are keeping it in the ground (seabed) exactly because of energy security? 

For the moment the dictators he references are all happily pumping lots of oil.   If that does ever change we may need some of our own reserves available for serious energy shocks in the future.

[Lightscribe]

No pullback yet.

 

[sleepwello'nights]

16 hours ago, Funn3r said:

They make us recycle glass. Can't put them in the rubbish. You have to save up the bottles then take them to a recycling point. In my flat I have literally nowhere to save the empties so avoid buying anything glass wherever possible.  Also the recycling skips are always full to overflowing for some reason and I feel bad dumping the bottles in the carpark like everyone does.

Puzzles me because glass is primarily sand. An excellent material for landfill. Ours are collected with household waste collection so need to make special trips to dispose of them. 

[Lightscribe]

Something is up in the ‘system’, the central banks have been accumulating for a reason.

Gold doing a Nickel.

https://fortune.com/2024/04/07/gold-price-rally-record-highs-fed-rate-inflation-safe-haven-etf/#
 

Meanwhile the west has no fucking clue. We deserve everything that’s coming.

 

 

 

Edited April 8 by Lightscribe

[Onsamui]

5 hours ago, SpectrumFX said:

We've just moved to a new recycling system. We used to just put all of the recycling into a single bag. Now we've got to separate it out into metal and plastic, cardboard, and glass. It's a right pain in the arse.

I happened to see the bin men come around this week, and watched them empty it all into the same fucking lorry.

Turns out the council haven't had their new lorries yet with separate compartments for the different stuff. Fucking clown world.

Most goes to Asia, so don't recycle.  Neil Oliver was talking about it the other week and showed documentary film. Friend works in refuse and he says it nearly all goes in landfill here or abroad.

Edited April 8 by Onsamui

[baffledbyzirp]

6 hours ago, Mandalorian said:

Is it?  How do you know?

You say about their currency having difficulty.  Why do you think the US stock market keeps going up?  Those two things are linked.

Nearly always isn't.  The general pattern is upwards with occasional blips downwards, not the reverse.

The reason I say that the US dollar is starting to show signs of weakness are:

1. USD accounts for a far smaller proportion of world trade than it did 20 years ago

2. $34.6 Trillion acknowledged debt, over $100 Trillion if you take into account unfunded liabilities.

3. Current debt accumulation increasing at approx $1 Trillion every 100 days.

4. Current deficit in excess of $1 Trillion.

5. Cost of servicing current debt interest only in excess of $1 Trillion.

6. BRICS & SCO.

7. Oil transactions being settled in currencies other than the USD, Iran, India and Russia.

8. Strained relations with Saudi which keeps the petrodollar ticking.

9. Sanction on Russia-Iran-Venezuela et al compromising the reserve currency status and legitimacy.

10. The value of gold and bitcoin.

11. Moral decline and industrial sclerosis in what was once a mighty industrial power.

12. The stock market goes up partly as a means to convert funny money into a tangible interest in real businesses per DH.

13. Freezing Russian reserves as they have done previously with Afghanistan, Venezuela, Iraq, and any state that is inimical to US hegemony. In this case it appears they are simply going to steal the deposits which spells doom for the system.

14. Doubling the size of money supply in a 4 year period.

15. US interest rates are at a level that is unsustainable since debt repayments are linked yet they cannot be reduce or their bonds will go unbid.

16. Removal of the debt ceiling.

17. Apparent weakness in the Eurodollar market as EMs seek alternatives.

18. The election cycle which will undoubtedly see recklessness on an epic scale before Trump returns  to the White House like an avenging angel.

19. The rise of India and China as a multi-polar transition is realised.

QED. Take your pick. GLA

 

[jamtomorrow]

7 hours ago, DurhamBorn said:

Give in.

You first

[wherebee]

58 minutes ago, jamtomorrow said:

You first

thats a bloke

[Pip321]

1 hour ago, baffledbyzirp said:

The reason I say that the US dollar is starting to show signs of weakness are:

1. USD accounts for a far smaller proportion of world trade than it did 20 years ago

2. $34.6 Trillion acknowledged debt, over $100 Trillion if you take into account unfunded liabilities.

3. Current debt accumulation increasing at approx $1 Trillion every 100 days.

4. Current deficit in excess of $1 Trillion.

5. Cost of servicing current debt interest only in excess of $1 Trillion.

6. BRICS & SCO.

7. Oil transactions being settled in currencies other than the USD, Iran, India and Russia.

8. Strained relations with Saudi which keeps the petrodollar ticking.

9. Sanction on Russia-Iran-Venezuela et al compromising the reserve currency status and legitimacy.

10. The value of gold and bitcoin.

11. Moral decline and industrial sclerosis in what was once a mighty industrial power.

12. The stock market goes up partly as a means to convert funny money into a tangible interest in real businesses per DH.

13. Freezing Russian reserves as they have done previously with Afghanistan, Venezuela, Iraq, and any state that is inimical to US hegemony. In this case it appears they are simply going to steal the deposits which spells doom for the system.

14. Doubling the size of money supply in a 4 year period.

15. US interest rates are at a level that is unsustainable since debt repayments are linked yet they cannot be reduce or their bonds will go unbid.

16. Removal of the debt ceiling.

17. Apparent weakness in the Eurodollar market as EMs seek alternatives.

18. The election cycle which will undoubtedly see recklessness on an epic scale before Trump returns  to the White House like an avenging angel.

19. The rise of India and China as a multi-polar transition is realised.

QED. Take your pick. GLA

 

A few on the list but “stealing assets spelling doom for the system.” “Doubling the money supply in 4 years” “deficits” etc  

Starts me thinking that it’s like being on a desert island with a group of people and all you have to offer the group is a suitcase full of £20 notes.

Week 1, Others will try to steal it at first and indeed fights ensue for the money.

Week 2, the guy who won the suitcase gives it to another guy for food.

Week 3, the guy now holding the money tried to buy water and coconuts from others in the group…no takers

Also stealing of the money in the first week undermined its value…I can give it to the little guy for his water, but he knows I can steal it back the next day anyway. 

Week 4, the money has been burnt to keep warm.

Timescales different but that fiat is becoming increasingly irrelevant other than as a yardstick of what’s happening. Cash in fiat is fine at 5% return but it’s short term waiting to pounce.

Coconuts, Fire and Water are the currency….it just takes a while for people to get hungry and realise it 😉

[wherebee]

7 minutes ago, Pip321 said:

A few on the list but “stealing assets spelling doom for the system.” “Doubling the money supply in 4 years” “deficits” etc  

Starts me thinking that it’s like being on a desert island with a group of people and all you have to offer the group is a suitcase full of £20 notes.

Week 1, Others will try to steal it at first and indeed fights ensue for the money.

Week 2, the guy who won the suitcase gives it to another guy for food.

Week 3, the guy now holding the money tried to buy water and coconuts from others in the group…no takers

Also stealing of the money in the first week undermined its value…I can give it to the little guy for his water, but he knows I can steal it back the next day anyway. 

Week 4, the money has been burnt to keep warm.

Timescales different but that fiat is becoming increasingly irrelevant other than as a yardstick of what’s happening. Cash in fiat is fine at 5% return but it’s short term waiting to pounce.

Coconuts, Fire and Water are the currency….it just takes a while for people to get hungry and realise it 😉

I had a discussion with the kids in the car at the weekend (long drive) about how money is worth less each year, so it makes sense to buy things you really need now, bringing purchases forward, as long as you aren't using debt.  The eldest wants to buy a car soon, which kicked off the topic.

I talked about how in hyperinflation in germany, people would run to the shops the minute they got paid as if they waited, food might have gone up in price.  That lead onto a rant about the cause always being government overspending.

No harm starting them young, eh.