Credit deflation and the reflation cycle to come.

[Bobthebuilder]

16 minutes ago, stokiescum said:

They can steal is sadly if they realy wanted to by just banning its sale then you’ve got to smuggle it out of the uk to flog it the good news is I doubt you can train dogs to sniff silver at the ports

 

21 minutes ago, stokiescum said:

They can steal is sadly if they realy wanted to by just banning its sale then you’ve got to smuggle it out of the uk to flog it the good news is I doubt you can train dogs to sniff silver at the ports

Dont have to hold the physical Stokie.

[Don Coglione]

4 minutes ago, Bobthebuilder said:

 

Dont have to hold the physical Stokie.

But the paper stuff can be disappeared (if indeed it ever existed...).

[Bobthebuilder]

5 minutes ago, Ponty Mython said:

But the paper stuff can be disappeared (if indeed it ever existed...).

True, but as i say, if it gets to that we are all fucked.

[King Penda]

40 minutes ago, Bobthebuilder said:

 

Dont have to hold the physical Stokie.

And you trust them to pay out if it goes to the moon 

[Bobthebuilder]

5 minutes ago, stokiescum said:

And you trust them to pay out if it goes to the moon 

To be honest? no i dont.

[Castlevania]

50 minutes ago, Ponty Mython said:

But the paper stuff can be disappeared (if indeed it ever existed...).

The physical ETC’s allow you to collect provided you bought enough to buy a brick.

[sancho panza]

9 hours ago, Cattle Prod said:

I think oil will get smashed in a bust too, I can't see how it wouldn't. Thursdays 7% selloff was a taster, there are huge pockets (not least China with it's new Shanghai contracts as a lever) to move the market. However underneath all the paper is the fundamentals going tick, tick, tick. The reality of shale is beginning to hit as I thought it would, and expect negative sentimeny on us production everywhere into the autumn. Most US production forecasts are models based on past performance, which was based on burning capital. Good luck with that. 

I'm investing in oil now as I see a panic spike sometime in the next 18 months, then a crash along with US stock markets, then a 5-7 year bull market for oil. And that'll probably be it. Hopefully I get paid off at that point, that'd be just perfect.

I've previously said there is no other major oil supply left outside the US, but I'm just back from the oil fields of Canada and I have to revise that view. Canada still has huge potential - at a price. And it's not really the oil sands either. If they get a pipeline through British Columbia approved I'll be investing. It's really just export route holding them back. But it'll take at least 5-7 years to sort out so doesn't affect my timescales. There is no supply to fill the gap after the bust as the investment hasnt happened for the last 4 years so I agree with @DurhamBorn on $200, which may be conservative.

With regard to that sell off being a taster,what do you mean? is that ref trade wars?

Oilprice.com saying don't trust the bounce back.

https://oilprice.com/Energy/Energy-General/Should-Traders-Trust-The-Drop-Or-The-Bounce-Back-In-Oil.html

As you know,I'm lining up some oilies,particualrly the larger cap plays.The more I research,the less need there appears to be to look dredge the riskier end of the trade eg XES/OIH/FCG

Have you got as view on the Chinese 

PetroChina

https://www.investing.com/equities/petrochina-co-ads-exch

China petroleum

https://www.investing.com/equities/sinopec-corp-ss

CNOOC

https://www.investing.com/equities/cnooc-ltd

 

Alognside gazprom,they appear to offer incredible value to the uneducated eye(like mine)

[sancho panza]

10 hours ago, Cattle Prod said:

I think oil will get smashed in a bust too, I can't see how it wouldn't. Thursdays 7% selloff was a taster, there are huge pockets (not least China with it's new Shanghai contracts as a lever) to move the market. However underneath all the paper is the fundamentals going tick, tick, tick. The reality of shale is beginning to hit as I thought it would, and expect negative sentimeny on us production everywhere into the autumn. Most US production forecasts are models based on past performance, which was based on burning capital. Good luck with that. 

I'm investing in oil now as I see a panic spike sometime in the next 18 months, then a crash along with US stock markets, then a 5-7 year bull market for oil. And that'll probably be it. Hopefully I get paid off at that point, that'd be just perfect.

I've previously said there is no other major oil supply left outside the US, but I'm just back from the oil fields of Canada and I have to revise that view. Canada still has huge potential - at a price. And it's not really the oil sands either. If they get a pipeline through British Columbia approved I'll be investing. It's really just export route holding them back. But it'll take at least 5-7 years to sort out so doesn't affect my timescales. There is no supply to fill the gap after the bust as the investment hasnt happened for the last 4 years so I agree with @DurhamBorn on $200, which may be conservative.

Where do you think the bottom might be? $30 bucks or is $20 possible?

[sancho panza]

Interesting piece on Op ref other commodities discussed here eg LIT

Aslo mentions potential growth in drones going forward

 

https://oilprice.com/Energy/Energy-General/Oil-Markets-Hit-Hard-By-Trumps-New-Trade-War-Offensive.html

Friday August 2, 2019

1. Shale hit, offshore growing

- Employment is shrinking in the U.S. shale sector, but growing offshore.

- “This is a clear effect of the increase in offshore sanctioning. We expect offshore commitments to nearly double from 2018 to 2020, and sustain high levels of spending over the next five years,” says Matthew Fitzsimmons, vice president on Rystad Energy’s oilfield services team.

- Demand for offshore oil services will reach $442 billion by 2025, according to Rystad Energy, up 45 percent from 2018.

- Meanwhile, onshore North America is starting to see cuts. Halliburton (NYSE: HAL) recently cut 8 percent of its workforce. Whiting Petroleum (NYSE: WLL) slashed a third of its workforce this week and saw its stock price fall more than 35 percent on Thursday – although the loss was exacerbated by the U.S. decision to hike tariffs on China.

2. Trade war hits US soybean exports

- The U.S. agricultural sector has been hit hard by the trade war, which is now set to escalate by another round on September 1.

- Soybean exports from the U.S. have plunged since the trade war began in 2018, with Brazil taking market share. According to Standard Chartered, Brazil accounted for 80 percent of China’s soybean imports over the past 12 months.

- With market access cut off, American farmers put soybeans in storage, and inventories rose to a record high of 28.6 million tons in the 2018/19 season, according to Standard Chartered.

- To make matters worse, China has suffered through an outbreak of African swine flu, leading to “widespread culling of hog herds,” which led to a significant decline in soybean imports used for feed.

3. Fed cuts rates, disappoints gold. But trade war provides boost

- The Federal Reserve cut interest rates on Wednesday by 25 basis points, which was about what was expected. However, Fed Chairman Jerome Powell cautioned that it was not the beginning of a new dovish period for interest rates.

- The dollar rose, while equities and commodities declined. “Some rate cut expectations were also priced out and gold fell accordingly,” Commerzbank said in a note.

- However, on Thursday, gold jumped after President Trump announced new tariffs on China.

- Investors clearly flocked to gold as a safe haven asset, as concerns about the health of the global economy resurfaced.

4. Natural gas liquids market falls sharply

- Natural gas liquids (NGLs) have been a sweetener for oil producers over the past few years, adding a lucrative product to their streams. But more recently, NGL prices have crashed.

- “NGLs entered the year at seasonal highs versus WTI but have since disconnected and are pricing near record low levels due to domestic NGL demand and export growth failing to keep pace with NGL supply growth,” Bank of America Merrill Lynch said in a note.

- Lower NGL prices are exacerbating the poor returns on falling low natural gas price and relatively low crude prices.

- “To the extent possible, producers could shift plans to adjust for the NGL and natural gas price weakness going forward by reallocating capital to higher return basins with less exposure to NGLs and natural gas,” Bank of America suggested.

- The investment bank noted that basins with high NGLs (Niobrara, Utica, Oklahoma) have worse returns than those that have a bit more crude oil (Bakken and Delaware).

5. Falling lithium prices

- Lithium demand is slowing in China, while supply is on the rise, sending prices tumbling.

- Lithium prices tripled between 2015 and 2018, raising concerns about adequate supply because the EV revolution is still in its infancy.

- But the solution to high prices is high prices. A wave of new supply has come online. Six lithium mines have opened in Australia since 2017, according to Bloomberg.

- At the same time, vehicle sales have cooled in China. Lithium prices are down by 30 percent since last year.

- “The latest EV data did reveal slowing growth, inferring that on top of excess supply, demand is now a problem,” Macquarie Capital Ltd. wrote in a report this month. “The key interest for investors should be who is likely to survive.”

6. The $40 billion market for drones

- Drones can help slash costs across a variety of industries, with the potential of cost-savings on the order of $100 billion by 2024, according to a new report from Barclays.

- Drones offer an array of other advantages, from safety improvements to enhanced monitoring. For instance, oil companies can remotely inspect pipelines from far away using drones, rather than people. Telecom companies can inspect equipment in remote mountains with drones.

- The market for drones in these commercial applications could reach $40 billion by 2024, up from $2.2 billion in 2018. That’s 38% CAGR.

- Chinese tech company DJI is the frontrunner as a drone manufacturer, capturing 74 percent of the market.

 

[sancho panza]

1 minute ago, Cattle Prod said:

I mean how easily a giant market like oil can be moved, for no particular fundamental reason. Deep pockets. I suspect China was behind it, to offset the new tarriffs. Doesn't matter who, paper market rules, and it'll be smashed down to below production cost levels in a wider selloff/bust.

Interesting perpsective CP.Thanks

[sancho panza]

Just now, Cattle Prod said:

That'd be the range I buy in. It could spike lower for a short time, but that would only be in front month contracts. Longer dated contracts will hold up against the panic low.

Again, I expect a spike first. Maybe even over $100 a barrel, depending on how shale sentiment plays out this autumn/winter.

I was having a play with monthly and weekly charts on some of my propsective oilies and it was interesting how the monthlies hid some absolutely torrid intra week action.

After what happened to my CNA punt I'm careful to use my technical rules to override my urge to buy value plays.Nothing hurts my head more than watching a value play get more of a value play.

I think were' going to face the weak dollar section of the run up to the big kahuna ie yen/GBP/everything but the Euro() strenghten versus the dollar due to a number of factors eg lower foreign demand for UST(already happening),weaker consumer sentiment in USA, and a general weakening of US economy.

I'm keen to deploy into the oilies(and other commodities) before that run starts occurring as I think there's a real chance of some  significant upside ahead of June 08 .Then a smash down when I'll hopefully have the chance to increae our icnome by buying them back.Having said that,a lot of the ones I'm looking at have charts that are pointing down near/medium term

I can see the chance of a big bottom there in oil.Once we're in that time-and if I don't see June 08 coming,then we won't have sold-a vicious bottom is entirely possible in my eyes.CB's have played some silly games(I read somewhere that the BoJ owns 65% of Japanese ETF issuance/40% of JGB issuance-)

[sancho panza]

24 minutes ago, Cattle Prod said:

I'd ignore Oilprice, except for contrarian reasons. Very light journalism, mostly regurgitated. Not read much in the industry.

I'm not into China in general. In my limited experience with them in the industry, they have limited geoscientists (too mathematical and uncreative), and screw around with paying the bills. Chinese production is in terminal decline, hence all the south china sea agression. Some of those companies depend on domestic production.

CNOOC I know best. Still have a bunch of good people from the nexen takeover, and have some excellent assets (e.g Buzzard in the UK and Stabroek block in Guyana). But are becoming more Chinese influenced every year. Becoming more opaque, secretive. Who knows what the books are like. Don't see long term growth there either.

Not for me, Sancho.

Cheers CP.

The only reason I looked tonight was -don't laugh-I googled biggest oil co's in the world to see if I missed anything in my trawls through XLE/Europe.What you say doesn't surprise me at all and pretty much confirms my hesitancy.

It's strange really but when you look at the trouble the Chinese are having in Hong Kong it really doesn't paint a great picture for external investors who may have some experience of the former colony.

In a similar way,I heard from a contact in Zimbabwe that there is a great deal of antipathy toward the Chinese there and in SA(Mrs P hails from SA),They buy things up,but the locals detest them 

[sancho panza]

5 minutes ago, Cattle Prod said:

As I flagged here months ago! Oilprice good for general light reading I suppose, not a bad summary. More to come in the shale patch though, including widespread bankruptcy. I've just been with a bunch of excellent young shale patch geos in Canada, and feel sorry for them. So keen and optimistic. But as was mentioned, this industry will chew you up and spit you out.

I have a system I mentioned earlier for flicking through large swathes of companies to find the few in the sector I wish to focus on.

I was surprised going through OIH/XES that HAL didn't make the grade balance sheet looks more than a little ropey.You can get away with a lot more if your turnover is a BP esque.

Working on your theory hence my searching more widely to avoid US shale,particualrly beginning to warm to the idea of upping our Russian exposure.

7 minutes ago, Cattle Prod said:

Haha the wanking sign made me laugh, sums up my views pretty well! I've bought some gbp/usd recently, think it'll strengthen  

I think you've got a good buy there.I've decided not to let cable affect my purchase plans for US stocks/ADR's.10% is a lot on a currency but nothing on a stock.

Eurozone going to hit the skids a lot sooner than people think imho.Too many people on TV saying UK screwed by Brexit rather missing the rather large issue of who's going to pay for the Deutsche bank/Monte Delpsci/Santander etc clean up operations.

[leonardratso]

3 minutes ago, Cattle Prod said:

Or they build infrastructure, then take it back when the loan isnt paid! Was it ports I was reading about? I lived there for 4 months in a different life. They have a very different approach to business. Its all personal contacts (they have a word for this) and bonus points if you shaft the laowai (they have a word for this too. Korea is the same. 

Biggest oil companies? Possibly because of their downstream businesses refining and distributing 10mbpd of oil other people found. But I am biased due to my personal experience. Jim Rogers seems to love the place!

gambian cleaner at work, nice fellah, good laugh, easy going, went missing for a couple of weeks last month, when he came back i asked him where he had been, home to gambia he said - boy did he go off on a rant about the chinese taking everything out of africa, ive never seen him lose it so much and rant. So yes, the anipathy is strong, and will probably get stronger the more they take. There again, africa is really there just to get shafted is it not? Plenty of other countries have done much the same.

 

[Majorpain]

7 hours ago, leonardratso said:

gambian cleaner at work, nice fellah, good laugh, easy going, went missing for a couple of weeks last month, when he came back i asked him where he had been, home to gambia he said - boy did he go off on a rant about the chinese taking everything out of africa, ive never seen him lose it so much and rant. So yes, the anipathy is strong, and will probably get stronger the more they take. There again, africa is really there just to get shafted is it not? Plenty of other countries have done much the same.

Modern day colonialism, all the benefits of "investment" flow only to the Chinese wherever they "Invest":

https://medium.com/@farooqtirmizi/cpec-is-dead-somebody-tell-beijing-9e18a891ff0b

Quote

That $1 billion, therefore, never hits Pakistan’s economy as an investment. It is $1 billion that goes from the Chinese government or state-owned company to a state-owned company within China to pay for equipment. Even the Chinese labour gets its salaries deposited into bank accounts within China. The money, in other words, stays completely within China and so never shows up as foreign investment into Pakistan.

 

[Harley]

There's a great documentary about the Chinese trying to build a road in Zambia and tearing their eyes out.

[sleepwello'nights]

6 hours ago, Majorpain said:

Modern day colonialism, all the benefits of "investment" flow only to the Chinese wherever they "Invest":

https://medium.com/@farooqtirmizi/cpec-is-dead-somebody-tell-beijing-9e18a891ff0b

•  

• t
•  

 

 

Quote

That $1 billion, therefore, never hits Pakistan’s economy as an investment. It is $1 billion that goes from the Chinese government or state-owned company to a state-owned company within China to pay for equipment. Even the Chinese labour gets its salaries deposited into bank accounts within China. The money, in other words, stays completely within China and so never shows up as foreign investment into Pakistan.

 

That's the Chinese for you, copying the US again.

[Dogtania]

1 hour ago, sleepwello'nights said:

That's the Chinese for you, copying the US again.

Exactly what I thought, isn't that the playbook that America has followed for the last 50 plus years?  Guess China doesn't have anything approaching cold war tension from back when on their horizon so can just out and out economically subjugate these new colonies.

[Talking Monkey]

3 hours ago, Majorpain said:

Modern day colonialism, all the benefits of "investment" flow only to the Chinese wherever they "Invest":

https://medium.com/@farooqtirmizi/cpec-is-dead-somebody-tell-beijing-9e18a891ff0b

 

Kin hell that is not going to end well for Pakistan, they gonna get smashed

[Errol]

4 hours ago, Dogtania said:

Exactly what I thought, isn't that the playbook that America has followed for the last 50 plus years?  Guess China doesn't have anything approaching cold war tension from back when on their horizon so can just out and out economically subjugate these new colonies.

Exactly. But the Americans and the West feel that it is a game that only they are allowed to play. When They do it, it is basically fine. But when China operates independant sovereign policy and ignores the dollar, the US/West goes insane.

[Harley]

The monthly charts can be interesting........

The SIL (silver miners ETF) price is now back at precisely where it was after it peaked in it's failed break out in January this year ($27).  It has come out of a double bottom and could now again turn down or go higher.  But this time momentum is stronger than before.  A high risk trade but would be lovely to see something like the 182% gain in 2016!  And is it going to draw out yet another precious metals cup and handle pattern or disappoint?

Which way will it go? The weekly is looking a bit high momentum wise but MACD only turned positive in May and price might currently be kissing prior resistance:

But then done just fine until recently. 

One to watch!

[sancho panza]

On 03/08/2019 at 22:18, Cattle Prod said:

I'd ignore Oilprice, except for contrarian reasons. Very light journalism, mostly regurgitated. Not read much in the industry.

 

CP,are there any sites you'd reccommend for learning about oil -in laymens terms of course?

On 01/08/2019 at 22:15, DurhamBorn said:

This is a fantastic article.Id urge everyone to read it,copy and paste it,and read it again several times.Its by a master macro investor.It also follows many of the themes of this thread and also where i think we are going and why including describing how a distribution cycle works.Very happy to see Ray Dalio coming around to similar conclusions to this thread.

https://seekingalpha.com/article/4275729-paradigm-shifts

"The gains in investment asset prices benefited those who have investment assets much more than those who don't, which increased the wealth gap, which is creating political anti-capitalist sentiment and increasing pressure to shift more of the money printing into the hands of those who are not investors/capitalists."

" to finance their expenditures, owners of them will have to sell off principal, which will diminish the amount of principal that they have left, so that they a) will need progressively higher and higher returns on the dwindling amounts (which they have no prospect of getting) or b) they will have to accelerate their eating away at principal until the money runs out."

"I suspect that the new paradigm will be characterized by large debt monetizations that will be most similar to those that occurred in the 1940s war years."

". the big question worth pondering at this time is which investments will perform well in a reflationary environment accompanied by large liabilities coming due and with significant internal conflict between capitalists and socialists, as well as external conflicts."

That really was a super read.Thanks for posting.

[Harley]

Working away with my partner yesterday and had the Financial Sense podcast on.  There's good old Jim being asked what he would be doing right now and replying "PMs and dividend stocks".  Partner looks across and smiles at me - I had a free pass yesterday!

[Majorpain]

https://www.bbc.co.uk/news/world-middle-east-49225916

Iran seized an Iraqi tanker this time, unusual as I thought that relations with Iraq were much better than in the past.

They are doing their best to make sure this blows up big time, big drop in oil price last week must have made for some sad faces in Tehran.

[A_P]

8 hours ago, Harley said:

Working away with my partner yesterday and had the Financial Sense podcast on.  There's good old Jim being asked what he would be doing right now and replying "PMs and dividend stocks".  Partner looks across and smiles at me - I had a free pass yesterday!

I've just ddg'ed to see who Jim might be, is this the guy? 

Wiki entry:

Quote

James G. Rickards is an American lawyer, speaker, gold speculator, media commentator, author on matters of finance and a self-proclaimed expert on finance. He is the author of The New York Times bestseller Currency Wars: The Making of the Next Global Crisis, published in 2011, The Death of Money: The Coming Collapse of the International Monetary System, published in 2014, The New Case for Gold, published in 2016, and The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis, also published in 2016. None of Rickards' major predictions thus far have been realized. In 2012, he predicted that the price of gold would reach $5,000 to $7,000 by 2017, however its price remained below $2,000 all through.

Ignore I think I've found it now. Weird my search brought up Rickards. Ill take a listen to the podcast.