Economic implications of a SARS/Coronavirus outbreak

[over9k]

Oh dear.

 

[over9k]

And futures are straight back into the green and bonds have plummeted like nobody's business.

Amazing.

 

[sptrawler]

I'll avoid politics and simply say that from a purely technical perspective, any energy source can work reliably if it's designed and built to do so and likewise they all fail if under built relative to demand.

People often take the issue far too "religiously" - they all work if done well and they all fail if done poorly.

All that has happened, is Russia has shown the EU, who's your daddy

 

[over9k]

All that has happened, is Russia has shown the EU, who's your daddy

It's more of a case of the EU giving itself a set of concrete boots with all this leftist idiocy.

There's very few places on earth where "green" energy actually works. Germany isn't one of them.

 

[over9k]

Also, not sure if anyone else is holding any bank/energy plays but they seem to be at damn near nosebleed territory now. Historically speaking, I've noticed that feeling to be a pretty good indicator to sell.

 

[dyna]

WPL up 25 % in a month. I'll keep holding though. The US S&P Energy 500 index is up 45 %, while our index is up by just just 11 %.
Could be a fair while before gas ( and oil for that matter) goes the way of the dodo.

 

[over9k]

WPL up 25 % in a month. I'll keep holding though. The US S&P Energy 500 index is up 45 %, while our index is up by just just 11 %.
Could be a fair while before gas ( and oil for that matter) goes the way of the dodo.

Yes, the smartest money has known this for a very long time.

The really big one is coal (and to a lesser extent, uranium)

 

[Smurf1976]

Yes, the smartest money has known this for a very long time.

Energy transitions by their very nature take a very long time.

It's one of the few industries where you can today discuss 2030 and politely correct anyone who suggests that's "long term". To someone investing their money in shares it might be fairly considered a long term but to anyone looking at the physical side 9 years is nothing when you're dealing with assets that have a lifecycle measured in decades or even centuries.

Coal, oil and gas aren't going away tomorrow.

As for nuclear that depends on governments.....

 

[over9k]

Energy transitions by their very nature take a very long time.

It's one of the few industries where you can today discuss 2030 and politely correct anyone who suggests that's "long term". To someone investing their money in shares it might be fairly considered a long term but to anyone looking at the physical side 9 years is nothing when you're dealing with assets that have a lifecycle measured in decades or even centuries.

Coal, oil and gas aren't going away tomorrow.

As for nuclear that depends on governments.....

There's a fantastic documentary called "pump" that you can find here:

And there's a lot to take in from it but the big one is when they interview the former head of shell. He reckons it'll take us about 3-4 decades to actually get off oil.

 

[moXJO]

To follow on from the timber shortage we now have an insulation shortage. Namely 50mm anticon that goes under roof sheets that was brought to my attention. This can put projects back a lot as the roof is done once the frame is up.

 

[over9k]

Oil now over 80/barrel. Not the kind of thing that gets fixed in a few days either.

Very ugly winter ahead.

 

[over9k]

Here's the past 3 weeks in a nutshell:



Raising rates isn't going to do anything because things like heating aren't exactly something you can go without. Hence the massive inelasticity of heating energy (power), oil etc.

Cranking rates would simply cause stagflation and the central banks have as good as confirmed it by now, hence markets plummeting because there really is *nothing* they can do about this. The ONLY solution is a supply increase which is not a simple/easy/quick thing to do at the moment.


In summary: More shite ahead.

 

[over9k]

https://www.bloomberg.com/news/arti...reak-not-slowing-down-despite-6-week-lockdown

"Sydney cases not slowing despite 6 week lockdown"

View attachment 128621

As I said before, this genie isn't going to be put back in the bottle. I suspect the new clock on this is going to be how long before they just give up like the U.K did?

So it seems that clock's time expired yesterday:



"Cases will rise, hospitalisations will rise, but we just can't stay in lockdown any longer".

Told you.

 

[Smurf1976]

The ONLY solution is a supply increase which is not a simple/easy/quick thing to do at the moment.

Adding to that, the time varies considerably.

Bringing an existing drilled but uncompleted oil or gas well into production where supporting infrastructure (pipelines etc) already exists is pretty quick.

Putting a coal mine that's been on care and maintenance back into production or recommissioning a power station that's been sitting idle can be done in a few months normally or somewhat faster if there's a real panic to get it going.

But at the other extreme, well to go and discover a new oil field and bring it into any serious level of production or to build a major nuclear power station from scratch, well depending on location that can easily end up taking more than a decade.

With that in mind I note two things:

First is the rig count in the US which is back up to 532 from the latest data I can find online. That's about half the level of 2018 but more than double the low point in 2020. So it's heading in the right direction but still a long way short of running flat out.

Second is that the number of drilled uncompleted (DUC) wells is coming down quite sharply. So in short, the low hanging fruit is being picked to get production happening quickly but ultimately that's unsustainable, you can't keep completing more than you're drilling forever. See here: https://www.eia.gov/todayinenergy/detail.php?id=49456

Same could be said for most places. There's some movement, some things are happening, but it's fairly modest and there's no stampede thus far.

 

[Smurf1976]

More inflation coming through, this time food:

Kraft Heinz says people must get used to higher food prices

The boss of the food giant says rising prices are partly due to pandemic disruption.

www.bbc.com

People will have to get used to higher food prices, the boss of Kraft Heinz has told the BBC.

Note that it says "will have to get used to it" which implies it's not "transitory".

I expect most other inflation will likewise not be transitory. Once the prices are up, they won't go back down no matter what the central banks tell us.

 

[over9k]

Also, check this out:



Not sure if I'd call crypto movements an economic consequence but if crypto moves on inflation and the virus causes inflation, here's another hedge for you.

Note the different scales on the left vs right side of the graph. Bitcoin is basically just the high beta option. The correlation is actually quite astounding.

 

[qldfrog]

Adding to that, the time varies considerably.

Bringing an existing drilled but uncompleted oil or gas well into production where supporting infrastructure (pipelines etc) already exists is pretty quick.

Putting a coal mine that's been on care and maintenance back into production or recommissioning a power station that's been sitting idle can be done in a few months normally or somewhat faster if there's a real panic to get it going.

But at the other extreme, well to go and discover a new oil field and bring it into any serious level of production or to build a major nuclear power station from scratch, well depending on location that can easily end up taking more than a decade.

With that in mind I note two things:

First is the rig count in the US which is back up to 532 from the latest data I can find online. That's about half the level of 2018 but more than double the low point in 2020. So it's heading in the right direction but still a long way short of running flat out.

Second is that the number of drilled uncompleted (DUC) wells is coming down quite sharply. So in short, the low hanging fruit is being picked to get production happening quickly but ultimately that's unsustainable, you can't keep completing more than you're drilling forever. See here: https://www.eia.gov/todayinenergy/detail.php?id=49456

Same could be said for most places. There's some movement, some things are happening, but it's fairly modest and there's no stampede thus far.

And in many cases, restarting a well, a stopped mine now flooded, an oil rig now static is not always possible quickly especially as we are in a supply crisis with chips in shortage which could prevent buying just one critical element

 

[qldfrog]

We all know of used car prices jumping higher and delays in getting new cars..inflation pushed that wayall that because of chip IC shortage.
https://www.thedrive.com/news/40458...ked-at-kentucky-speedway-due-to-chip-shortage
And that is before China invading Taiwan...there was no earthquake..tsunami and no, it is not the WFH people buying new computer for new tax deduction and zoom conferences who stop the line of car computer chips
Definitively worth considering a Reset..what else?
Taiwan was greatly unaffected by covid and overall demand for chip did NOT surge vs previous years.we are really being manipulated in my opinion.but when ICs are used everywhere..food energy transport production, expect the worst in consequences and of course price jump for what is available..new or used

 

[Smurf1976]

And in many cases, restarting a well, a stopped mine now flooded, an oil rig now static is not always possible quickly especially as we are in a supply crisis with chips in shortage which could prevent buying just one critical element

A lot will also depend on who owns it.

As I suspect you're aware, if something's not in current use then it tends to take one of two paths.

Either there's a conscious effort by the owner to maintain it or, alternatively, it very rapidly ends up in non-working condition for one reason or another.

Keeping something ready to run isn't free and if it's not running, if there's zero income from it, well in practice it may be let go.

 

[over9k]

More inflation coming through, this time food:

Kraft Heinz says people must get used to higher food prices

The boss of the food giant says rising prices are partly due to pandemic disruption.

www.bbc.com

Note that it says "will have to get used to it" which implies it's not "transitory".

I expect most other inflation will likewise not be transitory. Once the prices are up, they won't go back down no matter what the central banks tell us.

Yeah there was a great peter schiff interview with precisely this. He basically said that he didn't see used cars dropping in price because new cards are now going to be so much more expensive. If used is a percentage of new and new is higher, there's your inflation even in the used market.

I'll see if I can dig it up if you're interested?