Posted by: graemebird | November 22, 2009

Central Petroleum (CTP): Shares In General In Trouble/A New Surge On The Way For Central Petroleum.

Also: A formula for covering your act with silver.

INFLATION AND COMPANY TAX DOVETAILING.

Monetary inflation overstates profits which increases the tax liability. This can drain the company of real capital investment even as the tax man is getting his loot and the bigshots are voting themselves higher salaries and bonuses. Yet monetary inflation can be used to keep interest rates low. The creation of new money will sometimes get out there into the stock market and cause a rally. After the last monetary crunch it was very evident that the new money would find its way to the stock market.

But consider the American situation. They are sitting on a powder-keg of potential galloping inflation and the marxists in Washington opening the door to rampant bank looting. We are supposed to hold up banks. But in America the banks are making the people stand and deliver. It may be thought that shares are the ideal inflation hedge. But the dual attack of company tax and inflation tax, dovetailing with eachother, drains the companies in real terms. And so you can get a very sick corporate sector. This is where things were about the time when Paul Volcker went to work at the end of the 70’s. And the American stock market had died in the ass already for about a decade.

American real estate is still unravelling and our real estate market might not be healthy for a while yet. So if American shares are no good and real estate is probably overpriced what is it we can do? Well our situation in Australia is not as bad as the Americans. But on the other hand our shares market can tend to go up and down with the Americans. Also while Stevens is in charge we might have a reasonably responsible management of our monetary situation but then I doubt it. These bankers will work with eachother rather than be working for us. And if the Americans are printing money hand over fist the banks will likely find a way to get our guys to act irresponsibly as well. In any case everyone ought to be looking out for this monetary-inflation/company tax death blow.

Right now you’d want to have shares in companies that can pull gold and silver out of the ground much more cheaply than the current cost. But at a certain point of galloping inflation you would rather have the gold and silver itself because of the dual looting effect of inflation and company tax. Its a matter of time when you want to switch strategies. Particularly as it takes energy to get this gold and silver out of the ground. And what various assholes have done to us is set us up for an energy crisis, not to be delayed too much longer.

Now notice how our friends at Central Petroleum are just sweet and immune to all of this. What you have to worry about is the fact that Central Petroleum will probably have to dilute its shareholding. Cutting value in half maybe four separate times, with the shareholding falling about 40% each time they dilute matters in this way. So I don’t want anyone getting in trouble on my account. But with that said Central Petroleum has got things sorted.

Consider what inflation will do to these guys. It will overstate profits bringing them closer to a comfortable tax-free zero profit and loss. It will actually help these guys. And company tax doesn’t apply to them. Well how about this cap-and-kill? Well that will destroy their competitors and bring energy prices up high. But CTP will be producing their own electricity locally for their own uses and selling some to anyone around. And they plan to plant all these trees out in the middle of nowhere. So they can fulfill the carbon frauds requirements running a forestry act in the middle of nowhere, probably at just tiny loss. You see its easier for them. Because they are in the middle of nowhere, and they have all this free land at their disposal for this purpose.

Nothing is going to bother these guys. When the train comes through they’ll sell it a fillup in artificial diesel to keep it going to Darwin and on the way back to Adelaide. Later on they will provide liquified-coal/artificial diesel for both these towns and the towns all the way along the track. Thankfully there is plenty of natural gas around. But we have been stopped from coming good with the nuclear power and methyl-clathrates by appallingly bad management. So CTP will be able to limit losses with these very high energy prices we will be expecting.

One time I figured out that if every ton of coal they thought they owned was valued at 1c their share price was 300 times undervalued. That won’t be the case now because of the share dilutions. But still we are not seeing the value yet that these shares ought to have and I suppose for very good reasons. What with this CO2-bed-wetting menace. And with the fact that it will be many years before they run a solid profit. But what I’m saying is that all this horrid policy that we are being subjected to will hurt the rest of us. But it isn’t going to hurt Central Petroleum. So my advice is to get it now if you can get it under 17c. But look out for their financing deals and you may want to offload if you get a whiff in the air of a new share dilution. Because for sure the price will see-saw up and down.

Just more up then down.

When it comes to that day where you think that silver is better to buy then silver shares, and likewise with gold, because of the double-looting one-two talked about above…… Well one could do worse then just buy the stuff and hold. And then cover yourself with some sort of option each time the price hits a new high. Probably in Australia its still a good thing to go with the undervalued mining outfit that can pull gold or silver up on the cheap. But if our conditions deteriorate to where the Americans are now the other strategy might be better. And especially for silver. Because the way things are going that could be the first monetary metal we might be using everywhere on a local basis.

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Responses

  1. “New Zealand started a monetary-policy revolution when it introduced inflation targeting in 1989. That innovation swept the world in the 1990s, and was all the more remarkable for being introduced by the social-democratic Labour Party. Yet 20 years later, back in opposition, and facing a falling U.S. dollar, Labour is turning its back on the framework it pioneered. That could have serious consequences if and when Labour finds itself in government again.”

    Sinclair quoting this from Kirchner. It would not matter if you explained it 100 times to Sinclair and with cartoons. The dummy isn’t ever going to understand what a disaster consumer price inflation targeting is. The so-called innovation was never practiced as Sinclair claims. Had it been practiced faithfully instead of only in theory, it would have done more damage then it actually did.

  2. This is pretty much the anti-intellectual approach of Sinclair going here. If you hold one variable constant, everything has to swing wildly around that variable. What we are after is stability in business spending. So we want to stabilise a metric that reflects business spending.

    Monetary growth, leads to more spending, lead to price changes generally, usually seen first in the investment and producer markets. Spending on consumer goods is just a subset of spending more generally. And then this spending will lead to changes in consumer prices.

    How many degrees of separation does Sinclair want here? Its pretty clear if you stabilise the tail the dog could get dragged around some. Consumer price targeting is therefore devastating. The idea is to stabilise TOTAL SALES REVENUE. Not sales revenue of finished goods but total sales revenue all up.

    If you do it this way then conditions never need get as harsh as they were in 2008. On the other hand before you get consistently falling prices and growing sales it might take you a few years of middling-harsh conditions. But Sinclair hasn’t learnt anything from the sado-monetarism of the early 80’s in New Zealand.


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