Credit deflation and the reflation cycle to come (part 2)

[JMD]

I notice that eliminating methane gas is more and more being ramped as the best 'easy win' for making quick impact on reducing the global warming risk. Livestock and oil companies have been singled out as the biggest contributors, but perhaps not necessarily a bad thing - I'm thinking methane capture tech will allow the oilies to pretty much continue their operations as before, and the switch to EVs for example could be phased in over more years. In fact, I'll make a prediction that the scientists will soon come out with revised models showing that adverse climate temperature affects can be drastically reduced by removing methane from the atmosphere. You see methane lasts in the atmosphere for only 10 years, but co2 hangs around for hundreds of years. So once we stop the methane emissions, which is also much more powerful and destructive in regards being a global warming gas, and hey guys - that existential problem we've been fretting about is (kinda almost?) solved!! 

[Talking Monkey]

5 hours ago, Lightscribe said:

It’s a double edged sword. You would of had to get the best of both worlds long term fix somewhere cheap like DB son has. Personally I have no mortgage currently but need to move in the next year or so. I live in in a flat in zone 3 (will be very difficult to sell once everything hits) my partner bought it long ago, so hopefully will be able to undercut the market.

But whatever comes out of that will be going with the rest of my assets, ISA portfolio, crypto etc (which I will sell in the next few months melt up) The inflation stocks I’ll rebuy after the BK (gamble but I’m willing to risk it).

My aim as it stands is to buy outright with no mortgage at all. Or else the backup plan is to join DB and buy in Durham! 

I think a lot of us have buying in Durham as plan B, I reckon DB has done a fantastic job promoting it. 😀

[Talking Monkey]

5 hours ago, Lightscribe said:

To be honest it doesn’t surprise me and certainly rings true to form of ‘you will own nothing’. The house always wins. That’s why my aim is to buy outright or not at all.

I've a similar view with the nuance that if you do have a mortgage then have it paid off by roughly mid to 2/3s the way through the cycle, as lord knows what crazy stunts will be pulled at end cycle. 

[JMD]

6 hours ago, Lightscribe said:

It’s a double edged sword. You would of had to get the best of both worlds long term fix somewhere cheap like DB son has. Personally I have no mortgage currently but need to move in the next year or so. I live in in a flat in zone 3 (will be very difficult to sell once everything hits) my partner bought it long ago, so hopefully will be able to undercut the market.

But whatever comes out of that will be going with the rest of my assets, ISA portfolio, crypto etc (which I will sell in the next few months melt up) The inflation stocks I’ll rebuy after the BK (gamble but I’m willing to risk it).

My aim as it stands is to buy outright with no mortgage at all. Or else the backup plan is to join DB and buy in Durham! 

Lightscribe, so in any forthcoming meltup, are you intending to sell all your crypto? If so is that to enable you to potentially buy back in afterwards/later at lower prices? Obviously not asking for trading advise here, but interested because I though you were a long-term hodler? 

[DurhamBorn]

6 hours ago, Ellandback said:

He prefers fixed rate over variable but long term he sees a hyperinflationary environment where banks could trigger obscure clauses to break mortgage contracts, above video is set to him answering a question about the benefit of long term fixes.

I was reluctant to post this on the thread but I recommend watching the whole thing - prior to CV I would have dismissed this guy as peddling blackpilled bollocks - but not anymore.

I think buy 8% of mortgage in silver.If the above happened silver will 12x minimum,sell silver pay off mortgage.Banks have very few on long rate deals,most people are dumb and prefer to go for shorter fixes to say a few quid a month.Banks are more likely to remove all deals and simply go standard variable only.Shift risk,or be well rewarded for holding it.

[Lightscribe]

40 minutes ago, JMD said:

Lightscribe, so in any forthcoming meltup, are you intending to sell all your crypto? If so is that to enable you to potentially buy back in afterwards/later at lower prices? Obviously not asking for trading advise here, but interested because I though you were a hodler? 

Short term no I’m not a hodler as I expect crypto to take a major crash along with everything else. Long term most definitely yes. I think we may have much higher to go for the next few months with the S&P funds.

I’ve been posting on this thread with updates of my BTC/LINK trading for a couple of years now. By the metric I’m sure you can work out I’m going to have to deal with gathering my records for tax (or move to Portugal)  so it will take a while. I’ll continue to gauge it. Also some banks won’t accept deposits from crypto exchanges. Santander is ok last time I looked but plan and test your exit route.

My aim is to cash out before the BK (don’t we all) but leave some money aside on the exchange to put it all in LINK (BTC, ETH, QUANT, XRP and BNB too if they fall enough) on low buy orders in GBP (most certainly not Tether USDT as that will go bust). I’ll then put this on a hardware encrypted wallet away from any exchanges as quickly as possible. I expect exchanges to limit withdrawals and some will go the way of Mt Gox. As I said before it’s all or nothing for me as my original investments withdrawn.

Crypto will most definitely survive all this however, otherwise we all wouldn’t have the blockchain technology to be able to look forward to this...

 

 

 

[JMD]

6 hours ago, Castlevania said:

Almost all mortgages are repayment ones nowadays. So the delta isn’t one to one. An increase from paying 2% to 3% on an interest only mortgage is indeed a 50% increase in payments. On a repayment mortgage it depends how many years you have left to pay, with a longer term meaning less of an impact as lower capital repayments will offset some of the pain. 

Castlevania, (not stalking your posts, promise!) ...I can't locate a nice graph of the internet, but I always thought that in very simple terms, during the first years of any duration/length repayment mortgage, borrower repayments are almost entirely comprised of interest payment. Only after approximately two thirds way through the term of the mortgage are repayments 50/50 interest/capitol payment, with the last few years being almost all capitol payment. Not trying to be being pedantic, but doesn't this mean that newly taken out mortgages would very much be affected by interest rate adjustments by the bank if they could force such increased rates on their customers?

[Castlevania]

22 minutes ago, JMD said:

Castlevania, (not stalking your posts, promise!) ...I can't locate a nice graph of the internet, but I always thought that in very simple terms, during the first years of any duration/length repayment mortgage, borrower repayments are almost entirely comprised of interest payment. Only after approximately two thirds way through the term of the mortgage are repayments 50/50 interest/capitol payment, with the last few years being almost all capitol payment. Not trying to be being pedantic, but doesn't this mean that newly taken out mortgages would very much be affected by interest rate adjustments by the bank if they could force such increased rates on their customers?

In a high interest rate environment then yes. However in a low interest rate one then no. A mortgage at 2% with 25 years to run will have roughly half the payment being capital repayment.

Ultimately think of it as an annuity i.e. where every payment is the same each month. If you borrowed £300k at zero interest over 25 years then you’d have 300 payments of £1,000. If you suddenly had to pay 1% then the overall payment increases but instead of making £1,000 of capital repayment in the first month you’d pay less with larger capital repayments backdated to the end. At 10% you’d pay next to no capital in the first month.

[CVG]

50 minutes ago, JMD said:

Castlevania, (not stalking your posts, promise!) ...I can't locate a nice graph of the internet, but I always thought that in very simple terms, during the first years of any duration/length repayment mortgage, borrower repayments are almost entirely comprised of interest payment. Only after approximately two thirds way through the term of the mortgage are repayments 50/50 interest/capitol payment, with the last few years being almost all capitol payment. Not trying to be being pedantic, but doesn't this mean that newly taken out mortgages would very much be affected by interest rate adjustments by the bank if they could force such increased rates on their customers?

Not a graph. But this may help. First table is 10 year mortgage. Second table is 25 year mortgage.

Take £100,000 at 10%. Interest in year 1 (simplistically) is 10% of 100,000 = £10,000 in both cases. In the first year ....

Under 10 year you pay 12*1322 = £15864, i.e. 10K interest and 5.8K repayment

Under 25 year you pay 12 * 909 =£10908, i.e. 10K interest and only 908 repayment

 

[MrXxxx]

8 hours ago, Castlevania said:

Almost all mortgages are repayment ones nowadays. So the delta isn’t one to one. An increase from paying 2% to 3% on an interest only mortgage is indeed a 50% increase in payments. On a repayment mortgage it depends how many years you have left to pay, with a longer term meaning less of an impact as lower capital repayments will offset some of the pain. 

Agree, but in this case it would be more as not only are you paying the interest each month, but you are also paying off some of the capital...hence why the `cheap` monthly option used to be interest only with an endowment premium to pay off the capital at mortgage term end (supposedly!).

[JimmyTheBruce]

11 minutes ago, MrXxxx said:

Agree, but in this case it would be more as not only are you paying the interest each month, but you are also paying off some of the capital...hence why the `cheap` monthly option used to be interest only with an endowment premium to pay off the capital at mortgage term

I use this a lot:

https://www.drcalculator.com/mortgage/

[MrXxxx]

5 hours ago, janch said:

I can't remember worrying about it unduly but I was young then That mindset is still here and is nothing new for DOSBODDERS.  Those who are used to extravagant spending on lots of takeaways/fancy coffees/meals out/holidays/clothes will be the ones who get the biggest shock.

The thing was then you could only get x2.5 of a single salary or x4 of a joint one, so although many had -ve equity for th majority payments were still affordable...now with x8 to x10 multiples its no longer the case.

[MrXxxx]

4 hours ago, DurhamBorn said:

I think buy 8% of mortgage in silver.If the above happened silver will 12x minimum,sell silver pay off mortgage.Banks have very few on long rate deals,most people are dumb and prefer to go for shorter fixes to say a few quid a month.Banks are more likely to remove all deals and simply go standard variable only.Shift risk,or be well rewarded for holding it.

And that is when the pain will be felt and the property market will correct...the thing is, will the government let the latter happen?.., especially as a) social housing is limited, and b) housing benefit is a drag on the system that they wouldn't want to see increased.

[MrXxxx]

1 hour ago, MrXxxx said:

Agree, but in this case it would be more as not only are you paying the interest each month, but you are also paying off some of the capital...hence why the `cheap` monthly option used to be interest only with an endowment premium to pay off the capital at mortgage term end (supposedly!).

Ignore, I can see my thought process/understanding was incorrect...thanks to those who `corrected` me gently! :-)

[King Penda]

4 hours ago, Talking Monkey said:

I've a similar view with the nuance that if you do have a mortgage then have it paid off by roughly mid to 2/3s the way through the cycle, as lord knows what crazy stunts will be pulled at end cycle. 

Overpay by 10% a year it’s a nice safety net that’s if there are no penalties 

[sancho panza]

15 hours ago, wherebee said:

The big challenge we will have now is - do we sell our oilies once they have doubled, plan for a BK, and pick up on the drops, or do we hold and not worry about bail ins, capital loss, and timings?

I have already topsliced about 30k of profit (think of that!) but am torn between the two routes above.  Same with GDXJ - I topsliced when it hit 57 (good timing) but if it hits 75 I will be seriously tempted to take it all.

I think either/or WB.

I'm going to try and game it,but if I don't plan B is sit tight.We're loaded to the gills(probabaly inadvisedly so) wth oilies,but when we entered the trades,Plan B was on the table.Has to be.I'm not the greatest market timer by any stretch.

At the sort of prices most of us are in these oilies at,they're long term buy n hold.

You can alawyas doa  bit of both.I jsut don't sense that the oil run up is done yet.

[DurhamBorn]

Did a bit on sterling today,my target price is $1.4723 ,CAD,YEN and EURO all up against the dollar into summer.

Not advice etc.

[sancho panza]

 

 

12 hours ago, dnb24 said:

what’s the view on here with regard mortgages- I’m split between waiting for the melt up to end and a correction occur to jumping in at low rates now- of course dyor and natch - but appreciate other peoples views.

 

 

I think there are a few consdierations.If you're buying somewhere that you can keep long term,ie long enough to take you into the infaltionary run,then a 10/15 year from a decent size insitution makes a lot of sense.Then inflation will pay your debt.

If it's something you might need to offload within 5-10 years,then I personally would think harder on it.Noone can exactly predict the future,but the last thing you want to be doin is offlaoding into the argest detb deflation since GD1.

We rent,not ideal,but then our spare cash goes into the pension pot and helps pay the rent if needed.But then I'm not neceesarily attached to Leicester like I was maybe ten years ago.

I do think a decent size dislocation is coming in msot places south of Leeds/Sheffield.

I was looking at LE2 for the crash thread.Popualtion of 44,000 hosueholds and transactions of 53 inJanuary thus far.Average salary £21k or so,average hosue price according to transactions data £310k.t's seriously hard to

It's seriously difficult taking those price signals at face value.There isn't the volume.Pre 2007,average Jan transactions was circa 130.

 

11 hours ago, Ellandback said:

He prefers fixed rate over variable but long term he sees a hyperinflationary environment where banks could trigger obscure clauses to break mortgage contracts, above video is set to him answering a question about the benefit of long term fixes.

I was reluctant to post this on the thread but I recommend watching the whole thing - prior to CV I would have dismissed this guy as peddling blackpilled bollocks - but not anymore.

I haven't got the time to watch it,but the T+C's of msot  mortgage contracts contain a host of clauses that could give rise to concerns.

The ones that would worry me the msot are the LTV clauses,whereby banks can demand more capital if your LTV drops belwo the level at which you took out the mrotgage.

Generally speaking though banks are keener to repo properties with equity than not.

 

I also think more genereally,it makes sense to take mrotgages with systemic institutions like HSBC.In a panic,the govt will bail these first.The less improtant last.

Politically bail outs look a certainty if a debt deflation occurs but that very much depends on whether sterling is holding or not.A crashing currency might mean all the options of the last decade are off the table.

Last year I psoted an excelent paper by Prof Kevin O'Dowd and Dean Buckner regarding leverage ratios in UK banks and currently,they think the banks are more elveraged than 2006.

If anyone has some recent T+C's it would be great to read them.

[sancho panza]

11 hours ago, Castlevania said:

Almost all mortgages are repayment ones nowadays. So the delta isn’t one to one. An increase from paying 2% to 3% on an interest only mortgage is indeed a 50% increase in payments. On a repayment mortgage it depends how many years you have left to pay, with a longer term meaning less of an impact as lower capital repayments will offset some of the pain. 

I think given volumes are so low,that you have to empahaize the improtance of the marginal buyer in thsi market.Taking LE2 as a prime example,locals are miles away from stepping in at the bottom.Meanwhile a ot of BTLers are paying tax on revenues fully this year.It wouldn't tkae much ti potnetially swamp such a dry market

[JMD]

6 hours ago, Lightscribe said:

Short term no I’m not a hodler as I expect crypto to take a major crash along with everything else. Long term most definitely yes. I think we may have much higher to go for the next few months with the S&P funds.

I’ve been posting on this thread with updates of my BTC/LINK trading for a couple of years now. By the metric I’m sure you can work out I’m going to have to deal with gathering my records for tax (or move to Portugal)  so it will take a while. I’ll continue to gauge it. Also some banks won’t accept deposits from crypto exchanges. Santander is ok last time I looked but plan and test your exit route.

My aim is to cash out before the BK (don’t we all) but leave some money aside on the exchange to put it all in LINK (BTC, ETH, QUANT, XRP and BNB too if they fall enough) on low buy orders in GBP (most certainly not Tether USDT as that will go bust). I’ll then put this on a hardware encrypted wallet away from any exchanges as quickly as possible. I expect exchanges to limit withdrawals and some will go the way of Mt Gox. As I said before it’s all or nothing for me as my original investments withdrawn.

Crypto will most definitely survive all this however, otherwise we all wouldn’t have the blockchain technology to be able to look forward to this...

 

 

 

Thanks Lightscribe. Lots for me to think about.                                                                                                                   As regards the video, the real scary part for me is the way in which NBC chooses to report the whole China social credit story. The report seems so detached and ambivalent, even throwing in a 10-20 year timeline at the end of the video to prevent their viewers from worrying too much(?). I notice they also kept using the term of 'discrediting' citizens to keep them in line, I wonder if that is a direct translation from the Chinese? Anyway if/when we do get our own similar system here in the West, appears very much like we will be getting our own tech driven/updated form of puritanism... hmm, we've certainly been there before, but there's that history repeating/cycle again!

[sancho panza]

7 hours ago, DurhamBorn said:

I think buy 8% of mortgage in silver.If the above happened silver will 12x minimum,sell silver pay off mortgage.Banks have very few on long rate deals,most people are dumb and prefer to go for shorter fixes to say a few quid a month.Banks are more likely to remove all deals and simply go standard variable only.Shift risk,or be well rewarded for holding it.

I think when you look at this idea it makes a lot of sense if you wish to hedge the solvency of the banking system-I would if I were going to take out a mortgage.

Some banks may be ready to blow but then again they may not.If they blow,then PM's are going sky high.Luke Gromen was saying a while back PM's are final payment.It's hard to see a scenario in which banks collapse and PM's don't rocket.

If the banks don't collapse then you're 10 year fix is good.

6 hours ago, JMD said:

Castlevania, (not stalking your posts, promise!) ...I can't locate a nice graph of the internet, but I always thought that in very simple terms, during the first years of any duration/length repayment mortgage, borrower repayments are almost entirely comprised of interest payment. Only after approximately two thirds way through the term of the mortgage are repayments 50/50 interest/capitol payment, with the last few years being almost all capitol payment. Not trying to be being pedantic, but doesn't this mean that newly taken out mortgages would very much be affected by interest rate adjustments by the bank if they could force such increased rates on their customers?

This piccie is a 30 year Fannie style fix.Still makes the point.

[Mapper]

3 hours ago, JMD said:

Thanks Lightscribe. Lots for me to think about.                                                                                                                   As regards the video, the real scary part for me is the way in which NBC chooses to report the whole China social credit story. The report seems so detached and ambivalent, even throwing in a 10-20 year timeline at the end of the video to prevent their viewers from worrying too much(?). I notice they also kept using the term of 'discrediting' citizens to keep them in line, I wonder if that is a direct translation from the Chinese? Anyway if/when we do get our own similar system here in the West, appears very much like we will be getting our own tech driven/updated form of puritanism... hmm, we've certainly been there before, but there's that history repeating/cycle again!

Did the Chinese government watch Black Mirror and get their ideas, or was it the other way around?

[nirvana]

6 hours ago, DurhamBorn said:

Did a bit on sterling today,my target price is $1.4723

WOW...is that based on the amount of dollars that the FED will print?

those of you looking to pay off your mortgage early, watch out for the bitch*, I mean wife, I paid mine off early and then I got royally fooked.....it was a bloody nice house too 

*your mrs might not be too bad but they all talk shite and scheme over social media and a few glasses bottles of wine so if she has a few bitches for mates you could be in big trouble that way...

[wherebee]

38 minutes ago, nirvana said:

WOW...is that based on the amount of dollars that the FED will print?

those of you looking to pay off your mortgage early, watch out for the bitch*, I mean wife, I paid mine off early and then I got royally fooked.....it was a bloody nice house too 

*your mrs might not be too bad but they all talk shite and scheme over social media and a few glasses bottles of wine so if she has a few bitches for mates you could be in big trouble that way...

so, so important.  

you don't have to worry about protecting your wife from other men - it's other women that can ruin a decent relationship; misery loves company.

[MrXxxx]

6 hours ago, sancho panza said:

I think when you look at this idea it makes a lot of sense if you wish to hedge the solvency of the banking system-I would if I were going to take out a mortgage.

Some banks may be ready to blow but then again they may not.If they blow,then PM's are going sky high.Luke Gromen was saying a while back PM's are final payment.It's hard to see a scenario in which banks collapse and PM's don't rocket.

If the banks don't collapse then you're 10 year fix is good.

This piccie is a 30 year Fannie style fix.Still makes the point.

So eyeballing it, only when you get to year 20 does interest start to have a smaller contribution (impact?) than principal.