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

[geordie_lurch]

11 minutes ago, Barnsey said:

Accord via broker, or 2.75% with YBS (same company), 75% LTV.

I have my eye on the 10 year fixed at Barclays at 1.99% but that's with a max LTV of 60% but that Accord 15 Year fix one (and their 10 year one) is 75% LTV and looks good at 2.59% and 2.36% respectively.

 

[Boon]

@Cattle Prodthat's a great commentary. Nice one.

[geordie_lurch]

7 hours ago, DurhamBorn said:

Im on about the divi ,£30k of shares pays the interest on a £100k 2.7% mortgage.I dont think the shares will do a lot in capital terms,maybe 50% over the cycle with 8% a year divis.

As per the following notes on hl.co.uk, dividends are never guaranteed but they seem like a decent buy and hold to me in keeping with this thread for all the reasons DB has mentioned before

Quote

A lot of that cash is currently tied up in stabilising a balance sheet that's carrying considerably more debt than we would like, but it still leaves a sizeable surplus that can be returned to shareholders through dividends (which have grown every year since 1999 to date) - but are never guaranteed.

 

[Democorruptcy]

Just saying....

<insert name>

[leonardratso]

uncle terry sent out his annual letter if its of interest to anyone, probably not liking the sectors he has but i find he does talk a lot of sense, he may well be in for a shock this decade but hes made me some money and ive duly accepted it and pissed it up the wall spent it wisely;

https://www.fundsmith.co.uk/docs/default-source/analysis---annual-letters/annual-letter-to-shareholders-2020.pdf?sfvrsn=4

 

[geordie_lurch]

10 minutes ago, Democorruptcy said:

Just saying....

<insert name>

Maybe I should buy my first at current prices and join you lot

[Loki]

7 minutes ago, geordie_lurch said:

Maybe I should buy my first at current prices and join you lot

Absolutely, no time to lose. 

[leonardratso]

19 minutes ago, geordie_lurch said:

Maybe I should buy my first at current prices and join you lot

go big (you might move it and we can all get out).

[DurhamBorn]

@Cattle Prod really good stuff .Nice to see the options about hurting bond holders because i have my roadmap set at rates being ran 2% to 3% behind inflation.It could be some of the pain is taken by cutting welfare/state wages etc,but that is yet to be seen.

[Talking Monkey]

13 minutes ago, DurhamBorn said:

@Cattle Prod really good stuff .Nice to see the options about hurting bond holders because i have my roadmap set at rates being ran 2% to 3% behind inflation.It could be some of the pain is taken by cutting welfare/state wages etc,but that is yet to be seen.

Would running welfare/state wages increases behind inflation a way it will be done, stealth cuts. 

[Majorpain]

2 hours ago, leonardratso said:

uncle terry sent out his annual letter if its of interest to anyone, probably not liking the sectors he has but i find he does talk a lot of sense, he may well be in for a shock this decade but hes made me some money and ive duly accepted it and pissed it up the wall spent it wisely;

https://www.fundsmith.co.uk/docs/default-source/analysis---annual-letters/annual-letter-to-shareholders-2020.pdf?sfvrsn=4

Its always interesting to read his thoughts, i would agree that the sectors he invests in are "suspect".  Its all well and good when money keeps getting pumped into the system/consumer, but what happens to the companies protective "moat" when inflation rears it ugly head?  His thought on that was they retain the power to increase prices like oil/miners/resources etc., but its not been tested in practice as its been deflating since 1970.  I'm glad im not betting against him though!  

Quote

I will leave you with this thought: What are the similarities between a forecaster and a one-eyed javelin thrower? Answer: Neither is likely to be very accurate but they are typically good at keeping the attention of the audience.

Not sure on that one.  

[Barnsey]

5 hours ago, geordie_lurch said:

I have my eye on the 10 year fixed at Barclays at 1.99% but that's with a max LTV of 60% but that Accord 15 Year fix one (and their 10 year one) is 75% LTV and looks good at 2.59% and 2.36% respectively.

 

Could we dip into negative rates and see more competition? Of course we could, but my fear is that as soon as there's a whiff of inflation on the horizon, these 15 year deals will be pulled, along with many 10 year products. There's little downward scope for mortgage rates but a lot of upward room, just look at the rates being offered on new high LTV products, some close to 4%.

17 hours ago, RJT1979 said:

Hasn't Telford got grooming problems?

Don't think I'm their type frankly

[Talking Monkey]

1 hour ago, Barnsey said:

Could we dip into negative rates and see more competition? Of course we could, but my fear is that as soon as there's a whiff of inflation on the horizon, these 15 year deals will be pulled, along with many 10 year products. There's little downward scope for mortgage rates but a lot of upward room, just look at the rates being offered on new high LTV products, some close to 4%.

Don't think I'm their type frankly

If we go with Dave Hunters thesis ie near term uptick in inflation followed by BK, then in the BK what are thoughts on the rates on long term fixed mortgages. Would there be some top deals to be had with a hefty deposit

[dnb24]

7 minutes ago, Talking Monkey said:

If we go with Dave Hunters thesis ie near term uptick in inflation followed by BK, then in the BK what are thoughts on the rates on long term fixed mortgages. Would there be some top deals to be had with a hefty deposit

Will be interesting to find out- it’s something I keep thinking about-as we are now looking at buying in Midlands- however one thing I keep coming back to is that all assets will be hit if a BK comes along- I’d rather borrow at a higher % then if the asset I’m buying has had a decent haircut, than borrow now at a lower % but without the haircut. Especially as I aim to pay off the mortgage as soon as possible with some reflation stocks helping out. 

[Bobthebuilder]

1 hour ago, Barnsey said:

Could we dip into negative rates and see more competition? Of course we could, but my fear is that as soon as there's a whiff of inflation on the horizon, these 15 year deals will be pulled, along with many 10 year products. There's little downward scope for mortgage rates but a lot of upward room, just look at the rates being offered on new high LTV products, some close to 4%.

Those 10 and 15 year fixes are relatively new products I think. If they had been available 10 years ago I would have taken your arm off for one. As soon as a whiff like you say, they will be gone.

[wherebee]

1 hour ago, dnb24 said:

Will be interesting to find out- it’s something I keep thinking about-as we are now looking at buying in Midlands- however one thing I keep coming back to is that all assets will be hit if a BK comes along- I’d rather borrow at a higher % then if the asset I’m buying has had a decent haircut, than borrow now at a lower % but without the haircut. Especially as I aim to pay off the mortgage as soon as possible with some reflation stocks helping out. 

I bought a house whilst we were still working overseas (so not so much ability to research, look, etc) precisely because in the 2013-2017 period I expected another GFC.  I didn't want my savings in a bank where they might be bailed in/lost in a collapse.  

 

Something to think about.

[Barnsey]

1 hour ago, Bobthebuilder said:

Those 10 and 15 year fixes are relatively new products I think. If they had been available 10 years ago I would have taken your arm off for one. As soon as a whiff like you say, they will be gone.

Virgin had a 15 year fix for a while but pulled out, YBS was lower at 2.45% pre covid crisis.

The problem with a BK is that it'll be short and sharp, but housing doesn't trade like stocks, and given willingness to provide forbearance (let's face it the virus will probably still be with us through this year), you could be looking at a fair wait for prices to come down. In the meantime of course, long term fixed rates could be going up, mortgage product availability drying up like the Mojave Desert. As we've discussed endlessly, they'll be throwing everything at another slump, more than ready to act aside our American friends, with full endorsement from the IMF. You cannot spend enough they cry.

Extension of furlough inevitable, Switzerland just announced an extension and more generous and lenient terms. The alternative?

You've had 40-50% of Eastern European construction workers head back, virus delays with new build construction, home builders purposefully slowing building to a crawl according to market conditions (advertising last properties available when only 20% of site completed). There's a squeeze here, part manipulation, but home builders aren't daft. Then there's the high savings rate, mostly held by home owners or prospective home buyers. 

Study your local chosen markets closely, almost on an obsessive micro level. Ignore the mainstream news about prices up or down. Crunch the numbers, think about the relationship between rates and pace of price declines (+ rent in the meantime).

Whilst very high inflation can hurt the housing market, it IS a relatively easily accessible hard asset, and could experience a boom in more sensibly priced areas with all this money sloshing around until rates really ramp up. And as rates do ramp up, you could see a dash for value. Let's face it, the majority don't have the faintest idea about investing in Gold etc. It might not feel like it, but prices haven't done a whole lot in many areas since 2016, still comfortably below long term trend since 1975, whereas the bubble leading to GFC was well above.

We've been waiting on the sidelines for about 3 years now, changed jobs and location to make it happen, of course I'm conflicted but looking at the sums it made sense to look through a potential BK (we still can't be 100% Mr Hunter will be right, especially with Yellen now in place, she can come up with some truly crazy **** to keep the party alive and has already expressed she'll do just that in close coordination with Biden). Fixed long term debt at these RECORD low rates makes sense in many ways.

[DurhamBorn]

1 hour ago, Bobthebuilder said:

Those 10 and 15 year fixes are relatively new products I think. If they had been available 10 years ago I would have taken your arm off for one. As soon as a whiff like you say, they will be gone.

I cant believe how good some are.My son and his partner bought in June,hes 21,shes 22,10 year fix with TSB 2.69 roughly fixed for 10 year,10% over pays allowed and from year 6 to 10 can over pay as much as you want or leave etc with zero fees.Its an incredible deal.He owes around £110k and bought £30k of silver,i think thats at around £50k today.They are over paying around £7k a year.After 5 years of £7k over pay and the repayments they should owe £60k.He is going to sell the silver as soon as it equals the outstanding mortgage so if silver stays where it is now,around 6 years,so mortgage free by 27ish 

 

[Barnsey]

2 minutes ago, DurhamBorn said:

I cant believe how good some are.My son and his partner bought in June,hes 21,shes 22,10 year fix with TSB 2.69 roughly fixed for 10 year,10% over pays allowed and from year 6 to 10 can over pay as much as you want or leave etc with zero fees.Its an incredible deal.He owes around £110k and bought £30k of silver,i think thats at around £50k today.They are over paying around £7k a year.After 5 years of £7k over pay and the repayments they should owe £60k.He is going to sell the silver as soon as it equals the outstanding mortgage so if silver stays where it is now,around 6 years,so mortgage free by 27ish 

 

And here I am starting in my mid thirties...

Good on him, let's face it, prices up there have got a lot of upside potential vs most of the country.

[Loki]

1 minute ago, Barnsey said:

And here I am starting in my mid thirties...

Good on him, let's face it, prices up there have got a lot of upside potential vs most of the country.

You must be down south too

[Barnsey]

2 minutes ago, Loki said:

You must be down south too

Was until 2019, I gave it my best shot.

[Yellow_Reduced_Sticker]

13 hours ago, MrXxxx said:

I'm not going to listen to any of ya, @YRS is my man, what do you think @YRS? :-) :-) :-)

 

OK I'll bite!

 

Last year i bought a SMALL stake in: Frontline Ltd ( FRO ) The Dividend Yield is off the frigging CHARTS: 32.15%

 

I'm selling out when it HITS 300 Dollars!

 

Just think if ya put a bit of 'RISK capital' in now at around $6 AND say it did go to OVER $300 ...well Sherlock with those HUGE divis that's going to pay your mortgage off!

 

 

HOWEVER ...DON'T do it!

 

WHY?

 

2 Reasons:

 

1/ Bloody HIGH RISK!

 

2/ As i owned some THEY are bound to go BUST!

 

Anyways NOW...on to more important stuff...

 

I hereby give @DurhamBorn a BOLLOCKING! ;-)

 

It's been raining cats and dogs ALL day, because of your 'RAIN' TIP ...i thought i do Tesco's for the YRS, I even didn't want to venture out as it was real stormy with 45mph winds, its still is as i type this literally pissing down heavy, anyway got there, headed for the YRS section, well... FFS it was RAMMED with YRS grabbing scavengers!

 

LOOKS like those YRS grabbing scavengers are flocking to this board!

 

 

 

[Barnsey]

Something else to consider...

 

[DurhamBorn]

Superb post @Barnsey .House prices in my town are at 2004 prices.Some terrace houses in the pit villages at 1995 prices.

Iv noticed though in the nice 3 bed semi sort of houses there is simply no supply and when the decent ones come up for say £130k/£140k they sell in a week.I noticed a lot of southern accents lately as well,that never happened before.Could be benefit claims or people selling up down south and moving north.

[Talking Monkey]

5 minutes ago, Yellow_Reduced_Sticker said:

 

OK I'll bite!

 

Last year i bought a SMALL stake in: Frontline Ltd ( FRO ) The Dividend Yield is off the frigging CHARTS: 32.15%

 

I'm selling out when it HITS 300 Dollars!

 

Just think if ya put a bit of 'RISK capital' in now at around $6 AND say it did go to OVER $300 ...well Sherlock with those HUGE divis that's going to pay your mortgage off!

 

 

HOWEVER ...DON'T do it!

 

WHY?

 

2 Reasons:

 

1/ Bloody HIGH RISK!

 

2/ As i owned some THEY are bound to go BUST!

 

Anyways NOW...on to more important stuff...

 

I hereby give @DurhamBorn a BOLLOCKING! ;-)

 

It's been raining cats and dogs ALL day, because of your 'RAIN' TIP ...i thought i do Tesco's for the YRS, I even didn't want to venture out as it was real stormy with 45mph winds, its still is as i type this literally pissing down heavy, anyway got there, headed for the YRS section, well... FFS it was RAMMED with YRS grabbing scavengers!

 

LOOKS like those YRS grabbing scavengers are flocking to this board!

 

 

 

I bought a bit of that frontline too, be a top laugh if it goes near 300