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

[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

[Barnsey]

2 minutes ago, DurhamBorn said:

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.

Couple new starts at my workplace also given up on the SE. Things have become so unbalanced, and with the whole WFH thrown in the mix too, I reckon a bit of inflation and proportionate property taxes based on current values could start a serious reversal of pricing disparity in this country.

[DurhamBorn]

@Yellow_Reduced_Sticker iv started doing Aldi at 7.45am,lots of 50% off,and then next door into Iceland for the same.Tills open at 8am in Aldi but can go in at 7.45am.Iv found Lidl quite good as well at around 5pm,but iv not got the times nailed down 100% yet,only 30% off in there,but get chicken breasts regular and good prices.

Anyway your raking the cash in on Royal Mail,up again today.Hopefully help if you need to pay for 50% off instead of 75% 

[Loki]

17 minutes ago, Yellow_Reduced_Sticker said:

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

Same, hat tip @M S E Refugee

[Yadda yadda yadda]

3 minutes ago, DurhamBorn said:

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.

Could be people who can work from home. The property price differential is life changing. Quite difficult to do it now whilst there is lockdown. If we start to see a lot of people moving north it is going to have a big effect on the country. Few people with southern accents are likely to know much about small Durham towns. If there is an influx near you there will be more in a city like Newcastle on the fast mainline. Or Durham city.

Could also be councils moving benefits claimants though. I hope not. Only people who benefit from that are the councils.

 

[feed]

Well i'll be selling up and heading North sometime in the next few years. 

I grew up in Rotherham, so i've been working in essex for the last 25 years.  Waiting on a redundancy payoff or a couple more years and i'm out.  Although not back to Rotherham, obviously. North Yorks somewhere i expect. 

Don't have much of a southern accent though.  

[Noallegiance]

I'm SE and while I see the stupid prices and what we could get for £500k around 3 miles from Telford would be +£1m here, it's my home here. Born and bred. Family, friends, young kids settled all at the same school. Outside of financial reasons moving north is a big gamble for my psyche. And I don't gamble.

[Democorruptcy]

2 hours 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 don't think 10 year mortgages are new. 15 seems a funny number. You could have got a 25 year fix in 2012!

 

Quote

 

Manchester Building Society has launched long-term residential and buy-to-let products, which can be fixed up to a maximum of 25 years.

The rate on its residential product is 5.24%, available up to 80% LTV. The rate can be set for between 10 and 25 years and comes with a £995 arrangement fee.

The rate on its two buy-to-let products is 5.74% for the capital and repayment option, while its interest-only version is available at a rate of 5.99%. The products are available up to 75% LTV and are portable. Both deals include an arrangement fee of £749.

As with the residential deal, the rate on its buy-to-let products can also be set at between 10 and 25 years.

https://www.mortgagesolutions.co.uk/news/2012/08/17/manchester-bs-offers-25year-fixed-rate-deals/

 

 

[MrXxxx]

1 hour ago, DurhamBorn said:

I noticed a lot of southern accents lately as well,that never happened before

About time you had a bit of civilizing influence up that way...and the other social benefits?....we will probably bring Waitrose up there too so you can get your YRS bargains as well, you'll have to learn how to queue when looking at that section though, none of this sticking your elbow out/rugby (union!) scrum malarky!

[Bobthebuilder]

1 hour 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 

 

I am thinking of re mortgaging if I can get a return on 30%. I love this thread so many things thrown into the cement mixture.

[Noallegiance]

1 hour 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!

 

 

 

Well the last set of energy crises and a soaring oil price did wonders for the stock between 2002-2008....

#justsayin

[sancho panza]

 

9 hours ago, Cattle Prod said:

Yes, it made me sit up a few times, I want to re-listen. Shame Erik and Patrick didn't discuss it afterward, there were some profound roadmap implications that jive with a lot of this thread. Exceprts from the transcript that interested me:

 

I hadn't really thought of the Euro strengthening against the pound.

Sounds familiar.

I'd been wondering what had moved the Fed a bit more hawkish, maybe they don't like this capital flight.

This has put me off TLT as a hedge to an extent.

I agree with the short term downside and upside in gold, and it dovetails with Jon Kaplan.

I want to short the Nasdaq as a hedge against my oilies, but this gives me pause. If Treasures are the real bubble, maybe stocks are the bond. Hunter's veiw. Maybe I just won't bother.

Familiar to us here, and I vote one more charade. Nice to hear what happened in the 70s called a debt jubilee, if only to shut the boomers up. I can see why you are scoping long term fixes now, it's why I did. Though with only 7 and a bit years left on my fix, I have serious fix envy @Barnsey

I hadn't thought that the Volcker medicine cannot be taken now. So what is the end game?

Now that bit caused me to stop in my tracks and get my dog grumpy. What a thought. The revaluation would be worldwide too, or else all physical gold would flow to USA. So China et all would be able to easily pay for their energy in gold, which is back to my gold as oil proxy thoughs. I'm trying to game out what the custodians of GLD would do in this instance. I can't see them redeeming fully, can you? Is there really any counterparty that would lose in such a revaluation...oh I don't know. I think what he's saying migth only apply to physical gold, and I have far more GLD than physical. A headache.

From Twitter recently:

 

Path 1 is the path of least resistance, especially as pensions won't noticed they're being screwed. Bondholders that need to buy a lot of oil know they are going to be screwed and are trying to buy it in CNY and EUR instead, which needs to be watched carefully. It all depends on what currency producers prefer to be paid in. For now, it's dollars.

 

https://www.macrovoices.com/guest-content/list-guest-transcripts/4017-2021-01-14-transcript-of-the-podcast-interview-between-erik-townsend-and-luke-gromen/file

 

I thought it was a really seminal interview that pulled together a fair few of the major themes that have been developed on here by @DurhamBorn & others over the years.It had that big an effect on me that wehn I read @Barnseynailing the 15 year fix,I felt lilke getting a mortgage in the wife's name for the first time.

The one overriding conclusion for me is that if the Fed has two pretty unpalatable options in terms of smashing the dollar or the economy,then the BoE's positon is even worse.

Having been a debt deflationist since way before 2008,it took me a long time to get my head around the fact that CB's pursue policies based more on expediency than what's right.This thread has helped me do that.Gradually,I've been coming aorund to the fact that inflation is the easiest option but that it comes with a price tag.

It's hard to convey without reprinting a lot of text how cornered the Fed is and how through two decades of asset inflation they've basically pimped the US economy to the point where there are no easy chocies left.

The warning signs are there,1)stong dollar phses seeing sales of US assets both stocks and UST's,is a strong one 2)Stocks selling off hits the financialised US economy,same with CRE and real estate.3) Fed buying 100% net issuance 4) outstanding UST's are 9 times tax revenues 5) welfare+Dept of Defence+interest on UST's =130% of tax revenues etc etc...

There was a great discussion on here 100's of pages back re the dollar and the conclusion was iirc that teh dollar had one last crisis in it and this is it imho.

I think of teh 3 ways out that Gromen offers 1+2 are the easiest options via soft default.Losing the role of world policeman would mean the definite end of the $ imho.It'll be the last thing to go imho.

I msut say,like you,the interview did put me off owning UST's.But the overriding thing that it reaffirmed was not to buy any bonds,particualrly corporate.

Quite where this leaves the UK and sterling I'm not sure yet.

 

 

 

[sancho panza]

6 hours 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.

DB given that Gromen interview seems as if the strong dollar phases will be met with sales of stocks and UST's possibly.I knwo you've previosuly said your roadmap has a bottom at near 85 looming.Have you gone much further out ?

Have to say,listening to Gromen,amazing how many themes cropped up in this thread years back.Really amazing,even from back on ToS.Fair play

[Hunty]

Cycle

It's turning. Slowly.

A wise man once said.

In wine there is wisdom.

In beer there is freedom.

In water there is bacteria.

GLA. 

 

[wherebee]

Bought some more BAT on a little dip today.  Very happy with that.

Sitting on cash on the sidelines now.  Whole portfolio up 37% since June (when I started my portfolio consolidation tracking in Australia - previously spread across different brokers overseas).

37% in six months is incredible, and I have nothing in tech sector, which makes me feel very happy indeed.  I am prepared psychologically for a 10-20% fall in the BK in my stocks, as they are almost all mining/oil/potash/cigs and I am happy to sit and ride them for the next 5 years minimum.  Thank you again for DB and all the thread commentators.

I have about 3-5k in what I mentally class as punt stocks - those penny stocks which might turn into huge growers if they hit the right stride - for example, an aussie owner of a huge goldfield which is unexploited right now, but if it turns out to be diggable and the gold price goes up could be a 100x share price jumper.  If they go to zero, it's always tax deductible against dividends.

I have one bitcoin related investment, which is my nod to the 20k thread.  Up 5% so far, but is not just bitcoin related in terms of business activities.

A little bit of cash ready if the BK comes and we see a few more miners cheap.  I do think there is value there - the massive printing in the US and possible war means gold and silver have to continue to climb.

Finally, six dollars a week on the lottery.  you never know.

 

 

[DurhamBorn]

6 hours ago, sancho panza said:

DB given that Gromen interview seems as if the strong dollar phases will be met with sales of stocks and UST's possibly.I knwo you've previosuly said your roadmap has a bottom at near 85 looming.Have you gone much further out ?

Have to say,listening to Gromen,amazing how many themes cropped up in this thread years back.Really amazing,even from back on ToS.Fair play

Only a few years with a 78 tag on the dollar.Iv handed my notice in at work and leave next month.Im going to do a lot more work on things like that and will put all my road map targets on here.One thing is for sure,the west is in serious trouble,mainly due to welfare/left woke etc.I need to try to cross market all this onto the road maps and havent got time working.Sterling depends on a couple of things.The first is energy,the UK is best placed for renewables etc,most arent,the other side is welfare/state jobs are out of control.If energy starts to fail and no welfare cuts sterling will start to decline again,though at the moment i dont see much risk.

[Barnsey]

Like I say, no cliff edge for furlough