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


spunko

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They can still throw the likes of MIRAS at house prices so i think that will be thrown out there the second it started to drop.

It is after all, the be all and end all of UK PLC.

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6 minutes ago, Popuplights said:

My daughter and her boyfriend are living very cheaply at the moment, in my FILs house. He is in a care home. They are basically covering council tax and the bills, shared between 4 people. It's a bit shabby, but they are saving hard. We are in the south east, and they astounded and dismayed by the price of housing round here.  I think they will move up north eventually to get some value. 

Time to give your kid the birds and the bees chat; but don't forget the really fun part of the story where she can get a council house that costs £350k for nowt.

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2 hours ago, Fully Detached said:

Just for the shits, take a look at this place in France that popped up in my email this morning.

I could cycle there, nice part of the world :P IT IS FUCKING BEAUTIFUL TODAY! 35 degrees on my front balcony.....in the sun ;) right I shouldn't be here

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It’s not house prices, it’s wages.  

Do an RPI adjustment from the 2007 peak and we’re not there yet. They’ve moved sideways for years.  

November 2020 UK valued at £251,500.
01/09/2007    England and Wales    £192,258 : RPI adjusted = £274,465. 

As prices are based on the ability to borrow, that’s another driver for wage increases that has been absent.  
I think you’re going to need to adjust for inflation, if you want to see any meaningful falls over the next 10 years
 

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9 minutes ago, TheNickos said:

They can still throw the likes of MIRAS at house prices so i think that will be thrown out there the second it started to drop.

It is after all, the be all and end all of UK PLC.

Growing noises of stamp duty being a bad tax, very difficult to see abolished given the situation, but perhaps a reversion back to its original flat 1% may be possible with an introduction of a current value tax as has been frequently mentioned, replacing council tax.

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First coma scores of 2021.Some results not yet collated on the sites I use.17 is normally a buy but in a year like last year,you have to use some common sense.XOM and Imperial awaiting more data.Blanks are not in.

Company Share price Date Chart Inc BS CF Sector SCS
Baker Hughes USD-23.14 18/02/21 3 1 3 2 5 14
BP GBP-2.69 18/02/21 5 1 2 1 5 14
Can Nat Res                
Chevron USD 99.61 24/02/21 2 1 4 2 5 14
Conoco Phillips USD-48.43 18/02/21 2 1 3 2 5 13
Devon USD-21.59 24/02/21 5 1 2 2 5 15
Enbridge USD 36.52 24/02/21 2 3 3 4 5 17
ENI E 9.464 24/02/21 5 1 3 2 5 16
Equinor                
Exxon Mobil USD 55.45 24/02/21 4 1        
Imperial Oil USD 16.65 24/02/21 4 1 4      
Kinder Morgan USD 15.29 24/02/21 4 2 3 4 5 18
Lukoil                
Occidental                
OMV AG USD 50.53 24/02/21 2 4 5 4 5 20
Phillips 66                
Pioneer                
Repsol E 10.162 24/02/21 4 1 3 3 5 16
RDSB GBP-1337 18/02/21 5 1 3 5 5 19
SLB USD-26.04 18/02/21 5 1 2 3 5 16
Total E36.66 18/02/21 3 1 3 3 5 15

 

 

 

Notes on the Coma Scores

1) Based on Glasgow Coma Score used in assessing levels of conciousness in patients.Designed for 'spray n pray' ie buying a cross section of stocks in the sector.1 is poor value,5 is great value.Higher the score the better the prospects at that price point.

2) Only as good as the data that goes in.I use investing.com or marketwatch which rely on the data provided by the companies.They are snapshot in time,much like a CQC inspection.

3) Chart scores are based on my long term set up.I'm not a chartist.

4) Balance sheet scores-this year,any company where the goodwill constitutes 100% of the equity will get a score in red.50% an amber score.Lessons of the Scottish Play.Some sectors eg Telecoms,carry much higher debt levels than others but do so at better rates.

5) There's clearly an element of 'ceteris paribus', so DYOR as ever,but the sector score is my take on whether the sector offers good value.

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Bobthebuilder
2 hours ago, JREWING said:

Remember Injin?

He/she used to say get outta Sterling, they will print forever and ever. Interest rates to zero etc etc.

Most of us used to think, huh? Rates at zero, they were ~5% at the time.

Printing money, no way, they would not do that shit surely? Zimbabwee does that shit!

F@ck me, how Injin was right. 

Glad I'm an old c*nt, the young are so so f@cked.

 

I learnt a lot in the early days on hpc. Injin made me realize I could make more money part-time self-employed than full time employed for a building firm. Cut out the middle man and sell my services direct to the customer. That worked out fantastically for me. I owe Injin a few beers.

I am learning a lot on this thread as well, thank you everybody.

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20 hours ago, Cattle Prod said:

I think that's the thesis I'm running with,liquidity from the Fed until there isn't.Lot of variables obviously,but once that big wave looms,then the Fed/BoJ/BoE/ECB will start losing that sense of communal concern that checks evryone has a life jacket  and it will get replaced by pure self interest in surviving the submersion.

We're still long our market sectors.But some flags are being seen in the distance,with what's @Barnsey was psoting to the fore.Copper is sending out a clear warning.

I've deferred to @DurhamBorn over kaplan in terms of reading the dollar here(which has worked out so cheers DB), but kudos to Kaplan who did say a few years back that the oil sector was the last to rally before most big market crashes and here we are.Which was where our portfolio build began.

Your $80 call looking good CP

image.png.17da80d39a64ba318d3fdd98c7c4548a.png

 

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1 hour ago, Popuplights said:

My daughter and her boyfriend are living very cheaply at the moment, in my FILs house. He is in a care home. They are basically covering council tax and the bills, shared between 4 people. It's a bit shabby, but they are saving hard. We are in the south east, and they astounded and dismayed by the price of housing round here.  I think they will move up north eventually to get some value. 

Also originally from SE. Inspired by DB's recent suggestion, I quite fancy this one in Darlington. If I was still WFH then I might have home office envy. Is that an intercom on the table? "Get the dinner on. I'll be home in 5 minutes"

https://www.rightmove.co.uk/properties/102411980#/

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1 hour ago, Barnsey said:

I'm not saying a crash isn't possible, but the 20% fall in the GFC is very recent history for those able to do their best to avoid the mistakes made, prices were running way above their long term trend and lending was incredibly reckless, both factors really are different this time. Another reason to keep prices up, elderly care equity release.

Budget next week, stamp duty extended until June at the earliest, furlough possibly well beyond summer. Why wouldn't they?

As for being butt****** by being sensible and not taking on debt, if you believe the premise of this thread that we are reaching a secular bottom in inflation expectations, now is the time to use fixed debt to your advantage in a considered way. I'm going to need a new sofa, could buy one with cash, or spread it over 4 years at 0% and stick the money into dividend reflation stocks.

Just fixed our gas and leccy with Shell Energy, longest fix on the market until Feb 2024 with £150 cashback through topcashback. Just another example of how I'm taking small steps to protect against inflation.

MOAAAAAR!!!

 

Any drops need to be offset against the rising cost of credit unless you're paying cash .

Rates going to go higher in the next year or two,.

Was reading about the losses Lloyds are taking and how them and HSBC are looking to cut office space as people prefer working from home.Even they can see the losses in CRE coming.

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On 23/02/2021 at 01:05, JMD said:

Will you be posting your coma scores SP? Always very interesting to see them. Personally I am looking for silver minors. I was aiming for equal portfolio allocations of the silver/gold miners, but find I'm still underweight the silvies, and fear I have left it too late to buy at half decent prices. Though as these are all long term holds I don't mind 'overpaying' for some good ones. Others thoughts and suggestions most welcome. 

I'll hopefully be working through the miners next week.A lot haven't go their data up yet,but they and the telecoms are next.

I'm only doing gold miners mainly but post the ones you're after and I'll include them if the data is avaialable and then you can see them in the context of the wider sector.

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6 hours ago, DurhamBorn said:

Strong pound hurts returns on foreign holdings.If you bought last March then sterling moves against the euro means a 5% lower price for Repsol today.Its done fantastic for us,i actually tagged the bottom on it with a big buy,and it still looks great value.

Aye - it does.

I went in 15.01. A few days prior to the bottom. Nice one when it works out you have hit the low. Cheers @DurhamBorn 🍻 

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In the vein of potential house price drops and wider impacts:

 

Central Bank funding paying people not to work covers unemployment and consumer spending.

Central Bank funding markets keeps asset prices up.

 

Central Bank funding dries up.........

 

PS - if CBs can no longer print at some stage soon, does that not stop the potential of UBI? How would it be 'funded', otherwise?

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7 hours ago, Harley said:

Japan?  GSK chart looks a dog atm.

2989527F-5ABB-4F52-A6BD-7B65ACFEAF0E.thumb.jpeg.86a2487782c36330651a277bb2c5d8ef.jpeg

Funnily enough the above “Japan Small cap’ fund was one of the first ever shares I bought after a 20 year gap. I was just finding my way.....

Bought just after the LK (‘Little Kahuna 20’) in March - and sold it at the end of summer thinking that 13% gain in less than 6 months was too good to be true. What an idiot. 
 

Actualy the other reason I sold it was I decided I only wanted to buy dividend giving income stocks in my ISA. Index funds and ETFs etc I’d decided I’d buy outside my ISA and take capital gains each year and use up my £12.5k allowance.

Any other recommendations? - as always I’ll do my own research.....

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4 hours ago, Bobthebuilder said:

I was the same when I bought, hated the idea of debt. Got a five-year fix, over paid the 10% every year, then at the end of the fix I had saved enough to offset the remainder of the mortgage. It was all gone in 8 years, with hindsight I don't even know why I was worried about it.

Housing is a mess, everywhere I look its mad. Even that lovely house in France would have been half that price a decade ago I expect.

I did exactly the same thing after STRing in May 2007 (Yorkshire) at a +30% to what it was 2 years later - and then buying back in at a -30% discount in May 2009 In the NE.

There was a HPC in the NE for some houses. STR Cash was put on deposit with Northern Rock for 2 years at 5% after the banking crisis. Nearly put a few hundred thousand in ICESAVE at 6%. Thank God GB backed Northern Rock with a government guarantee - so put it in their instead. Luck was on our side - so saved a huge amount of money 

After 2 years being sensible I insisted we take a 10year fixed mortgage rate at 4.79% (which looked superb value and security) but in hindsight looked like the most stupid decision ever - when mortgage rates dropped/stayed at less than 2% variable within 12 months or so.
 

We Overpaid every year (10%) and then after 10 years paid it all off in a lump sum. 
 

We should have just taken a variable 2% and overpaid would have cleared it in 7 years or less.

Anyway no mortgage now and cash building up every month.

Can’t complain really. Been lucky. Where to put it? 

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Fully Detached
28 minutes ago, Noallegiance said:

Central Bank funding dries up.........

Serious question - will that ever really happen? I remember all the talk of bond vigilantes, moral hazard and all  that stuff. Hasn't stopped them so far.

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2 hours ago, Hancock said:

Time to give your kid the birds and the bees chat; but don't forget the really fun part of the story where she can get a council house that costs £350k for nowt.

They are both junior doctors, I hope for the NHSs sake they know all about that...🤣🤣🤣🤣

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7 minutes ago, Fully Detached said:

Serious question - will that ever really happen? I remember all the talk of bond vigilantes, moral hazard and all  that stuff. Hasn't stopped them so far.

The other side of that is whether they can keep increasing the debt with interest rates going up.

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8 minutes ago, Popuplights said:

They are both junior doctors, I hope for the NHSs sake they know all about that...🤣🤣🤣🤣

Mental junior doctors having to stay in a relatives house to save up for a slave box.

Well is seems they will have to work for that 350k council house instead of getting it gifted.

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Fully Detached
3 minutes ago, Noallegiance said:

The other side of that is whether they can keep increasing the debt with interest rates going up.

Apologies as I am sure this will have been discussed here before. What makes you think rates are going to rise? Doesn't need a detailed reply, I guess it will be something like yield curve, which will be a good opportunity for me to relearn what the hell that actually is :) 

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52 minutes ago, Fully Detached said:

Apologies as I am sure this will have been discussed here before. What makes you think rates are going to rise? Doesn't need a detailed reply, I guess it will be something like yield curve, which will be a good opportunity for me to relearn what the hell that actually is :) 

Oh I don't have a detailed reply!

Just my upper-atmosphere viewpoint that whatever isn't comes to be, and whatever is won't be any more. 

Aside from that, are the CBs going to leave rates on the floor when inflation hits 5%? 8%? 10%? To avoid utter currency devastation they have to let rates run, even if below inflation, so that buying-power isn't decimated in short order. Sure they could, for example, try to introduce a new currency/version of a current currency but it'll still have the same problem.

Kaboom currency or kaboom debt-laden economy? The zug is being zwanged in the oven, I propose.

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Can someone smarter than me elaborate on this from DH please:

"With the economy opening up around the world, you are going to see cyclical earnings ramp up as you see operating leverage at work. It's what always happens coming out of a recession."

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Fully Detached
3 minutes ago, Noallegiance said:

Oh I don't have a detailed reply!

Just my upper-atmosphere viewpoint that whatever isn't comes to be, and whatever is won't be any more. 

Aside from that, are the CBs going to leave rates on the floor when inflation hits 5%? 8%? 10%? To avoid utter currency devastation they have to let rates run, even if below inflation, so that buying-power isn't decimated in short order. Sure they could, for example, try to introduce a new currency/version of a current currency but it'll still have the same problem.

Kaboom currency or kaboom debt-laden economy? The zug is being zwanged in the oven, I propose.

That is almost zen like, and has put a much needed smile on my face, thanks for that :) 

Regards rates, I have been of the view for some years that the only way out now actually is total destruction of the currency and debt default. So I look at the covid overreaction and I wonder to myself if it's entirely deliberate - after all, who could blame the govt if they "accidentally" destroyed the £ whilst trying to protect us all with furlough, bounce back bungs, stamp duty holidays etc. Then I see central bankers announcing their intention to "look through temporary inflation", and I think to myself that they're doing it entirely on purpose.

I guess we'll have a better idea after the budget next week, but I'm sad to say I no longer give them the benefit of the doubt that they could just be incompetent.

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4 minutes ago, Noallegiance said:

Can someone smarter than me elaborate on this from DH please:

"With the economy opening up around the world, you are going to see cyclical earnings ramp up as you see operating leverage at work. It's what always happens coming out of a recession."

I am not smarter than you but does he mean pent-up demand being allowed to release, and the amount of leverage (debt? Stimulus? Credit lines/records profits for the big corps during lockdown?) causing the earnings to be higher in proportion to that 'leverage'?

I suppose taking the technical definition of a recession (a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.) we would be coming out of one, for a bit, until the "global deflationary bust" hits.

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