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


spunko

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2 minutes ago, kibuc said:

If that's correct, then would I still be vat-exempt I if took delivery to a location in EU? I'd rather keep that silver at my parents' in Poland than trust a dealer long term. 

It's VAT exempt in some EU countries, and due to free movement of goods, you could keep it inside the EU and never pay VAT.

On return to UK, you'd have to declare it and pay UK VAT. Whether you did it not...

Not sure how it would work if you come in via NI.

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14 hours ago, nirvana said:

@planitinteresting summary, you should do a youtube channel xD

do you scalp or daytrade? news like today is for scalpers methinks.....the gurus here think macro but then idiots like me come along and create somewhat 'micro noise' BUT it's a good thread so I keep coming back

I am mainly invest fundamentals looking for value. Naturally a contrarian (worries me that I ended up here with loads of other weirdos - can't be coincidence o.O).

I try to trade swings and time my different sectors to squeeze extra profits. I try to assume each good trade was luck (don't get overconfident) and not beat myself up on mistakes. 

The micro noise is important on this thread as there will be a BK at some point in the future. I realise this is a macro thread but there is no one here that wouldn't like to be warned 1 week before a BK happens, perhaps even THE BK.

So add all the thoughts on this thread together and that to me seems like the best BK indicator I have. I did think about having a weekly poll "how likely do you think a BK is in the next 3 weeks". Plotting this over time could provide some extra information from which to take avoiding actions.  

 

Someone here will pick up the BK before it happens. Last year was easy, perhaps I was lucky but I sold out 100% when there was an obvious pandemic coming with no reaction in the stock market. The next one will be really hard to spot and parts of the cycle are currently out of phase so if a BK happened in the next 3 months it wouldn't be the final one.

 

Point is, I try to take everyone seriously here because all of you are not me.

 

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SpectrumFX
2 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'm two and a half years into a 10 year fix. My plan is to have enough money put away to pay off the mortgage at the end of the fix.

My concern with the short term deals was always what state I'd be in when it came time to remortgage. Getting a decent mortgage deal required both me and my wife to be in permenent employment. She's got health problems, and I'm a temperamental bastard who's walked out of several jobs in the past with nothing to go to, so there was always the risk that we'd come off the cheap deal and be unable to get another one.

Fixing isn't always a good idea though. You're basically making a long term bet on interest rates going up. A guy I used to work with fixed at 5%. This would have been around 2010. That's not gone well for him.

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geordie_lurch

My 10 year Barclays 1.99% fix is due to finally complete at the end of this month (issues in the property chain) and it's still available on their website so I'm hoping I get that just in time :S

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1 hour ago, SpectrumFX said:

walked out of several jobs in the past with nothing to go to,

Sounds like me:)  I always had a couple of months worth of savings.  I made sure I wasn't dependent on any job I could bear no longer.  It was usually other people and/or the corporate crap which got to me eventually rather than the actual work.

With regard to high inflation and mortgages, I lived through it in the 70s/80s.  We got used to prices rising every week and a letter from the bank every month or so saying the mortgage was going up.  Mortgages were all SVR then as far as I know so no fixed rates.   We cut back where we could and especially by shopping around on food/clothing etc.  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.

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12 hours ago, Lightscribe said:

You have to remember most economists and all the media experts were (and still are) all looking the wrong way. An inflationary financial  environment was last seen since before most of these journalists were born, very few have prepared. The inflationary signals have blind sided them and they are worried which will become increasingly obvious in their journalism.

Large swathes will be up to their neck in generic passive fund ISAs/pensions and over leveraged BTL. What’s coming will render their economics degree at university seem pointless. The saltiness of the articles will transition to one of panic. 

Obviously it comes as no surprise to this thread, as we’ve known what was coming for years and knew what had to happen at the end of this cycle. Our only unknown factor which is what lengths the government will go to sanction/seize/impose to save the masses.

”This experiment with fiscal dominance led to a bitter dispute between the Fed and the Truman administration, ultimately leading to the Treasury-Fed Accord of 1951. This deal restored the operational independence of the central bank. But by then the compound effects of double-digit inflation had fleeced long-term debt holders.”

I only wish Carney was around for this bit. He knew exactly how far he could push it before it was time to get out of dodge.

The economists are certainly looking the wrong way. But it is the accepted dogma of our times to believe in the bright-shiney progress(ivism) vs the old-clunky cycle theory of history, economics, etc. However, this thread explores the macro cycle/s, and how to exploit them, but which is something that our so called experts would actually view as being akin to believing in witchcraft!?                                                                                      (...slight detour, as I'm 'sometimes' prone to do?) History has repeatedly shown the dangers and tragic consequences of rejecting reality or past experience, and today we appear to be gleefully rushing headlong, unquestioningly and ignorantly, into utopian visions of concepts like fairness and equity!?...My contrarian response is to shout 'all hail' our own thread witch - or should that be warlock(?) - @DurhamBorn!!!                                                                                                                                                                     (But i guess we all need our own myths?, Btw a good read on the subject is: The Myths we Live By, by philosopher Mary Midgely)

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Interview with the Horizon Kinetics boss. @DoINeedOnemonitors their new Inflation Fund for this thread, and that fund is itself mentioned from 45:00 mins. Actually the interview is also interesting because it shows how a 'very traditional conservative value investment money manager' has moved to accepting the BTC store of value, etc investment thesis. However that's not my reason for posting this - as I think it's very worth watching the whole video (though maybe a bit basic for some, not always a bad thing?) even if you do disagree about BTC - because it has interesting perspectives on value investing, emulating the Warren Buffet model, buying the exchanges 'to outrun inflation', and other ideas that chime with this thread.                                                                                           

 

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2 hours ago, SpectrumFX said:

 I'm a temperamental bastard who's walked out of several jobs in the past with nothing to go to,

It's not you its them, who are the tossers. 100% guaranteed.

Just they're too spineless and lacking in confidence to leave somewhere they hate and move on to the great unknown.

 

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Lightscribe
42 minutes ago, janch said:

Sounds like me:)  I always had a couple of months worth of savings.  I made sure I wasn't dependent on any job I could bear no longer.  It was usually other people and/or the corporate crap which got to me eventually rather than the actual work.

With regard to high inflation and mortgages, I lived through it in the 70s/80s.  We got used to prices rising every week and a letter from the bank every month or so saying the mortgage was going up.  Mortgages were all SVR then as far as I know so no fixed rates.   We cut back where we could and especially by shopping around on food/clothing etc.  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.

We’ll all be set up for it alright, it’s 95% of the rest of the country I’m worried about.

The government will have to put on the skids on the shrewd commoners like us with existing wealth to keep the indebted plebs from revolting. 

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Talking Monkey
9 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've decided to go a middle ground approach sell some percentage up to 50 or 60%. I worry about cash confiscation so plan on holding it in IBTL. Does the forum have a view on IBTL in terms of counterparty risk etc. 

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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!! 

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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! :P

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

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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. 

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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! :P

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? 

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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.

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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) :P 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...

 

 

 

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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?

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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.

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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

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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!).

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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/

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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.

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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.

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