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

[Harley]

5 minutes ago, 23rdian said:

I sort of have this problem too. I transferred a decent amount in from a cash ISA, invested half now but have the other half sitting in the cash account earning 0pc. I don't really want to transfer it out again but I want it ready for a BK. Are bonds viable? Liquid enough for this? Any other alternatives?

I have to do my weekly review this weekend but am expecting a buy signal in some bonds!  Yup, totally against the narrative, but that's the narrative for you!  I'm sure another one will be along soon if required though!

[HousePriceMania]

https://www.wsj.com/articles/fed-committed-to-diverse-workforce-and-senior-leadership-yellen-says-1475179202

 

Janet Yellen Sees Benefits to Central Bank Stock Purchases

The ability to buy equities or corporate bonds could be helpful in a downturn, the Fed chief says

 

[Don Coglione]

6 hours ago, kibuc said:

I went to London last weekend to get some escape from my family. The city partied like it was the 20s again (perhaps because it is?), Saturday morning there were young people dressed to impress all over the place clearly going somewhere fun, the place I went to there was a grand total of 5 security guys simultaneously manning the entrance AND reminding around a thousand people inside not to dance. It was purely for show and hardly anyone gave a fuck. Had a lovely night, including a "covid-unregulated" afterparty at a local brewery.

Around 20% people on the Tube had no mask at all and another 20% kept them firmly under their chins (and yes, I graduated from Spygirl's School of Made Up Stats).

I am in London this weekend and agree with all of that.

For me, no mask on the train here, on the Tube or in any venues. Only got asked about it once in a bar, quickly dismissed.

No-one gives a shit any more.

[janch]

1 hour ago, Harley said:

expecting a buy signal in some bonds! 

I remember DH saying bonds would have a last hurrah about the same time @DurhamBornsaid he preferred Brazil as it's currency would be strong vs US dollar.  So I bought some IBTL and also IBZL and both have so far risen a bit.  IBTL looks to be going higher. Yay!

IBTL: iShares $ Treasury Bd 20+yr UCITS ETF USD Dist

IBZL: iShares MSCI Brazil UCITS ETF USD (Dist)

This is not advice, DYOR etc

[Harley]

18 minutes ago, janch said:

I remember DH saying bonds would have a last hurrah about the same time @DurhamBornsaid he preferred Brazil as it's currency would be strong vs US dollar.  So I bought some IBTL and also IBZL and both have so far risen a bit.  IBTL looks to be going higher. Yay!

IBTL: iShares $ Treasury Bd 20+yr UCITS ETF USD Dist

IBZL: iShares MSCI Brazil UCITS ETF USD (Dist)

This is not advice, DYOR etc

Probably ahead of me as I use the monthlies as I'm prepared to sacrifice gains for the possibility of more certainty.  Yes, IBTL would be the main one.  I too question the whys and how longs but up is up and I'm not in it to make sense of everything.  Brazil was brave but thanks for the prompt to look.

[ThoughtCriminal]

Buy the dip! Ah...............

[Majorpain]

37 minutes ago, Don Coglione said:

No-one gives a shit any more.

Unless it involves a magic money tree, I was curious why waiters were using the NHS Covid app when they would be near enough guaranteed to be "pinged" with 10 days isolation, the £500 isolation payments are probably a big cause!  Oh no, isolation again.....  £1500 free a month cha-ching!  

Then there is "long" covid, I know plenty of people who got it bad, yet none suffer from its debilitating effects?  Maybe its only a Public sector thing with no question 100% sick pay for months on end.  

[MrXxxx]

3 hours ago, kibuc said:

It can have some serious effect on economy, too. The hotel I stayed in refused to accept cash (never mentioned it anywhere during the booking) "becasue covid" and simply told me to go somewhere else where they might accept it. Hadn't I been so desperate for my weekend out of town, I would have simply returned home. The very same day my wife was roaming our local hight street and saw a rainproof jacket she liked. She went inside, tried it on, wanted to buy it - sorry, no cash "becasue covid". So she got the fuck out of there and £170 stayed in her pocket. Baffling approach to doing business, really.

I have had this too; I don't like to use plastic as handing over cash helps you control your spending better...its almost as if some businesses want to go bankrupt!

The best I had was in Sainsburys, I wanted cashback so asked before paying "No sorry, we don't do cashback because of Covid"..."Can I pay with cash?"..."Yes thats fine"....wtf?...completely illogical, but the Sharon on the till couldn't equate the contradiction!

[Harley]

1 hour ago, MrXxxx said:

....but the Sharon on the till..

Useless related facts. 

My first girlfriend was called Sharon.  Lovely lass.  Went to the pics and snogged at the back row for our first date.  That's what the back row was for back then.

I also took my current partner to the pics on our first date.  I fell asleep and she foolishly thought dinner was included.  She worked the tills at Sainsbury's.   Her name is not Sharon.

Small world.

[MrXxxx]

13 minutes ago, Harley said:

Useless related facts. 

My first girlfriend was called Sharon.  Lovely lass.  Went to the pics and snogged at the back row for our first date.  That's what the back row was for back then.

I also took my current partner to the pics on our first date.  I fell asleep and she foolishly thought dinner was included.  She worked the tills at Sainsbury's.   Her name is not Sharon.

Small world.

..but does she give you cashback? :-)

[invalid]

For anyone interested in UK timber prices:

https://www.forestresearch.gov.uk/tools-and-resources/statistics/statistics-by-topic/timber-statistics/timber-price-indices/#:~:text=The average price for softwood,6 months to March 2020.

 

Coniferous Standing Sales Price Index:

• The index was 1.0% higher in real terms (7.9% higher in nominal terms) in the year to March 2021, compared with the previous year.
• The average price for coniferous standing sales was £31.03 per cubic metre overbark standing in nominal terms in the year to March 2021, an increase from £28.22 in the year to March 2020.

Softwood Sawlog Price Index:

• The Softwood Sawlog Price Index was 15.4% higher in real terms (22.2% higher in nominal terms) in the 6 months to March 2021, compared with the corresponding period of the previous year.
• The average price for softwood sawlog sales was £67.70 per cubic metre overbark in nominal terms in the 6-month period to March 2021, an increase from £49.76 in the 6 months to September 2020 and £55.42 in the 6 months to March 2020.

 

 

 

 

 

[sancho panza]

On 30/06/2021 at 22:16, Herby said:

Gap to close all UK stores.. 

https://www.bbc.co.uk/news/business-57670737

Gap to close all 81 stores in UK and Ireland
Published52 minutes ago

cross psot from the bust thread.Banks going to be taking CRE losses soon....

M&S shutting 29 bank branches and all current accounts

https://www.retailgazette.co.uk/blog/2021/07/ms-shutters-29-bank-branches/

 

H&M to shut 250 stores in 2021

https://www.retailgazette.co.uk/blog/2021/07/hm-reveals-plans-to-shut-250-stores-this-year/

 

https://www.retailgazette.co.uk/blog/2021/06/uk-govt-launches-consultation-into-business-rates-revaluations/

'British Property Federation chief executive Melanie Leech said: “We have long called for the government to introduce more frequent revaluations.

“Even before the pandemic, outside of central London, retail rents had fallen by about 30 per cent over the previous decade – and including inflation it’s more like 50 per cent – while rates remain based on outdated rental values from 2015.'

 

 

[DurhamBorn]

28 minutes ago, sancho panza said:

cross psot from the bust thread.Banks going to be taking CRE losses soon....

M&S shutting 29 bank branches and all current accounts

https://www.retailgazette.co.uk/blog/2021/07/ms-shutters-29-bank-branches/

 

H&M to shut 250 stores in 2021

https://www.retailgazette.co.uk/blog/2021/07/hm-reveals-plans-to-shut-250-stores-this-year/

 

https://www.retailgazette.co.uk/blog/2021/06/uk-govt-launches-consultation-into-business-rates-revaluations/

'British Property Federation chief executive Melanie Leech said: “We have long called for the government to introduce more frequent revaluations.

“Even before the pandemic, outside of central London, retail rents had fallen by about 30 per cent over the previous decade – and including inflation it’s more like 50 per cent – while rates remain based on outdated rental values from 2015.'

 

 

Councils sucked high streets dry on parking and rates to pay for none jobs and pensions.As usual tax kills certain sectors.Now they can reap what they sow.I doubt they owned Royal Mail,the best performing FTSE 100 stock this year the gainer from this of course.

The retail park near me is packed all week and booming,Next never stops with its click and collect etc.Easy parking and free,in out etc and councils out the picture.

[leonardratso]

softwood

[sancho panza]

for thsoe who want to see the CRE crash of 2021/22 in pictures.here are some .....would love to see similar data for the UK.

It's my humble opinion that CRE will be the BK's sub prime.The crash in San Francisco is epic.

#debtdeflation cometh.

https://wolfstreet.com/2021/07/01/it-gets-relentlessly-ugly-in-us-office-markets/

And “asking rents,” in this environment, are not indicative of actual lease terms and concessions agreed to. For example, real estate services provider Savills points out that in Washington D.C., “Concession packages for new, long-term, Class A leases now average $147.00 psf (per square foot) in tenant improvement allowances and 23 months of free rent, totaling $270.00 psf in total value – a 30.9% increase since the start of the pandemic.” This compares to stated asking rent of $58.46 psf.

Houston, first the oil bust then working from home.

The Houston office market is huge, with 192 million square feet (msf) of office space. Of this space, 31.3% are currently on the market available to lease, according to Savills. In terms of Class A office space, 33.3% is available for lease.

By submarket the availability rates range from 10% in Medical Center/South Houston to 52% in North Belt/Greenspoint. In the Central Business District, availability is 34.7%. These are the effects of years of oil-and-gas bankruptcies, downsizing, layoffs, and since 2020, the effects of working-from-home (chart via Savills).

San Francisco, office shortage turns into historic office glut.

 

Sublease inventory rose to a new historic high in Q1 of over 9 msf, according to Savills. The overall availability rate leaped to 26.3%, and Class A availability to 24.0%, compared to 7.7% and 7.3% in Q2 2019. By submarket, availability ranged from 21.9% in Mission Bay/Showplace Square to 35.5% in South of Market and to 39.2% in Jackson Square (chart via Savills):

 

 

In Washington D.C., “already record-high concessions have soared.”

Overall availability rose to a record 21.1% in Q2. This includes 2.5 msf in new developments, of which less than half are preleased, with some projects having seen no preleasing. By submarket, availability ranges from 10.3% in NoMa and 13.1% in Southwest – the only two submarkets with availability rates below 20% – to 26.9% in Capitol Riverfront:

Leasing activity, at 2.0 msf, was down 37% from 2019. Over half of the leasing volume by square footage was with the government. Renewals accounted for 57% of the leasing volume.

Asking rents have barely edged down to $58.45 psf for Class A and to $55.31 psf overall, but “already record-high concessions have soared,” according to Savills:

“Concession packages for new, long-term, Class A leases now average $147.00 psf in tenant improvement allowances and 23 months of free rent, totaling $270.00 psf in total value – a 30.9% increase since the start of the pandemic. Free rent has risen the most aggressively since March 2020, increasing by seven months on average for a transaction term of ten years or greater.”

Seattle/Puget Sound.

Availability rose to 19.4% overall, ranging from 9.0% in Everett Central Business District to 29.8% in Southend.

Manhattan, largest office market in the US.

Availability jumped to 18.4% overall and to 17.9% for Class A buildings. By submarket, availability ranged from 12.3% in Hudson Yards to 25.8% in Soho.

Leasing activity, at 4.9 msf, was down 50.5% from Q2 2019 and by 54.6% from Q2 2018. Asking rents have been inching down. Overall asking rent at $75.60 psf was down 3.5% from Q2 2019, and Class A asking rent, at $86.05 psf, was down 5.3%, and according to Savills, “concessions continue to rise with the current value of free rent and tenant improvement allowances for long-term Class A leases up 17% from the beginning of 2020.”

[Harley]

4 hours ago, sancho panza said:

for thsoe who want to see the CRE crash of 2021/22 in pictures.here are some .....would love to see similar data for the UK.

It's my humble opinion that CRE will be the BK's sub prime.The crash in San Francisco is epic.

#debtdeflation cometh.

https://wolfstreet.com/2021/07/01/it-gets-relentlessly-ugly-in-us-office-markets/

And “asking rents,” in this environment, are not indicative of actual lease terms and concessions agreed to. For example, real estate services provider Savills points out that in Washington D.C., “Concession packages for new, long-term, Class A leases now average $147.00 psf (per square foot) in tenant improvement allowances and 23 months of free rent, totaling $270.00 psf in total value – a 30.9% increase since the start of the pandemic.” This compares to stated asking rent of $58.46 psf.

Houston, first the oil bust then working from home.

The Houston office market is huge, with 192 million square feet (msf) of office space. Of this space, 31.3% are currently on the market available to lease, according to Savills. In terms of Class A office space, 33.3% is available for lease.

By submarket the availability rates range from 10% in Medical Center/South Houston to 52% in North Belt/Greenspoint. In the Central Business District, availability is 34.7%. These are the effects of years of oil-and-gas bankruptcies, downsizing, layoffs, and since 2020, the effects of working-from-home (chart via Savills).

San Francisco, office shortage turns into historic office glut.

 

Sublease inventory rose to a new historic high in Q1 of over 9 msf, according to Savills. The overall availability rate leaped to 26.3%, and Class A availability to 24.0%, compared to 7.7% and 7.3% in Q2 2019. By submarket, availability ranged from 21.9% in Mission Bay/Showplace Square to 35.5% in South of Market and to 39.2% in Jackson Square (chart via Savills):

 

 

In Washington D.C., “already record-high concessions have soared.”

Overall availability rose to a record 21.1% in Q2. This includes 2.5 msf in new developments, of which less than half are preleased, with some projects having seen no preleasing. By submarket, availability ranges from 10.3% in NoMa and 13.1% in Southwest – the only two submarkets with availability rates below 20% – to 26.9% in Capitol Riverfront:

Leasing activity, at 2.0 msf, was down 37% from 2019. Over half of the leasing volume by square footage was with the government. Renewals accounted for 57% of the leasing volume.

Asking rents have barely edged down to $58.45 psf for Class A and to $55.31 psf overall, but “already record-high concessions have soared,” according to Savills:

“Concession packages for new, long-term, Class A leases now average $147.00 psf in tenant improvement allowances and 23 months of free rent, totaling $270.00 psf in total value – a 30.9% increase since the start of the pandemic. Free rent has risen the most aggressively since March 2020, increasing by seven months on average for a transaction term of ten years or greater.”

Seattle/Puget Sound.

Availability rose to 19.4% overall, ranging from 9.0% in Everett Central Business District to 29.8% in Southend.

Manhattan, largest office market in the US.

Availability jumped to 18.4% overall and to 17.9% for Class A buildings. By submarket, availability ranged from 12.3% in Hudson Yards to 25.8% in Soho.

Leasing activity, at 4.9 msf, was down 50.5% from Q2 2019 and by 54.6% from Q2 2018. Asking rents have been inching down. Overall asking rent at $75.60 psf was down 3.5% from Q2 2019, and Class A asking rent, at $86.05 psf, was down 5.3%, and according to Savills, “concessions continue to rise with the current value of free rent and tenant improvement allowances for long-term Class A leases up 17% from the beginning of 2020.”

I've been waiting to exit my UK REITs which have been on a rise despite the macro.  Looks like they may be topping (or just pull back?) on the monthly, plus this, so probably time to take the loss.  It's gonna hurt.

[jamtomorrow]

[Removed f'd-up post]

[jamtomorrow]

4 hours ago, Harley said:

I've been waiting to exit my UK REITs which have been on a rise despite the macro.  Looks like they may be topping (or just pull back?) on the monthly, plus this, so probably time to take the loss.  It's gonna hurt.

What happens to REITs in lieu of gating? Do they just tank harder when the open-ended funds go a bit "gatey"?

[invalid]

From the DM:

 

Petrol prices now at an EIGHT-YEAR HIGH and up 18p-a-litre in just eight months - here's why they are set to head ever higher...

And the increase in costs at the pump look set to rise as the Organisation of the Petroleum Exporting Countries has told its biggest producers to increase outputs more slowly than expected in coming months, while rising global fuel demand causes supply to tighten. 

 

 

 

 

[MrXxxx]

5 hours ago, Harley said:

I've been waiting to exit my UK REITs which have been on a rise despite the macro.  Looks like they may be topping (or just pull back?) on the monthly, plus this, so probably time to take the loss.  It's gonna hurt.

It's gonna hurt?....think of all those local councils that invested council tax in REIT `investments`...that's really gonna hurt!

[Majorpain]

47 minutes ago, jamtomorrow said:

What happens to REITs in lieu of gating? Do they just tank harder when the open-ended funds go a bit "gatey"?

They will have no choice but to lock the doors if you don't get out quick enough.  I checked the T and C of one i was interested in, and it did say they reserved the right to gate the fund at their discretion if property (fire) sales couldn't keep up with withdrawals.

[MrXxxx]

14 minutes ago, Majorpain said:

They will have no choice but to lock the doors if you don't get out quick enough.  I checked the T and C of one i was interested in, and it did say they reserved the right to gate the fund at their discretion if property (fire) sales couldn't keep up with withdrawals.

Agree...just look at the Neil Woodford funds for a recent example and the justification used for stopping a mass exodus.

[jamtomorrow]

27 minutes ago, MrXxxx said:

Agree...just look at the Neil Woodford funds for a recent example and the justification used for stopping a mass exodus.

But what about closed-ended funds? They seem to be flavour of the month because there isn't really any redemption as such (so they can't/won't "gate") which means you'll presumably get *some* of your original investment back in a rush for the exit (rather than having it locked in the burning building).

Edit to add: which is potentially interesting in terms of CRE price signals on the investment side. Open-ended funds effectively stop transmitting a price signal once they're gated - valuation could be anywhere between zero and whatever they say it is. With closed-ended, the market always takes a view.

[DurhamBorn]

6 hours ago, Harley said:

I've been waiting to exit my UK REITs which have been on a rise despite the macro.  Looks like they may be topping (or just pull back?) on the monthly, plus this, so probably time to take the loss.  It's gonna hurt.

I took a whack on selling some down as well.I do think some areas might come back,but im not sure that can happen before rates increase and they have to re-finance at higher rates.

Notice today another of your warnings coming true.Morrisons agree private deal.Now a 50% gain in a few months is nice,i had a small holding,but im actually in two minds.The fact as you say income producing assets are being removed one after the other so that ordinary investors end up with nowhere to invest.

This big private money is slowly taking out all the real assets while the young are putting all their money into things that will likely be worthless in the future.

Maybe they just want us in green bonds.

 

Listed REITs are mostly common shares and their values go up and down on demand,they dont need to sell anything or lock up.If they have a net asset value of 50p the shares can be 10p or 90p it doesnt matter,its just what investors think about the future etc.

Some REITs are managing to sell assets at close to book value,yet their shares are half asset value,so in theory they should double,but its likely those assets are the best ones,the tail is probably much worse.The biggest hit to values will likely be to big pension schemes etc.They tend to own individual stores or small blocks in high streets,those are the worst hit.REITs tend to own whole centres etc so at least can re-purpose them.Our local park is hugely busy,but the high street is dead and almost everyone leaves as the lease ends.Iv noticed a lot are being done up as bars etc.

[Castlevania]

10 minutes ago, DurhamBorn said:

I took a whack on selling some down as well.I do think some areas might come back,but im not sure that can happen before rates increase and they have to re-finance at higher rates.

Notice today another of your warnings coming true.Morrisons agree private deal.Now a 50% gain in a few months is nice,i had a small holding,but im actually in two minds.The fact as you say income producing assets are being removed one after the other so that ordinary investors end up with nowhere to invest.

This big private money is slowly taking out all the real assets while the young are putting all their money into things that will likely be worthless in the future.

Maybe they just want us in green bonds.

 

 

Some of the private equity companies are listed so could be an alternative. Blackstone is on the NYSE. Bridgepoint is planning to list in London.