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

[Bobthebuilder]

Just posted a reply to @BurntBread on another thread about the amount of gas boilers in the UK, thought it was interesting so will post here.

In the UK, 85% of homes currently have a gas boiler. The other 15% is made up of LPG, oil, wood, coal, biomass, air / ground source heat pumps, solar, electric and no central heating.

Seems to me, the government has a big job ahead to get everyone to green electric use in 3 years. Another total non-starter from all the environmentalists.

[leonardratso]

2 hours ago, Bobthebuilder said:

Just posted a reply to @BurntBread on another thread about the amount of gas boilers in the UK, thought it was interesting so will post here.

In the UK, 85% of homes currently have a gas boiler. The other 15% is made up of LPG, oil, wood, coal, biomass, air / ground source heat pumps, solar, electric and no central heating.

Seems to me, the government has a big job ahead to get everyone to green electric use in 3 years. Another total non-starter from all the environmentalists.

well, its not as if theyll be around when it comes to the crunch.

[StrugglingMillennial]

It always takes a day or two for the media to catch up with this thread.

Looks like the driver shortage is really starting to bite.

https://www.dailymail.co.uk/news/article-9927671/Whats-really-driving-food-shelves-HARRY-WALLOP-goes-scenes-investigate.html

[belfastchild]

17 hours ago, sancho panza said:

Volunteers may be required in staffing shortfall at English care homes

‘Alarming’ drop in workers signing up, with many put off by requirement to be fully vaccinated against Covid by 11 November

Was talking to a care home area manager a couple of weeks ago over in England. Talking about corona and masks etc as you do and they said they had 5 staff who refused to have the jab. I said I thought that wasnt too bad but they said it was 1/10 of their full time staff and good workers. They said they were having difficulty getting agency staff to cover at the minute due to the sickies so were crapping themselves if they have to sack them (have already drawn up the papers).
Cant remember exactly the date but they said they had been asked to draw the lists up a couple of months ago.
Filling full time workers with part time single mothers on benefits just isnt a goer for them.

Another anecdote. Good restaurant I occasionally frequent out in the sticks in co antrim is now closed for 10 days as they cant get the staff. It hasnt occurred to them that being in the sticks, paying minimum wage, to kitchen staff, unsociable hours, hard work etc etc isnt really that appealing. They do really good food and its not Belfast prices but inevitably they will realise they will have to pay more to attract and retain staff, which means prices will go up.

[No One]

Quote

Meanwhile, driver pay has slipped to the point that they get little more than supermarket shelf-stackers, partly due to the Government blocking a loophole that allowed them to operate as limited companies.

Yup, fucking about with IR35 would have such effects.

[Majorpain]

1 hour ago, belfastchild said:

Was talking to a care home area manager a couple of weeks ago over in England. Talking about corona and masks etc as you do and they said they had 5 staff who refused to have the jab. I said I thought that wasnt too bad but they said it was 1/10 of their full time staff and good workers. They said they were having difficulty getting agency staff to cover at the minute due to the sickies so were crapping themselves if they have to sack them (have already drawn up the papers).
Cant remember exactly the date but they said they had been asked to draw the lists up a couple of months ago.
Filling full time workers with part time single mothers on benefits just isnt a goer for them.

Another anecdote. Good restaurant I occasionally frequent out in the sticks in co antrim is now closed for 10 days as they cant get the staff. It hasnt occurred to them that being in the sticks, paying minimum wage, to kitchen staff, unsociable hours, hard work etc etc isnt really that appealing. They do really good food and its not Belfast prices but inevitably they will realise they will have to pay more to attract and retain staff, which means prices will go up.

Three in four civils firms in materials supply jam | Construction Enquirer News

There is a lot of inflationary pressure building up in multiple areas, when this volcano blows its going to be epic.  Raw materials and labour are spent, and yet more still money is pouring into the economy.

"Just in time" economy doesn't work if you cant get things in time, never mind 3 months for some things at the minute!

[HousePriceMania]

1 hour ago, No One said:

Yup, fucking about with IR35 would have such effects.

Im surprised to one predicted this...

 

https://driverrequire.co.uk/ir35

 

 

[Noallegiance]

1 hour ago, HousePriceMania said:

Im surprised to one predicted this...

 

https://driverrequire.co.uk/ir35

 

 

As I recently wrote here, I've kept my Class II licence in case I have no other viable option for employment, but just let my CPC lapse.

I won't go back for £11-£15p/h 7am-6pm.

[RickyBacker]

Another anecdotal albeit straight from the horses (company) mouth. I can't give too much detail, but ... family business supplies a component for an Apple product. Apple have just contacted to say that they need to reduce their purchase order by 70%. This component cannot be supplied by any other manufacturer as they developed it together. 

[janch]

20 minutes ago, RickyBacker said:

Another anecdotal albeit straight from the horses (company) mouth. I can't give too much detail, but ... family business supplies a component for an Apple product. Apple have just contacted to say that they need to reduce their purchase order by 70%. This component cannot be supplied by any other manufacturer as they developed it together. 

You don't say it outright but are we to conclude that Apple sales are falling?

[Sidd]

Looks like DXY is breaking out again and as usual silver plummeting again much more than warranted. Better hope the Fed announces a delay to the taper talk or could be seeing another sea of red on my screen.

[Transistor Man]

From an industry where cost always drops: 10-20% price increases.

"Taiwan Semiconductor Manufacturing Co. (TSMC) has reportedly notified its customers about substantial incoming chip production price hikes.

The world's largest maker of semiconductors will increase prices for virtually all advanced and popular process technologies in a bid to improve its gross margins.

Meanwhile, augmented quotes will make costs of products like CPUs, GPUs, SoCs, and controllers higher.

TSMC plans to increase prices of wafer processing using its 7 nm and thinner fabrication processes by as much as 10%, whereas prices of wafers processed using 16 nm-class and thicker nodes will increase by 20% for orders set to be fulfilled starting December, reports DigiTimes citing sources among chip developers.

Just like other foundries, TSMC does not disclose its quotes publicly, but the company intends to increase the price of one wafer processed using its 28 nm to 'nearly $3000 staring from January,' the report says."

[sancho panza]

21 hours ago, Noallegiance said:

House of Lords - Quantitative easing: a dangerous addiction? - Economic Affairs Committee (parliament.uk)

I'll be interested to read that tonight.Figure 5 sets the tone for the BK postponed/can kicked from 08...thanks for posting

20 hours ago, Bobthebuilder said:

Just posted a reply to @BurntBread on another thread about the amount of gas boilers in the UK, thought it was interesting so will post here.

In the UK, 85% of homes currently have a gas boiler. The other 15% is made up of LPG, oil, wood, coal, biomass, air / ground source heat pumps, solar, electric and no central heating.

Seems to me, the government has a big job ahead to get everyone to green electric use in 3 years. Another total non-starter from all the environmentalists.

Always appreciate you bringing these points to our attention Bob.The stats are really run against the grain of what the politicians are promisng themselves and the MSM.

85% is a much bigger number than I'd have thought possible.

5 hours ago, belfastchild said:

Was talking to a care home area manager a couple of weeks ago over in England. Talking about corona and masks etc as you do and they said they had 5 staff who refused to have the jab. I said I thought that wasnt too bad but they said it was 1/10 of their full time staff and good workers. They said they were having difficulty getting agency staff to cover at the minute due to the sickies so were crapping themselves if they have to sack them (have already drawn up the papers).
Cant remember exactly the date but they said they had been asked to draw the lists up a couple of months ago.
Filling full time workers with part time single mothers on benefits just isnt a goer for them.

I think they'll run into employment law issues as well as insurmountable operational problems.In Lodnon,I think the situation is severe as a lot more staff are ethnic minorities which are more likely to decline vaccination..If you make someone redundant and they're job still exists then it's unfair dismissal=court case+ legal fees+ pay out.

Unless the law has changed on that.I suspect these carers will be in like Flynn.

I think those that are left without having the 'clot shot' won't be having it.Something like 150,000 NHS staff haven't had it out of 1,300,000(say what!!!) but I'd reason that the bulk of those are patient facing,not admin staff.So if the govt gives marching orders they could be losing 20% of frontline staff or more.They couldn't manage before.

I suspect we'll go down the route of sacking non vacced staff and then re employing agency staff where a blind eye will be turned to vaccination status.

[RickyBacker]

50 minutes ago, janch said:

You don't say it outright but are we to conclude that Apple sales are falling?

On this particular product which was only released about 12 months ago, yes.

[RickyBacker]

12 minutes ago, Transistor Man said:

From an industry where cost always drops: 10-20% price increases.

"Taiwan Semiconductor Manufacturing Co. (TSMC) has reportedly notified its customers about substantial incoming chip production price hikes.

The world's largest maker of semiconductors will increase prices for virtually all advanced and popular process technologies in a bid to improve its gross margins.

Meanwhile, augmented quotes will make costs of products like CPUs, GPUs, SoCs, and controllers higher.

TSMC plans to increase prices of wafer processing using its 7 nm and thinner fabrication processes by as much as 10%, whereas prices of wafers processed using 16 nm-class and thicker nodes will increase by 20% for orders set to be fulfilled starting December, reports DigiTimes citing sources among chip developers.

Just like other foundries, TSMC does not disclose its quotes publicly, but the company intends to increase the price of one wafer processed using its 28 nm to 'nearly $3000 staring from January,' the report says."

This is a big change. I'm not familiar with the chip industry, but as you say, the norm is for cost reduction. The industry that I'm familiar with is usually about 6% cost reduction per annum. 

[Hancock]

6 minutes ago, sancho panza said:

Always appreciate you bringing these points to our attention Bob.The stats are really run against the grain of what the politicians are promisng themselves and the MSM.

85% is a much bigger number than I'd have thought possible.

I think they'll run into employment law issues as well as insurmountable operational problems.In Lodnon,I think the situation is severe as a lot more staff are ethnic minorities which are more likely to decline vaccination..If you make someone redundant and they're job still exists then it's unfair dismissal=court case+ legal fees+ pay out.

Unless the law has changed on that.I suspect these carers will be in like Flynn.

I think those that are left without having the 'clot shot' won't be having it.Something like 150,000 NHS staff haven't had it out of 1,300,000(say what!!!) but I'd reason that the bulk of those are patient facing,not admin staff.So if the govt gives marching orders they could be losing 20% of frontline staff or more.They couldn't manage before.

I suspect we'll go down the route of sacking non vacced staff and then re employing agency staff where a blind eye will be turned to vaccination status.

Boris will presumably uturn on this, as the NHS and care homes will get sued like never before.

If you haven't been jabbed, this could be your route to a wealthy early retirement!

 

[wherebee]

ADE watch (as per previous threads)

• moderna and pfizer both down yesterday by around 1%
• both slipping down over the week
• moderna well down from mid august highs

 

I'm watching these two like hell. If they break lower, I think that's my BK sell signal.

[sancho panza]

7 hours ago, StrugglingMillennial said:

It always takes a day or two for the media to catch up with this thread.

Looks like the driver shortage is really starting to bite.

https://www.dailymail.co.uk/news/article-9927671/Whats-really-driving-food-shelves-HARRY-WALLOP-goes-scenes-investigate.html

Some of the stand out points if this article is representative of teh industry as a whole-very much backs up what I'm hearing from a good friend who drives lorries for a living.

Particularly ref the age of lorry drivers.My friend was saying he knows a couple who sued to alternate shifts so both could work and pick up kids etc,since Covid,she's stopped work and he's gone onto part time hours with no significant loss in disposable income.

'The impact this has on family life has driven many younger drivers out, with the result that 62 per cent of the workforce is over 45.'

'The hourly pay for drivers at GXO has just increased from £14.76 to £17.76. '

'On a normal day, Cliff Chegwidden, the transport operations manager, should have between 175 and 185 staff lorry drivers at his disposal, plus 60 to 80 drivers from outside agencies. They start at 4am delivering products to supermarkets.

'We're only operating 166 [staff] drivers today,' he says. But that's not the problem. 'The real issue is agency drivers. Those numbers have fallen dramatically to six at its worst last week. Today, it's 12. It's absolutely diabolical.''

'Up until earlier this year, he estimates that as many as 80 per cent of his drivers were non-British. 'We've been a heavily European site since the Poles came in 2007 or so,' he says. 'Then, in 2015, it became mostly Bulgarians, Romanians.''

[Loki]

14 minutes ago, sancho panza said:

'Up until earlier this year, he estimates that as many as 80 per cent of his drivers were non-British. 'We've been a heavily European site since the Poles came in 2007 or so,

The exact time the arse fell out of construction then.

 

 

My response below:

[sancho panza]

Wolf St-can't ever thank @Majorpain enough for bringing him to my attention.

For those who wonder where the Big kahuna deflationary wave will come from,here's one element(ignoring junk bond markets/office blocks/residential mrotgages etc)

I've jsut used one of the foure xamples he gives.The haircuts loomign are sizeable especially given how many banks are levereaged more than 30-1

Remember ten years ago when retial was still strong,some of these loans would have been graded reasonably well and I do wonder hwo and when these loans are readjsuted in terms of risk weighting on a banks balance sheet

https://wolfstreet.com/2021/08/25/mallmageddon-whats-a-live-mall-not-a-zombie-mall-worth-heres-how-far-the-value-of-four-live-malls-collapsed-this-summer/

Mallmageddon: How Far the Value of Four Live Malls, Not Zombie Malls, Collapsed this Summer

by Wolf Richter • Aug 25, 2021 • 92 Comments

Leaving Big Holes in CMBS as mega-landlords, such as Bookfield and Westfield’s owners, walk away.

By Wolf Richter for WOLF STREET.

Westfield Palm Desert Mall (Palm Desert, CA): -74%.

The 1-million sq. ft. Westfield Palm Desert Mall, along with other Westfield malls, is owned by European commercial property giant Unibail-Rodamco-Westfield which, bucking under $32 billion in debt, vowed in February to get rid of all its US malls. One way of getting rid of a mall is to walk away from it and let lenders take the loss.

A 575,000-square-foot portion of the mall, not including the anchor stores, serves as collateral for a $125 million loan that was securitized in 2014 into CMBS. To sell the CMBS to investors, the portion of the mall was appraised at $212 million.

Investors felt secure by this conservative structure. What could go wrong with lending $125 million on $212 million worth of collateral?

What went wrong was the brick-and-mortar meltdown that started in 2017 and which has now turned into mallmageddon.

In November 2019, Sears announced that it would close its store at the mall. The former Sears store, which wasn’t part of the collateral, remains empty. An empty box for an anchor store is deadly for a mall. The other anchor stores at the mall, a Macy’s and a JC Penney, are also not part of the collateral. JC Penney filed for bankruptcy in 2020.

In May 2020, the Unibail-Rodamco-Westfield defaulted on the loan payment. In June 2020, the $125 million loan was transferred to special servicing for payment default.

Unibail-Rodamco-Westfield has already shed several Westfield malls by giving them back to the lenders. In November 2020, ratings agency Fitch expected that either a deed-in-lieu or a foreclosure would be the likely outcome.

Now, the lenders have taken control. Management will be “transitioned” to a third party. Lenders are trying to sell the mall, and Unibail-Rodamco-Westfield will wash its hands off another American mall. The lenders will take the losses.

But how much are the lenders expected to lose? The special servicer had the collateral portion of the mall appraised twice: In March, at $65.9 million; and in August, according to Trepp, at $55.2 million.

This cut the “value” of the collateral from the $212 million “value” with which the CMBS was sold in 2014 to $55.2 million now amounts to a haircut of 74%.

If the mall can actually be sold for $55.2 million, and before fees and other charges, lenders, having lent $125 million against $212 million in collateral, would pocket a loss of 56%.

 

This summer, the collateral’s value was reduced from $101.7 million at securitization to $34.7 million, a haircut of 66%.

If the collateral is actually sold at $34.7 million, the lenders – having lent $59.5 million on $101.7 million in collateral – will book a loss before fees and costs of 42%.

[C-gull]

On 25/08/2021 at 15:32, Chewing Grass said:

Volunteers equals vaxxed and unpaid, a businesses wet dream if there are enough of them you can trust.

What I want explained to me is where are these volunteers coming from; if you can't pay people to do the work what makes you think there's a bunch of saps willing to do it for free?

Edit: I see that I was late to the party making this particular point

[Chewing Grass]

2 minutes ago, C-gull said:

What I want explained to me is where are these volunteers coming from; if you can't pay people to do the work what makes you think there's a bunch of saps willing to do it for free?

Sarcasm, although there are a few folks daft enough to do it for 'social credit' on certain digital platforms as long as they can get enough selfie's in.

[Talking Monkey]

5 minutes ago, C-gull said:

What I want explained to me is where are these volunteers coming from; if you can't pay people to do the work what makes you think there's a bunch of saps willing to do it for free?

There's no way they'll be able to get a sustained amount if volunteers. There may be a fair few who give it a go for a day but that's it only a tiny portion will come back a second day

[NogintheNog]

4 hours ago, sancho panza said:

I think they'll run into employment law issues as well as insurmountable operational problems.In Lodnon,I think the situation is severe as a lot more staff are ethnic minorities which are more likely to decline vaccination..If you make someone redundant and they're job still exists then it's unfair dismissal=court case+ legal fees+ pay out.

 

You'd have thought so wouldn't you, but.....

Wrote to my MP as I think it's the thin end of a wedge, and got this reply;

Quote

That is why the Government has taken steps to require care providers to deploy only staff who have been vaccinated within older adult care homes. This measure will protect the people most at risk in our society: around 90 per cent of those who died from COVID-19 were people over 70. The decision follows extensive consultation with care home staff, providers, residents and families. The measures have been approved by the House of Commons and are subject to a 16-week grace period. I can assure you that this was debated thoroughly and many Members, including myself, scrutinised the proposals closely.

 

 

Importantly, it is already lawful for a care home to dismiss unvaccinated front line staff, (provided that certain conditions have been complied with) under statute and at common law. Care homes have an overriding duty of care to its vulnerable residents. In the current context, it is entitled to make vaccination a condition of continuing employment. An employee who refuses is either failing to follow a reasonable management instruction or giving rise to some other substantial reason sufficient to justify dismissal - both of which are potentially fair reasons under s98(2) of Employment Rights Act.

 

 

 

It is then incumbent on employers to comply with the procedural requirements under s98(4) including a fair consultation & consideration of alternative roles (if any exist). Something like a remote administrative role might be an example.

 

 

 

Failing all that, any ensuing dismissal is already highly likely to be fair. The new Regulations formalise that but don’t materially alter the existing principle in employment law, despite what some constituents seem to think.

And there you have it!

By the way I have a parent in a Nursing home with Dementia. There was a 7% increase in fees last year and another 7% this year. My parent will run out of money much quicker than we thought....

Inflation, inflation....

[DurhamBorn]

Iv noticed today quite a few fund manager type companies,M&G,Schroders etc who seem to be building stakes in each other the last few months.It could be a case of they see value in the sector,or it could be they are expecting the sector to consolidate.Iv tried to see what M&G holds in its big Prufund and only 13% is property,and a lot of that will be industrial.It could be these big firms have looked at their models on inflation increasing and rates etc and see a lot of surplus.The risk though of course is they will all hedge with derivatives and that could be where the most damage in any BK is done.Iv picked up a few M&G though for now.