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


spunko

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9 hours ago, sancho panza said:

As I look back on my life and reflect,I;m hoping to pass on some of what I've learned to my kids in the hope they can stay safe and happy.As you say,it can take decades to develop an understanding that can make you profitable.Threads like this weren't around when I was younger, and even then you have to be introduced to the learning somehow.

 

 

Yes it takes a massive amount of learning,and knocks.I feel like im almost connected to the cycles now in that i can feel them.

The young at work are making massive mistakes,life changing,yet have no idea of it.Iv never seen a bigger lack of understanding of economics in my life.The government has everyone dumb now through welfare and credit.Temporary workers who think they will have the job forever with £30k mercs and BMWs on lease.Buying £180k houses at the end of the cycle for houses and their jobs.

My kids are learning fast.My daughter and her partner have already paid off 40% of their mortgage at 27 on a really nice house on my estate and he is slowly building a portfolio.He only puts £500 in each share and only a couple a year,but has about 8 already and said he is now getting a weeks wages in divis a year.On the road now.My daughter is a nurse and everyone she works with takes lease cars and everyone told her how great it was.She has an 9 year old Peugeot i fix that costs her about £200 a year instead of £2800 a year.The saving is towards knocking the mortgage down.

Inflation in the next cycle and the rising rates that come with it are going to shock people to the core.People dont have the finances,or worse the skill and knowledge to navigate that kind of cycle.

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1 hour ago, DurhamBorn said:

Inflation in the next cycle and the rising rates that come with it are going to shock people to the core.People don't have the finances,or worse the skill and knowledge to navigate that kind of cycle.

I can't agree more , even if I try :)


Not going in details , but in my "pilgrimages" through life/around the world and living in certain country in which Hyperinflation and High Rates was a way of life , people maybe are very unaware how "good and easy" live has been for the Millenials/Post-Millennials/Snow Flakes [ whatever neologism in use noways to describe them].

And, I for once, find myself struggling now not due similar self-infliction la-la-land life style or  modus operandi - however , at least I can see what needs attention and slowly doing it  - and  I cant thank  you guys enough for the input and discussion in this forum.

M.C. UK

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1 hour ago, DurhamBorn said:

Inflation in the next cycle and the rising rates that come with it are going to shock people to the core.

I don't think they teach accountants inflation accounting anymore so you know what's going to happen!

As has been said before, markets seek to deliver the most amount of pain.  No crime without the time!

1 hour ago, DurhamBorn said:

People dont have the finances,or worse the skill and knowledge to navigate that kind of cycle.

A new Youtube media career as Dr D!  Or we go subscription only!

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1 hour ago, DurhamBorn said:

Yes it takes a massive amount of learning,and knocks.I feel like im almost connected to the cycles now in that i can feel them.

The young at work are making massive mistakes,life changing,yet have no idea of it.Iv never seen a bigger lack of understanding of economics in my life.The government has everyone dumb now through welfare and credit.Temporary workers who think they will have the job forever with £30k mercs and BMWs on lease.Buying £180k houses at the end of the cycle for houses and their jobs.

My kids are learning fast.My daughter and her partner have already paid off 40% of their mortgage at 27 on a really nice house on my estate and he is slowly building a portfolio.He only puts £500 in each share and only a couple a year,but has about 8 already and said he is now getting a weeks wages in divis a year.On the road now.My daughter is a nurse and everyone she works with takes lease cars and everyone told her how great it was.She has an 9 year old Peugeot i fix that costs her about £200 a year instead of £2800 a year.The saving is towards knocking the mortgage down.

Inflation in the next cycle and the rising rates that come with it are going to shock people to the core.People dont have the finances,or worse the skill and knowledge to navigate that kind of cycle.

We have apprentices at work aged around 20 (so in their last year) driving around in all sorts of Merc's from leased A Classes to used AMG ones.

They don't think twice about tying themselves into potentially crippling 48 month leases and the only thing they think about is how much per month everything is.

New-build estates are full of youngsters and I have one child in one, obsessed with having a detached house with a garage he has spunked £279K on one. IIRC he is on ~30K and she is on ~£25K, if one of them ends up without work they will be seriously fucked especially as they drive two leased German cars.

My other two kids are more sensible.

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Yellow_Reduced_Sticker
On 13/09/2019 at 05:47, Castlevania said:

Pro tip. Get an NUS card (you can lie that you’re studying) and get 10% off everything in the Co-Op. you could have saved 50p!

 
@Castlevania NICE TIP, as I'm probably the MOST frugal cheap skate in their mid-fifties :Old: on this thread...can i get an NUS card, after all I am studying... studying this thread most days!That counts eh?:D
 
On 12/09/2019 at 23:48, stokiescum said:

takeing a lodger in if we are simplyfying matters 

@stokiescum Every time i read ya posts to do with lodgers, makes me think back about 'ol classic late 70's early 80's Rigsby with his tenants from Rising Damp, absolutely hilarious xD they were the DAYS for comedy!

...stokie why stokiescum?  just a thought why not change ya username to Rigsby?!:ph34r:

 

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24 minutes ago, Yellow_Reduced_Sticker said:
 
@Castlevania NICE TIP, as I'm probably the MOST frugal cheap skate in their mid-fifties :Old: on this thread...can i get an NUS card, after all I am studying... studying this thread most days!That counts eh?:D
 

@stokiescum Every time i read ya posts to do with lodgers, makes me think back about 'ol classic late 70's early 80's Rigsby with his tenants from Rising Damp, absolutely hilarious xD they were the DAYS for comedy!

...stokie why stokiescum?  just a thought why not change ya username to Rigsby?!:ph34r:

 

Well I’m in stoke and I’m feral quite apt lol

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Ok so Gold and Silver nosediving back to their 200MAs... swiftly exited for a bit and might have a crack at some oilies and gasies in the meantime.

DYOR etc 

but here I found this one and I thought where is the best place to post it. 

Thought maybe over at that Big Bathroom thread, but then thought of yourself, Errol- thought you might like it here.

https://www.thejournal.ie/gold-toilet-blenheim-palace-4809668-Sep2019/

now That is a Toilet.

 

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3 hours ago, Chewing Grass said:

We have apprentices at work aged around 20 (so in their last year) driving around in all sorts of Merc's from leased A Classes to used AMG ones.

They don't think twice about tying themselves into potentially crippling 48 month leases and the only thing they think about is how much per month everything is.

New-build estates are full of youngsters and I have one child in one, obsessed with having a detached house with a garage he has spunked £279K on one. IIRC he is on ~30K and she is on ~£25K, if one of them ends up without work they will be seriously fucked especially as they drive two leased German cars.

My other two kids are more sensible.

In context i bought my house for £50k and was earning £30k and my then partner £26k and we had zero debt and cars paid for.Its insane the situation your child has got into.They are trapped so they keep paying tax for those who wont work.Im sorry that they didnt listen to you,but sometimes there is nothing you can do.

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3 hours ago, Chewing Grass said:

We have apprentices at work aged around 20 (so in their last year) driving around in all sorts of Merc's from leased A Classes to used AMG ones.

They don't think twice about tying themselves into potentially crippling 48 month leases and the only thing they think about is how much per month everything is.

New-build estates are full of youngsters and I have one child in one, obsessed with having a detached house with a garage he has spunked £279K on one. IIRC he is on ~30K and she is on ~£25K, if one of them ends up without work they will be seriously fucked especially as they drive two leased German cars.

My other two kids are more sensible.

What really are they supposed to do though? Wait for 5-10 years for a 50% house price crash?

By that time they will have wasted nearly as much money in rent.

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3 hours ago, Yellow_Reduced_Sticker said:
 
@Castlevania NICE TIP, as I'm probably the MOST frugal cheap skate in their mid-fifties :Old: on this thread...can i get an NUS card, after all I am studying... studying this thread most days!That counts eh?:D
 

@stokiescum Every time i read ya posts to do with lodgers, makes me think back about 'ol classic late 70's early 80's Rigsby with his tenants from Rising Damp, absolutely hilarious xD they were the DAYS for comedy!

...stokie why stokiescum?  just a thought why not change ya username to Rigsby?!:ph34r:

 

I love the episode where the dad comes around threatening one of his tenants for seeing  his daughter and Rigsby slings the bloke out.He says there is no such thing as the permissive society and he should know he has looked for it.In the scene the young tenants see Ribsby in a different light,that in fact he is a tough guy underneath and for all his moaning at them cares about them and is a sort of father figure.The other seen in the movie where Phillip the dark guy tells the truth he isnt a chief son,Rigsby says,your from royalty alright,look at the profile of your face,,its a superb scene where you see Rigsby isnt racist at all,and for all his jokes and put downs he has great respect for Phillip and likes him.Phillip then sees Rigsby in a different light and respects him back.Brilliant show.

5 minutes ago, AQUAMAN said:

What really are they supposed to do though? Wait for 5-10 years for a 50% house price crash?

By that time they will have wasted nearly as much money in rent.

Move north.

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4 hours ago, Chewing Grass said:

We have apprentices at work aged around 20 (so in their last year) driving around in all sorts of Merc's from leased A Classes to used AMG ones.

They don't think twice about tying themselves into potentially crippling 48 month leases and the only thing they think about is how much per month everything is.

New-build estates are full of youngsters and I have one child in one, obsessed with having a detached house with a garage he has spunked £279K on one. IIRC he is on ~30K and she is on ~£25K, if one of them ends up without work they will be seriously fucked especially as they drive two leased German cars.

My other two kids are more sensible.

Trouble is, though, that child is 'normal'.  If shit comes to fan then the gov will work up mechanisms to support them.  As a country we couldn't afford to have everyone lose their house because interest rates have gone up.  

IMO we'll end up in a position where sensible folk (your other two) are hammered to keep the unsensible in houses (your third one).

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7 hours ago, DurhamBorn said:

You all know my thoughts on this,i think oil goes into the $30s at some point,then if/when we get a bust sharp short falls down to below $20,for a very short period,then next cycle $200+ or even $300+.I bought a few oil stocks though and have the ladders in place.Road map is clear down the road.Its one of the few areas to protect wealth in the next cycle.Its a classic really.Everyone thinks oil has no future (India alone is seeing massive growth in use,no chance electric takes over for 50 years) at the same time as it will have the best macro conditions since the 70s and probably falling supply.Its one of the reason i like transports as they will hedge for 4 years so avoid a lot of the pain at the same time as driving is costing more and more.

Oil To Hit $100? Half Of Saudi Oil Output Shut After Drone Strikes Cripple World's Largest Oil Processing Facility

https://www.zerohedge.com/geopolitical/massive-fire-after-drone-strike-hits-worlds-largest-oil-processing-facility-saudi

Black(!) swan?

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Yellow_Reduced_Sticker
1 hour ago, DurhamBorn said:

I love the episode where the dad comes around threatening one of his tenants for seeing  his daughter and Rigsby slings the bloke out.He says there is no such thing as the permissive society and he should know he has looked for it.In the scene the young tenants see Ribsby in a different light,that in fact he is a tough guy underneath and for all his moaning at them cares about them and is a sort of father figure.The other seen in the movie where Phillip the dark guy tells the truth he isnt a chief son,Rigsby says,your from royalty alright,look at the profile of your face,,its a superb scene where you see Rigsby isnt racist at all,and for all his jokes and put downs he has great respect for Phillip and likes him.Phillip then sees Rigsby in a different light and respects him back.Brilliant show.

@DurhamBorn I'm surprised that you've seen  Rising Damp, and ya remember the episodes so well! ...but then i think we only have a decade different age wise, YEP just brillant Rigsby (Leonard Rossiter RIP)

DB, you mentioned youre an engine fitter, can ya tell me who makes all the mechanical parts, are they made in house?

1 hour ago, dgul said:

Trouble is, though, that child is 'normal'.  If shit comes to fan then the gov will work up mechanisms to support them.  As a country we couldn't afford to have everyone lose their house because interest rates have gone up.  

...they didn't have any mechanisma to support the folks when rates shoot up to 17% in 1989 to 93 ...I nearly LOST MY HOUSE, had to rent it out, even with our combided salary & rent coming in we just managed to pay the mortgage, frecking sh*t 3 years!

The young of today have NO idea that IR's can go to 17% ...bit like someone telling me back then that IR's would go to a lowery 0.5% !!!

And have lots of mates back in that time , who gave the keys back to the EA, others who broke up with parnters, it really was a terrible time, one guy i know even ended up living in a caravan!:o

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25 minutes ago, Loki said:

Oil To Hit $100? Half Of Saudi Oil Output Shut After Drone Strikes Cripple World's Largest Oil Processing Facility

https://www.zerohedge.com/geopolitical/massive-fire-after-drone-strike-hits-worlds-largest-oil-processing-facility-saudi

Black(!) swan?

Never trade on things like this,they have no affect over the very short term.The thing to note though is arms sales,they have only one way to go in the next cycle.

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1 hour ago, dgul said:

Trouble is, though, that child is 'normal'.  If shit comes to fan then the gov will work up mechanisms to support them.  As a country we couldn't afford to have everyone lose their house because interest rates have gone up.  

IMO we'll end up in a position where sensible folk (your other two) are hammered to keep the unsensible in houses (your third one).

Government will have zero control of it,US long bond rates will call the shots.The couple might not lose the house,they will lose the cars,lose the holidays,lose the nights out,lose the new clothes,lose the weekends away,and enjoy rates going north instead.They will have to work much longer for the same utility.Remember the market always hurts the most people possible.It always has and always will.In the UK thats housing and pensions in trackers.

By 2027 rates will be 7% probably minimum,unless we dont get big QE.

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@Yellow_Reduced_Sticker most of the simple parts are made all over the world,China,India,US.The most important parts we make ourselves in plants mostly in Brazil and the US.A lot of the common rail parts are made by BOSCH in Germany or Czech Republic.The turbos etc another critical part is made here in the UK in Huddersfield by Holset (we own them).

The blocks are key and made in Brazil by ourselves as are the cranks the shells,pistons etc.Our engines are the best in the world.Pretty much every problem ironed out over 100 years.Incredible power in them as well.We still make a lot of quality goods in this country,and more is coming back.

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36 minutes ago, DurhamBorn said:

Remember the market always hurts the most people possible.It always has and always will.In the UK thats housing and pensions in trackers.

Not always though. There seems to be more good years than bad.

Too expand on this surely it would be the over leveraged (not strictly housing) and the poorly allocated/diversified that would suffer. But then they likely suffer all the time

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36 minutes ago, DurhamBorn said:

@Yellow_Reduced_Sticker most of the simple parts are made all over the world,China,India,US.The most important parts we make ourselves in plants mostly in Brazil and the US.A lot of the common rail parts are made by BOSCH in Germany or Czech Republic.The turbos etc another critical part is made here in the UK in Huddersfield by Holset (we own them).

The blocks are key and made in Brazil by ourselves as are the cranks the shells,pistons etc.Our engines are the best in the world.Pretty much every problem ironed out over 100 years.Incredible power in them as well.We still make a lot of quality goods in this country,and more is coming back.

Was talking with a old mate the other week, he works for Sunseeker down in Poole Dorset. He was telling me they use Cummings engines, no slow down with rich folk ordering boats apparantly.(for now).

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9 minutes ago, A_P said:

Not always though. There seems to be more good years than bad.

Too expand on this surely it would be the over leveraged (not strictly housing) and the poorly allocated/diversified that would suffer. But then they likely suffer all the time

Ive always thought any market is like a predator, it waits until as many prey as possible are in striking distance before it makes it move. Or like the fox in the hen house.

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Just now, Bobthebuilder said:

Ive always thought any market is like a predator, it waits until as many prey are in striking distance before it makes it move.

and strikes the weak and feable...

Data mainly shows short term pain but long term gain to those who can and do hold on.

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1 minute ago, A_P said:

and strikes the weak and feable...

Data mainly shows short term pain but long term gain to those who can and do hold on.

They usually strike the young.

I agree, good gains for those who can hang on, its just the hanging on bit thats a tad difficult.

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4 hours ago, Thorn said:

here I found this one and I thought where is the best place to post it. 

Thought maybe over at that Big Bathroom thread, but then thought of yourself, Errol- thought you might like it here.

https://www.thejournal.ie/gold-toilet-blenheim-palace-4809668-Sep2019/

now That is a Toilet.

As an aside, and whilst we are talking toilets...I used to buy the expensive, super soft tissue and then one day sitting there I thought `I am literally wiping my bottom on £1 notes`. From that day forward it was the cheapo `sandpaper` brand for me!...still haven't resorted to what we used as kids though (cut up newspaper squares) :-) :-) :-)

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Napoleon Dynamite

Just wanted to say thanks for the thread.  I've not commented much, or even invested off the back of it until recently, but I've followed from the start and tried to learn.

My cashflow's got a bit better lately and I've got some fundamentals in place (10 year low rate fix on mortgage, cars paid off, emergency fund etc.) So I'm now in a place to start trickling money in and building.

Plan is to save hundreds a month, then once I've got £1200 buy a share.  Spray and pray into FTSE 350 shares with information taken from this thread.  Two shares per sector.  Holding them long term.  Sound about right?

iweb looks like the best bet for me for a dealing account.  Will use an ISA to start with, then once I've built up a start using a LISA/SIPP for the Tax Relief.

Actually had a few thousand in a SIPP in Vanguard Life Strategy that I wasn't paying much attention to.  So sold that and I started with VOD and CNA last month, so far so good.  SIPP is HL and I think the fees are terrible for a small amount, will sort that out in future.

Will keep up to date with progress, assuming all goes to plan.

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3 hours ago, Yellow_Reduced_Sticker said:

...

...they didn't have any mechanisma to support the folks when rates shoot up to 17% in 1989 to 93 ...I nearly LOST MY HOUSE, had to rent it out, even with our combided salary & rent coming in we just managed to pay the mortgage, frecking sh*t 3 years!

The young of today have NO idea that IR's can go to 17% ...bit like someone telling me back then that IR's would go to a lowery 0.5% !!!

And have lots of mates back in that time , who gave the keys back to the EA, others who broke up with parnters, it really was a terrible time, one guy i know even ended up living in a caravan!:o

An excellent case in point.

In the 80's we had interest rates hovering around 10%, and inflation to match.  So an increase to 15%, while punitive, wasn't the killer that even 7% would be now.  Sure, interest rates went much higher for a short period, but even then the spike didn't affect that many people -- most people had purchased their houses more than a couple of years before and inflation (and the important wage rises) had eroded their debt.   Of course, it affected those that had bought (and I was in that cohort), but it wasn't that large a proportion of the population (ie, so the government didn't need to worry as much about the impact on the economy as you might otherwise imagine).

Nowadays, we've had low interest rates and high asset prices for years and years, and none of the inflation to erode the debt -- if they did raise interest rates they'd be punishing a huge number of people, not just the relatively few that had bought since 2016 (say). 

The other point is also of relevance -- they let interest rates rise but in the end let the pound leave the ERM rather than protect it with the necessary interest rates.  Ie, when things really got hairy they let the debtors have a lifeline.

Now, that's not to say that we'll have much higher interest rates, and I'm sure they'll hurt -- but I maintain that the government will intervene with mechanisms to support debtors (eg, MIRAS -- in fact, I think they'll introduce tax relief on most debt).  In addition, I'd suggest that they'll let the pound sink rather than protect it -- this will have the impact of hurting those relying on returns from simple investments (including pensioners) while not exposing simple debtors (eg, OO with mortgage) to the full pain of the interest rates that would otherwise be necessary to stabilise the economy (well, the exchange rate, anyway).

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