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

[Starsend]

5 hours ago, DurhamBorn said:

Because their price depends on credit and the cost of credit.The cost will be going up of mortgages and so will council tax,fuel,food etc.My road map says relative to present prices the costs of owning a mortgaged home will more than double and so a cut in half is the likely action.The belief is house price are driven higher by household forming,but thats not true,its the cost and ease of credit.

Commods will be where the inflation goes as people try to front run their currency being de-valued and they feed direct into inflation.Money supply going into housing slows velocity,money flowing into commods forces velocity to speed up,and then go gangbusters.

Thanks DB, good explanation and one I entirely agree with now you've pointed it out so simply. I have some hope then that my kids may one day own a house at a sensible price.

Be good to have some more discussion  on this thread at to what commods to buy and also how, what instruments available on HL etc so we can all be ready. I know Wisdom Tree do many but are there safer alternatives? I got stuck when they were frozen in 2008 like others on this thread. Must be other options available, be good to compile a list for everyone.

[Google247]

6 hours ago, DurhamBorn said:

Because their price depends on credit and the cost of credit.The cost will be going up of mortgages and so will council tax,fuel,food etc.My road map says relative to present prices the costs of owning a mortgaged home will more than double and so a cut in half is the likely action.The belief is house price are driven higher by household forming,but thats not true,its the cost and ease of credit.

Commods will be where the inflation goes as people try to front run their currency being de-valued and they feed direct into inflation.Money supply going into housing slows velocity,money flowing into commods forces velocity to speed up,and then go gangbusters.

First time posting, have read the thread over the past few months and Durhamborn I find your insights fascinating.

I dont agree with you on housing though. You cited the role credit plays in house prices which I fully agree with... however our opinions diverge on the outcome for prices due to credit doubling in cost. This may well happen. I dont see it halving prices though as mortgages properties either btl or owner occupied account for around 30-35% of the entire market.

If every house was mortgaged I think your view may be more accurate, maybe I am wrong but I honestly cant see how house prices in this country halve.. it would need all of the mortgaged buyers defaulting which would bankrupt the banks and the country. Can you honestly see this being allowed to happen? I dont know what method would or could be used to stop it but countless governments have made it clear that house price crashes wont be tolerated. 

 

[JMD]

Has anyone thoughts on Halfords prospects long term? Are any on here aware of its corporate strategy, or is it destined just to go bust?

It doesn't have competitors but then again what is its market these days? Is it a classic victim of the changes happening within the car industry... increasingly reliable cars, greater number of lease cars, less people prepared to do own car diy… and with the structural changes to the transport sector next cycle predicted by DB is it doomed !?!  

Its share price is tanking but I suppose its financials tells its own story, unmovable 300M debt, almost static 550M t/o for last 5 years, and declining 20M profit.

 

I ask just in case there may be hope and worth a sneaky punt?

 

 

[DurhamBorn]

Halfords is really tricky and iv been torn two ways on it.One side says its doomed as hardly anyone fixes their own car anymore,most people have lease cars (and the ones that dont can buy the parts cheaper elsewhere at motor factors).On the other cycling is likely a growth area,in the downturn more and more people should give up lease cars and own older cars and their easy fitting service of things like batteries and wipers should be a nice area.The worry is its cost base is simply to big compared to the sales they can make.I dont think id buy it myself as there are many more options out there.

[Loki]

Older cars simply become uneconomical to repair, unless we go full Cuba.  The best era in my mind was the late 90s for cars.  Enough tech to be reliable and fuel efficient, no CANBUS, good rust proofing.  Most of those are bean cans now.  Most people don't really care but as a petrol head I do think we lost a lot of great engineering as those cars were scrapped.

[DurhamBorn]

5 minutes ago, Loki said:

Older cars simply become uneconomical to repair, unless we go full Cuba.  The best era in my mind was the late 90s for cars.  Enough tech to be reliable and fuel efficient, no CANBUS, good rust proofing.  Most of those are bean cans now.  Most people don't really care but as a petrol head I do think we lost a lot of great engineering as those cars were scrapped.

Iv an 05 Pug 2.0 diesel 307 .Doesnt smoke at all,engine pretty much as new,110k on it.New clutch etc,but apart from that bodywork and most mechanics sounds.I bought it for around £5k at 5 years old,nearly 14 now.Iv got an 07 one as well as back up but rarely use that one.Insurance is £210 a year,repairs average about £200 a year as well.

I like 2.0l diesel engines on cars as they take very little wear.Mine would shoot up the steepest hill in 4th if needed.The weight of the car is nothing to a 2.0l.

 

[Bobthebuilder]

33 minutes ago, JMD said:

Has anyone thoughts on Halfords prospects long term? Are any on here aware of its corporate strategy, or is it destined just to go bust?

It doesn't have competitors but then again what is its market these days? Is it a classic victim of the changes happening within the car industry... increasingly reliable cars, greater number of lease cars, less people prepared to do own car diy… and with the structural changes to the transport sector next cycle predicted by DB is it doomed !?!  

Its share price is tanking but I suppose its financials tells its own story, unmovable 300M debt, almost static 550M t/o for last 5 years, and declining 20M profit.

 

I ask just in case there may be hope and worth a sneaky punt?

 

 

I was in Halfords today, they could have a bigger market if more people knew about some of the stuff they stock. Good tools for many trades, paint spray is popular with some modellers etc, i dont think they have the broad appeal that could be possible, shame i like them. Dont hold any though.

[Loki]

One high fuel pressure system fault would be a big fix though.  (Not to an engine builder, naturally).  Or a failed ECU could be unavailable as a spare part.

[Bobthebuilder]

16 minutes ago, Loki said:

Older cars simply become uneconomical to repair, unless we go full Cuba.  The best era in my mind was the late 90s for cars.  Enough tech to be reliable and fuel efficient, no CANBUS, good rust proofing.  Most of those are bean cans now.  Most people don't really care but as a petrol head I do think we lost a lot of great engineering as those cars were scrapped.

I would agree with that, the 90s VW Golf VR6 was a cracker. Also the 90s BMW 3 series.

[Yellow_Reduced_Sticker]

39 minutes ago, Bobthebuilder said:

57 minutes ago, Loki said:

Older cars simply become uneconomical to repair, unless we go full Cuba.  The best era in my mind was the late 90s for cars.  Enough tech to be reliable and fuel efficient, no CANBUS, good rust proofing.  Most of those are bean cans now.  Most people don't really care but as a petrol head I do think we lost a lot of great engineering as those cars were scrapped.

I would agree with that, the 90s VW Golf VR6 was a cracker. Also the 90s BMW 3 series.

I must of been lucky then with my 1984 VW Golf C 1300cc, MINT condition NO RUST its now in my garage appreciating in value every year! LOVELY EFT that only goes north lol

[Bobthebuilder]

4 minutes ago, Yellow_Reduced_Sticker said:

I must of been lucky then with my 1984 VW Golf C 1300cc, MINT condition NO RUST its now in my garage appreciating in value every year! LOVELY EFT that only goes north lol

Oh dont get me wrong they were crackers an all, i had a 1983 mk1 gti 1.8 Pirelli edition, very nice car it was to, in fact probably the best car ive ever had. Can i have it back please?

[Don Coglione]

3 minutes ago, Bobthebuilder said:

Oh dont get me wrong they were crackers an all, i had a 1983 mk1 gti 1.8 Pirelli edition, very nice car it was to, in fact probably the best car ive ever had. Can i have it back please?

For 20 grand, you can!

[dgul]

58 minutes ago, Bobthebuilder said:

I was in Halfords today, they could have a bigger market if more people knew about some of the stuff they stock. Good tools for many trades, paint spray is popular with some modellers etc, i dont think they have the broad appeal that could be possible, shame i like them. Dont hold any though.

Halfords is complex.

About 40% of their trade is bikes.  That sounds good (recession => less can afford cars => more bikes) but actually there are loads of bikes already in the UK (most of which are significantly under-used).  Sure, there's a maintenance requirement, but most jobs can be done with bits from ebay etc (bikes aren't hard to maintain) and harder jobs are a better fit for a local bike shop than the guys at Halfords.

Then there's cars (60%).  Actual spare parts and maintenance isn't that significant a part of their trade -- the biggie is 'accessories'.  The big problem here is that (IMO) Halfords has done a Maplin -- they've neglected their old faithful market (spares) and gone for the high margin accessories market.  Like Maplin, though, when customers realise that they're selling the same stuff as you get on Amazon for twice the price they'll associate the brand with 'ripoff' -- and once that label has been applied it is very difficult to take off.

Oh, and the old faithful (buying spares)?  They've mostly had enough with terrible service and patchy stock levels and have realised that the internet is cheaper, and EuroCarParts is there for the 'in a hurry'/'next day' stuff.

I think the next downturn could be terminal for them.

[Yellow_Reduced_Sticker]

4 hours ago, TheCountOfNowhere said:

Heads up. 

Just between ye and me. 

A nice lady in London just told me they're trying to offload properties for 50% lower than some of the current asking prices. Market is dead. Some people need to offload quickly, the term she used that I liked was some people are trying to realign to current market value.

This might be a one off or it might be the start of something sustained, who knows. The madness has to end at some point 

Good luck folks. 

REALLY? What sort of moolah are the properties ya talking MIL + ?

 

8 minutes ago, Bobthebuilder said:

Oh dont get me wrong they were crackers an all, i had a 1983 mk1 gti 1.8 Pirelli edition, very nice car it was to, in fact probably the best car ive ever had. Can i have it back please?

NO! 

My garage & mechanic friend said to me NEVER sell ya GOLF! ya'll regret it. so true looking at ya post Bob!

Even though i'm moving i'll sort somewhere to store it...

[Bobthebuilder]

Just now, Ponty Mython said:

For 20 grand, you can!

Yes ive heard of the prices they fetch now. I bought mine for £1500 in about 1995ish sold it 4 years later for £3500 only car ive ever made money on. Still wish i had it mind. As a comparison i bought a nice 1 bed top of split house flat in 1997 for £33500.

[Yellow_Reduced_Sticker]

4 minutes ago, Bobthebuilder said:

Yes ive heard of the prices they fetch now. I bought mine for £1500 in about 1995ish sold it 4 years later for £3500 only car ive ever made money on. Still wish i had it mind. As a comparison i bought a nice 1 bed top of split house flat in 1997 for £33500.

yep same here bought £1700 in 1997 today worth 9 to £10 K unreal!

hey Bob, love talking about OLD cars, but we going to get a bollocking soon... for being off topic!

[Bobthebuilder]

4 minutes ago, Yellow_Reduced_Sticker said:

yep same here bought £1700 in 1997 today worth 9 to £10 K unreal!

hey Bob, love talking about OLD cars, but we going to get a bollocking soon... for being off topic!

OK.

Back on topic, my DOSBODDERS portfolio built up of the usual suspects is doing pretty well, really pleased so far, thanks DB and everyone else. Saying that my current best short term risers are supermarkets and i dont mean car supermarket.

[Yellow_Reduced_Sticker]

39 minutes ago, dgul said:

Halfords is complex.

About 40% of their trade is bikes.  That sounds good (recession => less can afford cars => more bikes) but actually there are loads of bikes already in the UK (most of which are significantly under-used).  Sure, there's a maintenance requirement, but most jobs can be done with bits from ebay etc (bikes aren't hard to maintain) and harder jobs are a better fit for a local bike shop than the guys at Halfords.

Then there's cars (60%).  Actual spare parts and maintenance isn't that significant a part of their trade -- the biggie is 'accessories'.  The big problem here is that (IMO) Halfords has done a Maplin -- they've neglected their old faithful market (spares) and gone for the high margin accessories market.  Like Maplin, though, when customers realise that they're selling the same stuff as you get on Amazon for twice the price they'll associate the brand with 'ripoff' -- and once that label has been applied it is very difficult to take off.

Oh, and the old faithful (buying spares)?  They've mostly had enough with terrible service and patchy stock levels and have realised that the internet is cheaper, and EuroCarParts is there for the 'in a hurry'/'next day' stuff.

I think the next downturn could be terminal for them.

what about their auto MOT centers same company isn't it?

they have good reviews:

https://uk.trustpilot.com/review/www.halfordsautocentres.com

[DurhamBorn]

23 minutes ago, Bobthebuilder said:

OK.

Back on topic, my DOSBODDERS portfolio built up of the usual suspects is doing pretty well, really pleased so far, thanks DB and everyone else. Saying that my current best short term risers are supermarkets and i dont mean car supermarket.

I did think all the UK cyclicals would turn higher a few weeks back as put on here,really strong run since,my portfolio has performed really well.Got some nice timing as well as some of my miner profits went into many stocks that tagged the bottom.Lots of 20%+ increases.SSE up 20% with dividends as well.Only really Centrica down much,but can live with that.

[dgul]

11 minutes ago, Yellow_Reduced_Sticker said:

what about their auto MOT centers same company isn't it?

they have good reviews:

https://uk.trustpilot.com/review/www.halfordsautocentres.com

I'm sure they're very good (I've never used one -- I've got a guy down the end of the road who's excellent, cheap and won't sting me for unnecessary work on the MoT).

But, they're only 10%ish of group revenue and (more importantly) barely profitable.  I don't think they're important for the group.

[Bobthebuilder]

11 minutes ago, DurhamBorn said:

I did think all the UK cyclicals would turn higher a few weeks back as put on here,really strong run since,my portfolio has performed really well.Got some nice timing as well as some of my miner profits went into many stocks that tagged the bottom.Lots of 20%+ increases.SSE up 20% with dividends as well.Only really Centrica down much,but can live with that.

I know i dont post much of interest here, i am just a tradesman really with a 20 year love of stock investing. Love this thread, i bought miners late last year sold when Gold hit $1500, reinvested into reflations. Its probably the most succesful period ive had investing wise. I wish you all the very best of luck and lets meet up for a beer someday.

[Barnsey]

 

[spygirl]

14 hours ago, Starsend said:

This is the bit I don't get with regards to house prices. You've said elsewhere they are toast but why will they simply not end up even more mentally priced.

CB are there to ensure their economy can transact, has enough liquidtity and banks operate in an orderly, solvent way.

Quick history of uk banks n uk housing.

Up til 60s, most people lived in non ooo housing. Mortgages were v rare n hard to get.

Coming off gold standard allowed uk to expand money supply. Dereg in late 70s of finance allowed finsec to expand.

Despite the noise of inflation houses tracked mortgage limits - about 5x median income.

There was Barber boom but that was nothing major.

First major fuckup was endowments in mid 80s. Banks loved endiwments. Rather than have debt paid off, banks charged interest on full loan whilst the endowment matured. By setting monthly endowment at 50% of equiv repaynent, the banks could lend more money, and collect more interest. Fantastic!! Except endowments were a ponzi. And high irs in 90s caused massive defaults as even though capital repayments were low , ir payments shot up.

Next were three fuckups that followed each other - demute of building societies, followed by io mortgages, followed by io btl.

Demute gave ex bs access to wholesale money, rather than slown expensive deposits n capital.

The extra money pushed up hpi, so people did io mortgages, not even pretending to have caputal repayment.

Then even that could not meet cost, so they sold io btl to people whod bought 20 years earlier.

All while idiot Brown light touch.

Uk banks grew like a rocket.

Then fell like a stick, as whole sale money dried up and they were basically bust.

In the 10 years since uk BSes demuted, not a single one was solvet. 200 odd years of banking -poof, gone.

300 odd years of no bank run or major failure. Then 80% of uk banking going bust with 2 years. Nothing seen like that in the world ever.

Problem is housing is so expensive uk economy is locked - no job movement. Older homeowners are stuck as theres no younger ones to transact.

Job market is rigid outside tax credit subbed jobs. I see it every day - company wont pay enoigh for soneone to move, so job remains open.

BoE one good thing - MMR. Puts upper limit of 4.5 household income on mortgage - minus any spend.

Except with low irs and low wage growth, rebalancing is taking ages, cauding probs - hence cuntbin n brexit.

Whats going to happen?

QE will find its way into money. Bailing out banks was stupid. Should have took them to wall, marked down asset values, then recapitalise loans.

US have fixed their finsec bar fanny mac n mae.

UK not as good.

Ecb - useless.

BoE has fixed the size of uk mortgages to income, which will fix the HPE multiple.

North is okish - bar low transaction caused by 50% of 25-50 being on TCs, where you cannit get mortgage.

South is in big trouble. Well paying finsec jobs have gone, making high hpi even more danaging. And job market is stuck as noone us relocating.

Low IR is freezing transactions.

 

 

[TheCountOfNowhere]

2 hours ago, Yellow_Reduced_Sticker said:

REALLY? What sort of moolah are the properties ya talking MIL + ?

 

NO! 

My garage & mechanic friend said to me NEVER sell ya GOLF! ya'll regret it. so true looking at ya post Bob!

Even though i'm moving i'll sort somewhere to store it...

Top end for the shires ...£1.2m

 

Or a 2 bed flat in Brixton. 

Top down pressure. 

Yeah, it's. It a bubble. 

Agent was verbose. They need volume. 90.% of people will not see £1m after tax..99% won't see £2m

 

Whos gonna buy all these 2m properties? 

 

Only people in a pyramid scam can.... Till it collapses. 

 

Its at best... Teetering. 

 

Anyway, I'm done now, back to the continent after a few months working here. My £s to euros have made me a few quid so might come back post no deal brexit... Else no chance. 

 

You have been warned. 

[Don Coglione]

14 minutes ago, TheCountOfNowhere said:

Top end for the shires ...£1.2m

 

Or a 2 bed flat in Brixton. 

Top down pressure. 

Yeah, it's. It a bubble. 

Agent was verbose. They need volume. 90.% of people will not see £1m after tax..99% won't see £2m

 

Whos gonna buy all these 2m properties? 

 

Only people in a pyramid scam can.... Till it collapses. 

 

Its at best... Teetering. 

 

Anyway, I'm done now, back to the continent after a few months working here. My £s to euros have made me a few quid so might come back post no deal brexit... Else no chance. 

 

You have been warned. 

Oh do fuck off, you stupid lying c*unt.