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


spunko

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8 hours ago, DurhamBorn said:

I still own some,but not many now.Reason being im not sure on currency.I think sterling could rally up to $1.38.There is probably another 10% in bonds,maybe a little more,but im not chasing that.Im on my road map where im slowly buying into stocks i want,and some that are still slightly above what i want to start laddering at.Others are well into the buying process,a few have hit bottom ladders,some bouncing,some bumping along.Price points determine what and when i buy now.Nothing else gets in the way.Iv a little more work to do on the big oil companies and the telcos as id like to add a few more companies.I think the telcos are undervalued on a structural level before they suffered the big falls.Likely they will get a few more smacks yet,but fancy them to be big winners in the cycle ahead.Im still seeing oil below $40,maybe even a crazy spike below $20 for a very short period so iv only just added a very small amount of the oil companies so far.Im hoping to get them cheaper.Tricky as they might run on a weaker dollar but liquidity looks like its falling faster than CB action so im expecting another jolt down.Tough call though.

Thank you as always! Do you have any thoughts on the commodity funds available on HL? I ask as these have no dealing charge unlike £11.95 each time I buy shares.  

THREADNEEDLE ENHANCED COMMODITIES CLASS ZGHEDGED - ACCUMULATION (HEDGED GBP) and THREADNEEDLE ENHANCED COMMODITIES INCLUSIVE - CLASS AGH - ACCUMULATION (HEDGED GBP) are all T-Bills so they can be ignored

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13 hours ago, DoINeedOne said:

Investors in a £2.5bn UK property fund have been blocked from withdrawing cash after “unusually high and sustained outflows.”

M&G Investments (MNG.L) said on Wednesday afternoon it was halting withdrawals from its UK-focused Property Portfolio Fund with immediate affect.

The company said that “unusually high and sustained outflows” combined with “continued Brexit-related political uncertainty and ongoing structural shifts in the UK retail sector” have made it “difficult” to sell buildings it is invested fast enough to meet redemptions.

Here is what the Guardian report they own. Ha I’m actually familiar (in that I have shopped in them) both the Chelmsford and Maidstone retail ones. 
 

the So-Called BBC article I saw said it was a £2.5bn fund with £1bn of redemptions over last 12months.

 

https://www.theguardian.com/business/2019/dec/04/what-does-the-m-and-g-property-fund-own

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12 hours ago, Majorpain said:

Nah, £2.5bn is peanuts in the grand scheme of things, and they did the same thing in 2016.

Its the confidence thing though, second time this year that a fund has suspended withdrawals due to liquidity, and unsurprisingly its right after the UK retail sales plumbed new depths in the graph i posted up page.

The problems are stored up on the balance sheets. Eg. Massive right down of assets at some point. Then it balloons out all over the place - Local Authority ‘investment’, pension funds,  lenders taking a bath (I guess taking control of the companies). Also construction gets whacked as schemes get mothballed as the financing collapses. 
 

Re retail They’ll be intense lobbying regarding business rates, and other schemes - convert to residential, redevelopment of town centres to try to stop this. Might be just time so people can get the hell out of the worse commercial property positions?

 Intu Plc looks particularly vulnerable. Only a matter of time I think before it’s got new owners (lenders)

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Democorruptcy
12 hours ago, DurhamBorn said:

I still own some,but not many now.Reason being im not sure on currency.I think sterling could rally up to $1.38.There is probably another 10% in bonds,maybe a little more,but im not chasing that.Im on my road map where im slowly buying into stocks i want,and some that are still slightly above what i want to start laddering at.Others are well into the buying process,a few have hit bottom ladders,some bouncing,some bumping along.Price points determine what and when i buy now.Nothing else gets in the way.Iv a little more work to do on the big oil companies and the telcos as id like to add a few more companies.I think the telcos are undervalued on a structural level before they suffered the big falls.Likely they will get a few more smacks yet,but fancy them to be big winners in the cycle ahead.Im still seeing oil below $40,maybe even a crazy spike below $20 for a very short period so iv only just added a very small amount of the oil companies so far.Im hoping to get them cheaper.Tricky as they might run on a weaker dollar but liquidity looks like its falling faster than CB action so im expecting another jolt down.Tough call though.

Article about oil

https://www.hl.co.uk/news/2019/12/5/negative-emerging-markets-outlook-could-hammer-oil-demand-in-2020?

 

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Talking Monkey
17 hours ago, Eventually Right said:

Slightly tangential, late night post:

If you believe (as I do) in some of the central tenets of this, and the other threads, of what’s coming fairly imminently:

ie a global bust; massive government action on fiscal policy (MMT/huge unfunded government spending etc) because globally, rates are effectively at zero, so monetary policies alone won’t reverse the crash; this eventually leading to much higher inflation; and an even worse situation in 10 years or so, when the public completely lose faith in the centrals banks’ ability to smooth/save the global economy.

And, you’ve tried to express this to friends/family/colleagues/people you care about etc, but you don’t feel you’ve got through to them, because either:

a) they’re disinterested in economics/politics, and don’t think it really affects them 

b) they’re unwilling to have their beliefs on certain things (house prices always go up, for example) challenged, and believe the next 10 yrs won’t be too different to the last 10, and so don’t want to listen.

c) they’re unable to understand the arguments, because it requires a decent effort to learn about ZIRP/bond bulls/reserve currencies/fiscal vs monetary policies etc, and most people don’t have the time/inclination.

Does that lead you to a state of sort of “glum anxiety”? Because it sometimes feels to me, as if I (and plenty of others, here and on twitter for example) can see what’s coming, but all those friends/family/colleagues etc have no idea about the freight train that’s about to be driven through their future financial plans/dreams.

And you can’t really do that much about it-we could all be wrong, and the global economy totters along for another 10-15 years. I don’t believe that, but it’s not impossible, so you can’t get too forthright in dissuading people not to “stretch themselves to buy that bigger house” or persuading them to invest their savings in physical gold/silver or miners.

So you watch the global economic data get gradually bleaker, relatively happy with how you’ve set your savings/investments up to survive/benefit from a crash, but at the same time, feeling helpless about all those people who have no idea what’s about to hit...

The main thing I say is reduce debt or get onto a long term fix and reduce pointless consumption

The whole buy gold and miners etc and reflation cycle thing is something that I cannot talk about with 95% of people I know as they would just not understand what I am on about

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36 minutes ago, Talking Monkey said:

So you watch the global economic data get gradually bleaker

I get glum anxiety from this happening and yet the sham carries on without a hitch!  

It's like a world wide gaslighting.  It makes me question everything I thought was obvious.

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1 hour ago, Loki said:

I get glum anxiety from this happening and yet the sham carries on without a hitch!  

It's like a world wide gaslighting.  It makes me question everything I thought was obvious.

The hitch appeared today where i work,100 people finished to go with the 70 who went two months ago,orders in free fall.People shocked and numb.I was one month out on it happening when i went back last October.Figured it would be 12 months then.Im very happy to be going as i really need my time back,but didnt want to leave in case i ever want to go back and thought i might as well get the extra capital.I really feel for my workmates,some/most are in terrible positions.Iv been trying to advise a few over the last year to put a bit away,pay down debts etc without looking like i knew much about it.Ignored of course.Im leaving in two weeks and then il have lots of time to get to real work again.A true contrarian, while everyone else is upset,scared and worried sick i was just pleased my road map was on track.The good news for them is they will all be back once the reflation kicks in as they wont be able to produce quick enough.The bad news for the ones left who think this is the bottom is that its just the first stage.Brutal cuts to come yet.

 

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13 minutes ago, DurhamBorn said:

The hitch appeared today where i work,100 people finished to go with the 70 who went two months ago,orders in free fall.People shocked and numb.I was one month out on it happening when i went back last October.Figured it would be 12 months then.Im very happy to be going as i really need my time back,but didnt want to leave in case i ever want to go back and thought i might as well get the extra capital.I really feel for my workmates,some/most are in terrible positions.Iv been trying to advise a few over the last year to put a bit away,pay down debts etc without looking like i knew much about it.Ignored of course.Im leaving in two weeks and then il have lots of time to get to real work again.A true contrarian, while everyone else is upset,scared and worried sick i was just pleased my road map was on track.The good news for them is they will all be back once the reflation kicks in as they wont be able to produce quick enough.The bad news for the ones left who think this is the bottom is that its just the first stage.Brutal cuts to come yet.

 

I'm staggered people who know you ignored you.  I've never met you, doubt I ever will, and I would love to run all of my financial questions past you

My sympathy is limited for the wilfully ignorant, I'm afraid.  But I hope the reflation is good to them.  Maybe they'll learn something without losing too much.

Does this mean you'll be able to post here more? :Jumping:

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9 minutes ago, Loki said:

I'm staggered people who know you ignored you.  I've never met you, doubt I ever will, and I would love to run all of my financial questions past you

My sympathy is limited for the wilfully ignorant, I'm afraid.  But I hope the reflation is good to them.  Maybe they'll learn something without losing too much.

Does this mean you'll be able to post here more? :Jumping:

Indeed it does.As Democorrupcy knows iv been busy working on something capital wise and with that added to other things the next year will be full time work on my and my families portfolios etc.

I actually only went back to work to break my own rules on capital allocation to buy the miners.That worked out very well,so no regrets at all,and i enjoyed working with some old friends again and also getting my skills back up to speed in actually building things.First work will be liquidity.Is the deflation pulling away from the CBs.My quick scanning says it is.That means im still thinking $40 for oil is likely,unless the Fed ups the printing to a level where people want out of dollars.

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If you have time to write an ebook that would be cool.  I'd buy it.  I understand the real world premise of what you say but the numbers are beyond me.  

Like i understand how engines work but couldn't explain a power/torque chart beyond the immediately obviousxD

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1 hour ago, Loki said:

I'm staggered people who know you ignored you.  I've never met you, doubt I ever will, and I would love to run all of my financial questions past you

Don't be surprised. People on this forum are in the massive, massive minority. We are all free thinkers. Virtually all of us have opinions and ideas outside the mainstream of accepted thought.

'Normal' people just don't think about this stuff.

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3 minutes ago, Errol said:

I'm staggered people who know you ignored you.  I've never met you, doubt I ever will, and I would love to run all of my financial questions past you

Everyone at work ans all my friends ignore me. I reckon I probably have more saving than anyone else in my immediate circle, and I don't have loads by any means. I talk openly with them about the ideas on this thread but they don't get it. A lot have gotten HTB new builds. I feel for them if this all pans out as we think it will, as they will get hurt and none of them are bad people, they are just following the received wisdom.

It worked out really well for their parents (boomers).

I've convinced my girlfriend though. A cheap (30% below market) but derelict flat came up recently and  SHE argued ME out of it saying the system was about to collapse 😂.

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36 minutes ago, Loki said:

I'm staggered people who know you ignored you.  I've never met you, doubt I ever will, and I would love to run all of my financial questions past you

My sympathy is limited for the wilfully ignorant, I'm afraid.  But I hope the reflation is good to them.  Maybe they'll learn something without losing too much.

Does this mean you'll be able to post here more? :Jumping:

It’s entirely expected I’m afraid. The key thing about this thread which makes it what it is (after surviving from HPC) is that people from all manner of fields and walks of life, have done their own research and draw similar conclusions to where it’s all heading.

You tell the truth of it all to you’re average co-worker without sounding like a nut job... You can’t blame them either, as they’ve been bombarded from all angles by friends/families and the MSM. You talk about contrarian investing and a diversified portfolio and they’ll glaze over. You talk about taking on £750k worth of BTL leveraged debt on a load of properties and they start foaming at the mouth.

 If there’s one true saying in life, it’s that you can lead a horse to water but you can’t make it drink. By all means give people the breadcrumbs and let them find out for themselves and be grateful. Better than preaching to them and being an overbearing ball ache (as some people can be) as people automatically shut off

It’s how I approach my senior management. I just let them think my idea is theirs, then they agree to sign off whatever.

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2 minutes ago, Sideysid said:

It’s entirely expected I’m afraid. The key thing about this thread which makes it what it is (after surviving from HPC) is that people from all manner of fields and walks of life, have done their own research and draw similar conclusions to where it’s all heading.

You tell the truth of it all to you’re average co-worker without sounding like a nut job... You can’t blame them either, as they’ve been bombarded from all angles by friends/families and the MSM. You talk about contrarian investing and a diversified portfolio and they’ll glaze over. You talk about taking on £750k worth of BTL leveraged debt on a load of properties and they start foaming at the mouth.

 If there’s one true saying in life, it’s that you can lead a horse to water but you can’t make it drink. By all means give people the breadcrumbs and let them find out for themselves and be grateful. Better than preaching to them and being an overbearing ball ache (as some people can be) as people automatically shut off

It’s how I approach my senior management. I just let them think my idea is theirs, then they agree to sign off whatever.

Its crazy the levels its reached.The economy is now grinding down slowly with almost zero rates.Debt is now assumed as never needs paying off.What they miss is debt is always paid off.If not the principal,then through inflation and higher rates (not government debt though,that is never paid off).IO might seem fine and dandy at 2.5% ,but when its 8% and your 50 year old its suddenly a massive problem.I think debt and tax credits mean the likely pain will hit when people are 45 to 55 years old.Given pension age is 68 soon,thats two decades of hard struggle.Most people simply dont have the skills to be frugal and live well.Interesting few years ahead.

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8 hours ago, Sideysid said:

You talk about contrarian investing and a diversified portfolio and they’ll glaze over. You talk about taking on £750k worth of BTL leveraged debt on a load of properties and they start foaming at the mouth

It's not just about this `hard` financial approach though, for many a `soft` approach I.e selective purchasing, avoiding high IR debt, having a `rainy day` fund etc has as much if not more of an Impact on their financial wellbeing. Unfortunately in these days of mass consumerism/"I want it (now)" people have forgotten these basics until it is too late.

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If people want to spank every penny they have and then borrow a load more good for them. It's completely unnecessary, a bit of forward planning and you can be in control of your own destiny. I'll worry about them when I'm on a beach someplace an my kids are on a permanent gap year spending the dividends.

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Zero debt and savings has meant I could take 7 months off work in 2019 to address long-standing mental health problems.

That would have been impossible if I were on the treadmill to make sure I had enough to pay all the due debt payments. 

We're down to a few grand fiat savings plus future investments now, but so much better off on many fronts. 

Debt takes away people's time to just be human.

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VeryMeanReversion
On 05/12/2019 at 01:52, Eventually Right said:

ie a global bust; massive government action on fiscal policy (MMT/huge unfunded government spending etc) because globally, rates are effectively at zero, so monetary policies alone won’t reverse the crash; this eventually leading to much higher inflation; and an even worse situation in 10 years or so, when the public completely lose faith in the centrals banks’ ability to smooth/save the global economy.

I've been wondering for a while about the "how/what/when" for that scenario.

The demographics curves are rolling over, there will not be enough new people (youth or immigrants) that are both willing and able to take on new debt to keep the plates spinning.  Student loans were the last hope of the bankers to get the next generation in debt. I can't see what they can do next (benefits/tax-credits becoming loans?)

Without more debt, the big central bankers are going to have to print debt-free money at some point.  Personally, I don't object to the creation of debt-free money, may be a good idea if they can keep it to a very small percentage of the money supply each year.

However, it will start as relatively small amounts for what are thought of as good reasons. Then everyone gets used to it (just like they have with QE) and the numbers get bigger.  They need to start working on a clever sounding technical name for the creation of debt-free money to get people to accept it.


I've split my assets between housing equity, ~25 FTSE stocks, PMs and the odd investment trust. No bonds and minimal cash.  I want stuff that is useful or at least represents something useful that they can't make up.

 

 

 

 

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Talking Monkey
13 hours ago, DurhamBorn said:

Its crazy the levels its reached.The economy is now grinding down slowly with almost zero rates.Debt is now assumed as never needs paying off.What they miss is debt is always paid off.If not the principal,then through inflation and higher rates (not government debt though,that is never paid off).IO might seem fine and dandy at 2.5% ,but when its 8% and your 50 year old its suddenly a massive problem.I think debt and tax credits mean the likely pain will hit when people are 45 to 55 years old.Given pension age is 68 soon,thats two decades of hard struggle.Most people simply dont have the skills to be frugal and live well.Interesting few years ahead.

DB one of the things I notice is with the current debt load even a slight rise in interest rates causes all sorts of chaos, in the coming years the debt I understand will increase substantially, so how will CBs raise rates in that environment.

I'm beginning to properly understand now how you've described towards the end of the next cycle 2028ish  it will be one horrendous collapse, i'm guessing worse than the 1930s great depression, or is that being a bit dramatic

Actually in terms of historical recessions what are your thoughts on the severity of the upcoming one, similar to the last one or much worse

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5 hours ago, Noallegiance said:

Zero debt and savings has meant I could take 7 months off work in 2019 to address long-standing mental health problems.

That would have been impossible if I were on the treadmill to make sure I had enough to pay all the due debt payments. 

We're down to a few grand fiat savings plus future investments now, but so much better off on many fronts. 

Debt takes away people's time to just be human.

I had a succession of crap jobs but I always made sure I had enough in savings to live for a couple of months so I wouldn't ever be in the position of being forced to do a job I hated.   This was whilst raising three children and mostly fairly part-time work (before the days of tax credits).  I couldn't wait to be able to give up work entirely and be my own boss so to speak. I now live on the state pension and through living frugally I find I can even save some of it to add to my meagre investments.  For all those wanting to FIRE I would say go ahead if you can live cheaply and have modest needs with no debt.  It's surprising what you can live on if you put your mind to it and you don't need a big pot of money to do it.

You can have time or money but not both unless one of those investments turns into a pot of gold. I'd rather have the time any day then be on the rat-race treadmill.

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39 minutes ago, spygirl said:

And the UK is doing how well?

http://www.constructionenquirer.com/2019/12/05/clugston-files-for-administration/

629 people looking for a new job and £50m+ of damage to the supply chain as a bonus.

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22 minutes ago, Majorpain said:

And the UK is doing how well?

http://www.constructionenquirer.com/2019/12/05/clugston-files-for-administration/

629 people looking for a new job and £50m+ of damage to the supply chain as a bonus.

Weirdly, I saw this on a regional news letter.

Clugson were heavily invovled on waste heat builds i.e. be the horse on some subsidy dependent magic.

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Democorruptcy
18 hours ago, DurhamBorn said:

The hitch appeared today where i work,100 people finished to go with the 70 who went two months ago,orders in free fall.People shocked and numb.I was one month out on it happening when i went back last October.Figured it would be 12 months then.Im very happy to be going as i really need my time back,but didnt want to leave in case i ever want to go back and thought i might as well get the extra capital.I really feel for my workmates,some/most are in terrible positions.Iv been trying to advise a few over the last year to put a bit away,pay down debts etc without looking like i knew much about it.Ignored of course.Im leaving in two weeks and then il have lots of time to get to real work again.A true contrarian, while everyone else is upset,scared and worried sick i was just pleased my road map was on track.The good news for them is they will all be back once the reflation kicks in as they wont be able to produce quick enough.The bad news for the ones left who think this is the bottom is that its just the first stage.Brutal cuts to come yet.

 

Reminds of an old sage in the bookies, whenever he'd tipped up a winner but the others had ignored him he used to say "You can lead a horse to water but you can't make it drink".

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Democorruptcy
17 hours ago, Loki said:

If you have time to write an ebook that would be cool.  I'd buy it.  I understand the real world premise of what you say but the numbers are beyond me.  

Like i understand how engines work but couldn't explain a power/torque chart beyond the immediately obviousxD

Sorry but you are giving out mixed messages here. One minute you are pleased DB might be posting more, then the next asking him to write a book, which will mean less time in the forum. I think the general consensus would be more posts, we'll bin the time consuming book idea?

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