Jump to content
DOSBODS
  • Welcome to DOSBODS

     

    DOSBODS is free of any advertising.

    Ads are annoying, and - increasingly - advertising companies limit free speech online. DOSBODS Forums are completely free to use. Please create a free account to be able to access all the features of the DOSBODS community. It only takes 20 seconds!

     

IGNORED

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


spunko

Recommended Posts

11 minutes ago, DurhamBorn said:

Down into Yorkshire.Scarborough and Brid are just above or at 2005 prices,but lots of probates coming over there so likely falls coming as the market cant pull ahead.

https://www.rightmove.co.uk/house-prices/detailMatching.html?prop=82640132&sale=90534066&country=england

Same price as 2005.

Over in Cumbria down to 2005 levels as well in most places outside of Carlisle.

https://www.rightmove.co.uk/house-prices/detailMatching.html?prop=64106340&sale=10981405&country=england

However it has to be noted the huge increase from around 1997 until 2005.

I wouldnt buy in Cumbria as its boring (and i love the Lake District).

Up here,

https://www.rightmove.co.uk/house-prices/detailMatching.html?prop=61134348&sale=90349116&country=england

Buy new in 2004,lose £30k + inflation.Inflation adjusted that would need to be £323,304 now.So inflation adjusted they lost £143k on a £209k house.

Houses only go up right?,houses are a fantastic inflation hedge right?

 

 

 

Wow

Link to comment
Share on other sites

  • Replies 35.1k
  • Created
  • Last Reply
sleepwello'nights
11 minutes ago, DurhamBorn said:

 

Buy new in 2004,lose £30k + inflation.Inflation adjusted that would need to be £323,304 now.So inflation adjusted they lost £143k on a £209k house.

Houses only go up right?,houses are a fantastic inflation hedge right?

 

 

 

Wish it was that way down here:

https://www.rightmove.co.uk/house-prices/detailMatching.html?prop=44270456&sale=6499609&country=england

Link to comment
Share on other sites

7 minutes ago, sleepwello'nights said:

Im sure it will be soon,however i wouldnt wait,id move north while you can.

This is what you get here for that price.Includes 5 acres and stunning views over the Wear Valley

https://www.rightmove.co.uk/property-for-sale/property-62654211.html

If you prefer a city,

https://www.rightmove.co.uk/property-for-sale/property-65678190.html

Link to comment
Share on other sites

7 hours ago, Cattle Prod said:

For me, it was more if everyone is doing this, who is on the other side of the trade? If the market hurts the most amount of people, isn't passive the most amount of people? What is the price, if most money is re-upping on rising stocks?

A recipie for huge imbalance and price distortion.

Isn't it going to be those stock's within a passive index tracker with an over inflated PE that hurt people when they crash?...the problem is the majority of indices have each stock as a proportion of $ value rather than number of individual members...with the former if Amazon equates for $50 of you FTSE100 $ you lose 50%, if it was the latter you would only lose 1$ and so retain 99% of your funds.

Link to comment
Share on other sites

6 hours ago, Cattle Prod said:

We invited them into hq a few months ago. "Just shut your entire business, now" "Shareholders be pissed..." ..."Now". Where do you go with that? Dogma, not rational.

This is the issue, and why they will never succeed/reach their goal..."success is attained by lots of small steps, not one big leap"

Link to comment
Share on other sites

8 hours ago, sleepwello'nights said:

I think this goes to show an important issue that a lot of Southerners miss. They work hard to save a deposit, buy/get a mortgage, stay in the same area, and then have to work their whole life to pay it off. The alternative once they have some capital is to sell up, move to a cheaper area, and have an earlier retirement...it seems so obvious to me that I cannot understand why more don't do it?!...I can only assume it's something to do with settled friendships networks and keeping up appearances/with the Jones`s.

Link to comment
Share on other sites

13 minutes ago, MrXxxx said:

I think this goes to show an important issue that a lot of Southerners miss. They work hard to save a deposit, buy/get a mortgage, stay in the same area, and then have to work their whole life to pay it off. The alternative once they have some capital is to sell up, move to a cheaper area, and have an earlier retirement...it seems so obvious to me that I cannot understand why more don't do it?!...I can only assume it's something to do with settled friendships networks and keeping up appearances/with the Jones`s.

It’s because you can’t go wrong with property innit? They’re thinking these grotty ex council homes in the SE will be worth tens of millions in 25 years time, even with an ageing demographics crisis underway and mass house building to continue at increasing pace.

Link to comment
Share on other sites

sleepwello'nights
15 minutes ago, MrXxxx said:

I can only assume it's something to do with settled friendships networks and keeping up appearances/with the Jones`s.

I viewed a few of the houses 'oop North on Rightmove last night. Showed some to my wife who looked delighted when I said the ones I showed her we could afford. Then when I disclosed the location she lost all interest. "Too bloody cold" she said, "I'm not moving up there, its miles away from our children and friends"

Yet she isn't adverse to the idea of moving to far end of Cornwall which is on slightly closer, 50 miles or so. I guess it is closer to the Equator though. O.o

A friend has been researching my family tree and she has discovered that in the 18th Century one of my ancestors relocated from Cumbria to South Wales. That's where my branch of the family tree grew from. So I'm going back home I told her. "Are you coming with me" 9_9

Link to comment
Share on other sites

9 hours ago, Cattle Prod said:

For me, it was more if everyone is doing this, who is on the other side of the trade? If the market hurts the most amount of people, isn't passive the most amount of people? What is the price, if most money is re-upping on rising stocks?

A recipie for huge imbalance and price distortion.

Exactly.Rule one,the most important thing in the economy and the macro cycle is the cost of money.Everything else is cross market to that.

The cost of money drives where people invest on thousands of different levels.Most they dont consider,understand or even know exists.How many BTL leveraged up would say "property was a fantastic investment as the inflation cycle ended in the early 80s and a long dis-inflation started",1 in 1000? 

Thinking how long that cycle has been,almost half a lifetime,or nearly a full working lifetime and its easy to see why we are at the point where almost everyone is positioned for a dis-inflation cycle.

Of course the reason the market hurts the most people possible is because its not linear.Its a process that ends up somewhere.

I got the train to London from Darlington last year.When i got on it was quiet and relaxed,but each stop towards Kings Cross it got busier,until the last section was terrible,all manner of people crowding on.Cycles are like the east coast mainline.They go one way stop a while then return the other.

I think the no1 mistake people are making is that they are positioned for the start of a dis-inflation,not the end of one.

Worse all this "go green" talk and bash the commod companies is making ordinary people think,no future,dont want BP,buy Tesla.

Of course a lot of this comes from the huge investors.They always force out and push a story to reduce the price of the assets they want.

Huge complex economies dont go to the stone age or crash to bread and water,thats just hyperbole,but they do see very large sector rotation.That tends to do two things.First is cuts wealth on a temporary basis (a cyclical miner for instance),hurts but hold on and it returns.Second it cuts wealth on a permanent basis.That tends to happen through an inflation when people are parked in assets with a set duration,ie gilts,bonds etc.

Link to comment
Share on other sites

14 hours ago, sancho panza said:

Thanks for that CV.That's what I was trying to say in a much more plebby way.I'll read up some more on the detail so I can be a little more educated than jsut saying mark to market/mark to model.There was a great thread on ToS re Basel/reserve ratios/risk weighting etc.I'll see if I can dig it out.

Also worth noting that some of the abnks base their risk weighting on their own default data where they have a broad enough sample-IRB- whereas the smaller players use Standardized approach.Obviously prone to being gamed.

ref BTL  a while back I posted a pretty decent summary of the state of the private rental market with some -to me- surprsing stats .Some below.Key point is that whislt I suspect a lot of the laons are underwater,the Landlords who hold them have (possibly) unknowingly set up their own residence as collateral.

 

I'm going to set up a separate bank accounting thread CV,feel free to add any links that might be worth reaidng.

 

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/775002/EPLS_main_report.pdf

Most landlords operate as private individuals rather than as part of a company or organisation.94% of landlords rent property as an individual, 4% as part of a company and 2% as part of some other organisation.

While almost half of landlords own just one property, half of privaterented sector tenancies are let by the 17% of landlords with five or more properties. 45% of landlords have just one rental property. This represents 21% of the private rented sector9. A further 38% own between two and four properties (representing 31% of the sector). The remaining 17% of landlords own five or more properties, representing 48% of the private rented sector

 

 

edit to add a psot from the basel thread

https://www.housepricecrash.co.uk/forum/index.php?/topic/208169-bcbs-risk-weights/page/10/

SA stands for "standardised approach".

Banks can use the risk weights set out under this approach to calculate how much capital they have to hold, or they can use an internal ratings based (IRB) approach based on their own models. The higher the risk weight the more capital the bank has to hold against that particular loan, and therefore, effectively, the more expensive it is for them to lend.

Under Basel III risk weights will vary by loan-to-value (LTV) which means, amongst other things, that the amount of capital a bank has to hold against a repayment mortgage will go down as the principal is paid off.

From 1st January 2022 this is what the risk weights for BTL will look like for each LTV band under the standardised approach (currently, IIRC, there is a blanket RW of 35%):

image.png.17bbc0965862193e342bbe5bbc77e9a1.png

Smaller banks tend to use the standardised approach, hence the challenger banks lending into the riskier end of the BTL market are likely to be using this approach, and so will need to hold more capital against their BTL loan books.

Larger banks tend to use the internal ratings based approach. One of the interesting things that Basel III introduces is an output floor based on the standardised approach, which limits how much IRB can differ from SA in terms of capital requirements. This will be phased in from 1st January 2022, and will start by requiring that the amount of capital held based on an IRB approach will be no less than 50% of the capital that would have been required had the standardised approach been used. This will rise to 72.5% by 1st January 2027.

So in the table below the row in bold is the BTLers' LTV, the row in red is the risk weight that a bank taking the standardised approach would have to apply to that loan, and the rows underneath are the minimum risk weights that a bank using the internal ratings based approach will have to apply during each of the years that the output floor is being phased in:

image.png.25441f9159506cc59e0e599300b611aa.png

The 'Residential mortgage exposures by major portfolio' table from Lloyds has an '2014 Average risk weight %' column so as an example we can see that in 2014 Lloyds's internal ratings based approach resulted, at the time, in an average risk weight for their UK buy-to-let portfolio of just 9.33%.

This is all to the best of my knowledge so if anyone else wants to chip in?

 

I am not a banker.

neither do I have any inside or sector knowledge  on BTL.

However ....

Until very recently, AFAICT, neither did the banks or BoE.

And I do read bank news and have a reasonable idea of house sales in a number of nrothern towns and have access to the LR data via houseprices.io.

Putting aside the technicalities and the banking terms,  the more they look at BTL, the worse its gets.

~75% of IO BTL is owned by ~25% of LL.

~75% of IO BTL is Northern, in areas where there have been no nominal increases. Indeed, looking at some the price increases, most IO BTL is looking at 50% losses. In the places I monitor there are *NO* buyers for IO BTL housing stock, at least not anywhere near what the LL paid in 2002-2015ish.

Most Northern IO BTL are looking at 30/40k hit on selling. Now bear in mind IO BTL only put in ~10k and they typically own 3-10, theres a huge hit that will require the LL own house to sold, pension to be took and he bank to take a massive hit too. Cluster fuck. Remember, IO BTL is commercial lending - the banks can go after everything inc pension.

In so-em towns, IO BTL have been *the* market since ~2002ish. Even in the South, I reckon towns like Reading have seen the private rented sector housing stock increased from about ~5% when I lived there 25+ years ago, to 50%. And in Readings case most fo the occupants are low paid andor foreign.  Thats a massive amount of hot money which will evaporate with migrant/benefit changes andor a slowdown.

The BoE have barely progressed IO BTL - its been left to explode/market to sort out.

Its took the regulators ~10 years o sort out IO OO lending. And even then all theyve only managed is to clear 50% of the loans - either moving he younger and more solvent to repayment and moving the olderand better pensioned off to RIOs.

The remaining 50% are either earn too little andor have too small/no pension.

 

 

 

 

 

 

 

Link to comment
Share on other sites

Democorruptcy
11 hours ago, DurhamBorn said:

Im sure it will be soon,however i wouldnt wait,id move north while you can.

This is what you get here for that price.Includes 5 acres and stunning views over the Wear Valley

https://www.rightmove.co.uk/property-for-sale/property-62654211.html

 

£725k sterling!! Hey up lad, have you gone soft? Looks a bit pricey to me!!

Next door went for £355k in 2018 and less grass to cut.

Link to comment
Share on other sites

Maybe slightly OT but still relevant. Am beginning to understand DB’s excellent idea of laddering. Don’t have a lot of investment money to play with, had a bit more when I was still working full time. My point is, how do you guys take the emotion out of it? Am still kicking myself from not chucking £1000 or it may have been £500 into XRH0 back in 2015 when it was maybe 180. Watching it testing 10000 now! Gutted!

Link to comment
Share on other sites

27 minutes ago, Simon said:

Maybe slightly OT but still relevant. Am beginning to understand DB’s excellent idea of laddering. Don’t have a lot of investment money to play with, had a bit more when I was still working full time. My point is, how do you guys take the emotion out of it? Am still kicking myself from not chucking £1000 or it may have been £500 into XRH0 back in 2015 when it was maybe 180. Watching it testing 10000 now! Gutted!

There's no magic bullet, it's always a risk-reward play and the higher the risk, the stronger the emotions.

Laddering reduces the risk (and, by extension, the emotional load) by reducing your initial exposure, but that goes both ways - your exposure to upside is also reduced, and if your ladders don't get hit you end up underweight or you add at higher price. Conversely, if they get hit and it's not a falling knife, then you're much less unhappy than you'd be otherwise.

Emotions don't have to be a problem in itself. It's when they overrun you and make you make irrational and knee-jerk decisions that they become an issue. It's been shown that people feel uncomfortable with losses much more than they enjoy gains, so if they pile in early and then face a 10, 20, 30% drop they are more likely to cut their losses (therefore buying high and selling low) regardles of the fundamentals, whereas with laddering their losses would be smaller and there'd be a bigger chance they see through the storm.

Link to comment
Share on other sites

1 hour ago, Democorruptcy said:

£725k sterling!! Hey up lad, have you gone soft? Looks a bit pricey to me!!

Next door went for £355k in 2018 and less grass to cut.

I didnt say id bought it xD.Amazing what you can get up here though when you get above £500k compared to down south.That one has stables and 5 acres at the bottom of the garden.For a lot of people who love/have horses etc and the cash its probably a decent buy.Not my idea of fun cutting the grass,but looks like it has its own tractor,at least i could fix that :P

Link to comment
Share on other sites

1 hour ago, Barnsey said:

US 30 year yield back below 2%, just, wow. Stocks have to give and soon.

The world is going completely mad, China produces 85% of the worlds Tungsten (critical for tooling), its an opaque market at the best of times and rumours are circling about a shortage.

End of this month is going to be interesting when people run out of Chinese new year stocks.

Link to comment
Share on other sites

 

6 minutes ago, Majorpain said:

The world is going completely mad, China produces 85% of the worlds Tungsten (critical for tooling), its an opaque market at the best of times and rumours are circling about a shortage.

End of this month is going to be interesting when people run out of Chinese new year stocks.

When i was importing you had a 3 month lead roughly.You ordered after your stock had been here about 6 weeks,by the time the next arrived about 14 weeks later youd ber just about out.

I can tell you exactly what the Chinese will be saying to customers,no problem,everything ok,production ongoing etc,then when it doesnt ship they will say next week,then next week,then next week etc etc.Their factories are the biggest liars you will ever meet in life.Thats fine once you know that of course.

Link to comment
Share on other sites

2 hours ago, Simon said:

Maybe slightly OT but still relevant. Am beginning to understand DB’s excellent idea of laddering. Don’t have a lot of investment money to play with, had a bit more when I was still working full time. My point is, how do you guys take the emotion out of it? Am still kicking myself from not chucking £1000 or it may have been £500 into XRH0 back in 2015 when it was maybe 180. Watching it testing 10000 now! Gutted!

I too haven't enough for laddering but can see the advantages.  With regard to winners and losers I have a few (CNA/CARD/RG) which are showing considerable losses but I'm ignoring them and will hang on for the turnaround.  It's only luck but I have two which I took a punt on which are running (SLP/AAU) so I'm keeping them to see how far they go.  I only put a very small amount on each so of course I wish I'd put more but there you go.............win some; lose some.  You learn to be philosophical. 

I've definitely made some mistakes eg I sold Sibanye and then it carried on going up plus I sold SSE and NG which should be in my "hold" group for the divis and of course they've both gone up a lot since I sold them.  I'm hoping I've learnt to stop trading and just hang on to the ones I want for the long term.  It's definitely a learning process and fun.  I'd hate it as a job though and responsible for other peoples' money.

Link to comment
Share on other sites

1 hour ago, DurhamBorn said:

 

When i was importing you had a 3 month lead roughly.You ordered after your stock had been here about 6 weeks,by the time the next arrived about 14 weeks later youd ber just about out.

I can tell you exactly what the Chinese will be saying to customers,no problem,everything ok,production ongoing etc,then when it doesnt ship they will say next week,then next week,then next week etc etc.Their factories are the biggest liars you will ever meet in life.Thats fine once you know that of course.

The missus works for a large parts supplier to EU/US factories, importing a large % from China of course. Lead time went from 5-7 days to 12 weeks! The business has also stopped providing 30 days credit to customers, will keep you posted how things develop for as long as she's employed there.

Link to comment
Share on other sites

1 hour ago, Majorpain said:

The world is going completely mad, China produces 85% of the worlds Tungsten (critical for tooling), its an opaque market at the best of times and rumours are circling about a shortage.

End of this month is going to be interesting when people run out of Chinese new year stocks.

Crazy times! This time REALLY IS DIFFERENT! It'll take the US stock market a little longer to figure this out as inventory is worked through, definitely a bit of a lag to this wave of pain coming, but when it does :ph34r: Central banks can't control this like they have all the previous black swans.

Link to comment
Share on other sites

9 minutes ago, Barnsey said:

Crazy times! This time REALLY IS DIFFERENT! It'll take the US stock market a little longer to figure this out as inventory is worked through, definitely a bit of a lag to this wave of pain coming, but when it does :ph34r: Central banks can't control this like they have all the previous black swans.

Can they not just print goods..?

Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.

  • Recently Browsing   0 members

    • No registered users viewing this page.

×
×
  • Create New...