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


spunko

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14 minutes ago, DurhamBorn said:

On the BTL front the immigration news today on the new system has in the small print "no access to means tested benefits until settled status",settled status is after 5 years.So no tax credits,no Universal Credit,no Housing Benefit.That will hammer BTL over the mid term.

Im not 100% but i think that means they cant claim for children,unless maybe if the child is born here.Have to dig deeper into that,but its a massive change.

I think you’re right DB, the missus got her settled status a while back with relative ease but she has been here 23 years, not claimed a penny and only used the NHS once in that time. 5 years of nothing is certainty going to disrupt a last minute rush if the message is made loud and clear.

Pertaining to your previous post, she’s seen the most dramatic fall in business with German Industry customers in the past month or so, followed by Spain.

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31 minutes ago, TheNickos said:

Anyone using iweb ? tempted to try it as it is the cheapest in fee terms but a little bit no frills compared to something like ii.

I used to but not anymore, poorly designed interface and limited choices. I'd only recommend them for holding UK shares longer term.

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8 minutes ago, BearyBear said:

I used to but not anymore, poorly designed interface and limited choices. I'd only recommend them for holding UK shares longer term.

Agreed, just too limited for my liking.

ii seems to be best for my needs, £9.99 a month but get £7.99 credit (1 trade), no annual fees, regular investing just £0.99 per trade.

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8 hours ago, Cattle Prod said:

Agree- people will be too distracted to sell! That of course leaves room for a 2007 style oil price spike to trigger it. Not repeat, but rhyme...

I agree .It's this whole issue of will we get a weak dollar phase.I psoted a Russell Napier Macrovocies podcast a week or so back where he made a really intyelligent argument against there being a weak dollar phase based on his(probably right ) view that the US banking system is in a much better stats than the run up to 07/08.

Whilst I wouldn't disagree,my most punsihing lessons of the last ten years(and there have been many) have occurred because I totally underestimated the willingness of central banks to

a) pursue policies that are doomed to failure by the inherent contradictions and misunderstandings writ through them,particularly that money velocity is a constant

b) to then double down on said failing policies after they've 'remarkably' failed the first time.

The Western world needs a clean out of it's meo classical economic establishment and that's not going to happen in the next year.ergo,Powell will msot likely pursue some form of QE and rate cutting before that excellent discussion we had on here some 400 pages ago is proved right and we see a changing of the guard in terms of reserve currencies over the next ten years away from the dollar.At some point during that decade @Errol will also be proved right I suspect..

8 hours ago, Cattle Prod said:

I hadn’t really thought about it till you asked, so please don’t read much into that. My view is that’s it’s just not predictable. I won’t catch the bottom, I don’t want to miss out, and I know there will be time to deploy my capital. So I’m in enough to avoid fomo. I’m not buying more right now, like you. I will buy more if it goes into the 40s. If it goes up, there will be savage dips to fully deploy on.

Oil is inelastic, so the corona virus wont really affect short term demand (contracts to fulfill etc) But sentiment will. I think what’s holding up the price is either a) complacency, or b) long term buyers who understand the coming supply problems.

Of course the way to handle this is to lengthen ladders. But I don’t understand how the coronavirus lag will affect things. So I said Q4. @DurhamBorn will be able to see this better, but I suspect he’ll say “liquidity is far more important”. In terms of supply problems, I think it’s already happening. I just don’t know how long it’ll take to filter to Wall St.

Another signal in the supply noise: the Russians are recently  pushing forward > $100bn expensive Arctic mega projects they’ve known about for years. Why now? If they sanction them now, first oil in maybe 6-7 years. Good timing, do you think?! The last project of this scale was probably Gorgon in Australia, sanctioned something like 10 years ago. I was very interested to hear about new Rosneft sanctions today. 

Bakken oil is sold for ~$10 below WTI, while Alaskan oil is ~$5 above Brent. What’s up with that? Mostly that shale oil is light (it has to be to come out) and the physical world needs much more medium-heavy oil. And yet we all trade WTI and Brent on paper!

As I’ve always said, the one to watch is the Permian. When that stops growing, so does the US, and so does the world. It’s that concentrated. Coiled up, you could say...If the market was efficient it would be being priced in around now,, looking at the data,  but we all know here that’s not how it works.

Always appreciate your insights from the inside CP.

1) we started a mechanical buying program on the oilies mid August based on time rather than price ladders.At times we've stopped due to prices rising too much.Particuarly from Dec 12 when  I felt the amrekt was runnign.We're now in enough to avoid the fomo which is important because the last thing I want to be doing is chasing a rising market.

2) We've dipped heavily (for us)back into XOM around the $60 mark,RDSB sub £20, BP sub £4.80.But I was having a chat with my mother the other day and she was urging caution ref this corona virus very much for the reason you're stating ie sentiment.I have certain indicators I work from but my gut (don't laugh) is the number 1.My gut is saying there's more downside here

3) someone posted-it might well have been you- some analysis showing how little the price of oil has moved during some crises worth noting WTI bottomed at $41 back in Jan 09 on the monthlies.XOM currently near 10% of it's 09 low.Hence we'll keep dribbling in but my timeline has shifted further out for the bottom post corona virus.

4) fascinating that the russians are prepping those fields.It really is a sign of where it's going and it's going to be interesting tosee how the permian unwinds.It doesn't appear the market is ready for a massive bull in oil.Could catcha  lot of people out.

5) Having said all that,it's looking like PM's are getting ready to burst.No plan survivies contact etc and I have to say that I'm thinking today of pulling our oil services trades(which are breaking even) and deploying into more PM's.On a wider level I'm also wodnering whether to ditch our XOP/FCG plays and chuck it into big oil.

Questions questions.

 

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On 17/02/2020 at 20:51, sancho panza said:

Coronavirus could be there Chernobyl. Fascinating show on netflix if you havent seen it.

SP, yes perhaps so. I think Xi Jinping making himself president for life was an act of desperation not strength. We can probably even quantify the loss of control by the number of high-ranking Chinese dissidents locked-up, something that didn't happen even in the old USSR (intellectual dissidents yes, but not internal challenges to the hierarchy).  

The whistle blower doctor - Li Wenliang (deserves name check), along with the thousands of Chinese families affected/died from state mismanagement will I think begin to think what's the point of blindly following state dogma.

I'm surprised by the numbers of tourists China 'allows out to holiday abroad - was just 10m in year 2000, now over 150m last year - and they spend $300bn (astonishingly, Americans spent half this amount!). Those Chinese citizens represent maybe only a small elite but they cant unlearn what they have seen on their travels.   

It will be truly fascinating (though hopefully not '...interesting times', as the Chinese curse goes) how this plays out over the next 10 years. I do agree with the so-called controversialist historians Tom Holland/Niall Ferguson, when they write about the 'West and the rest'... in terms of systems, freedoms and belief.   

 

On 17/02/2020 at 20:51, sancho panza said:

keep us posted please.I'd be interested in that

SP, I will do.

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4 hours ago, spygirl said:

Every - and I mean every  BTL Ive spoken to about risk - does the 'hand the keys back to the bank' reply.

They seem to think yjr UK has non recourse mortgage lending, just liek the US.

At very long last, UK banks have regulation in place to stop banks ofering mortgages the customer is unlkikely to pay back. Theres loads of checks and whatnot, to ensure the mortgagee has the income stream to pay the motgage of.

Unless its commercial mortgage, where the regulation assume the the mortgagee has done their own research. No protection, no come back. Thats why BTL has boomed so much as OO mortgage has fallen - its unregulated.

as part of the playing with thebig boys, a BTL mortgage can be asked to be paid back, for whatever reason ,within a1 month. And if the balance is not paid off then the bank can go after every thing, inc pensions - a simple charge o nthe person til they are 55 when a pension cn been withdrawn.

Mr nM rs NotGettingMuchibnTheBabnkLetsButaRental tend to be not that leveraged, so they dont really get the IO BTL leverage to the moon returns - about ~4%  Assuming theyve got less than 60% LTV  or less leverage and 1 or 2 houses, will escape their BTL investment with a hefty but not house threatening loss.

 

Cheers for this info spy,I was unaware that BTL mortgages don't undergo affordability checks.Surely the bank look at the equity positoin of the mortgagor.

I was also unaware that they could chase pensions for a commercial mortgage.Amazing what I've learned after all these years.

ref the second point in bold,there are what might be termed margin call clauses in most mortgages including domestic.

Going on the BTLers I knwo -and I know a few with 10+ hosues,none of them have a clue about any of this.Most were unaware of S24.

You got a view on the impact that's having?

1 hour ago, DurhamBorn said:

The main thought really is this.Lower oil prices will hold up the main economy for a little longer.$43 is only $7 away,$250+ is the next cycle target.What i can say is i wont be selling any oil connected stocks until oil is at least $180,none.The only people with capital to grow a green business in the next cycle will be the very oil companies everyone hates right now.Want to invest in future energy?,buy big oil.

an excellnet point DB

1 hour ago, Barnsey said:

I think you’re right DB, the missus got her settled status a while back with relative ease but she has been here 23 years, not claimed a penny and only used the NHS once in that time. 5 years of nothing is certainty going to disrupt a last minute rush if the message is made loud and clear.

Pertaining to your previous post, she’s seen the most dramatic fall in business with German Industry customers in the past month or so, followed by Spain.

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Democorruptcy
16 hours ago, Agent ZigZag said:

Well lets hope they dont do it in 7 years time until I can get hold of mine.

Council tax is my big bug bear that I consider is going to be a huge head ache for Government and Local councils as the rate of % increase year on year at present is way above inflation. Projecting into the future in say 10 years time at the current rate of increase I could be looking at nearly 4k, excluding inflation. Thats a lot of money to find. They had better put up the taxable allowance to accommodate

What a sickener that the best you can hope for, is the council to swipe your tax threshold change, that in the budget the  governbankment will tell you it puts more money in your pocket. Now you see it now you don't!

I always avoid putting money in council pension machines in car parks.

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Yellow_Reduced_Sticker
15 hours ago, Bobthebuilder said:

Shocking, My council tax bill is about the same as i spend on food a month, to pay for their pensions? crikey. Meanwhile my wife cant get a MRI scan, earns to much money so low down on the list.

 
Council tax is THEFT I'd don't give a toss what anyone says its F****** THEFT!
 
This is my only gripe where i recently bought ... is paying this Rip-off-THEFT! it makes my blood boil!:Old:
 
To soften the blow of their SCAM/THEFT...
 
I always make sure i ONLY buy Yellow Reduced Sticker items, or like DB says ONLY buy second-hand goods...
 
I save minimum 50% on my YRS monthly shop so around £125 quid a month, so i just say to me self I'm getting 1/2 price Council tax!
 
Bob, are ya doing any: Yellow Reduced Sticker vulturing...? :D
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Miners are finally starting to move:

HOC back to 175.

Sibanye is up another 10% pre-market, now above $13.  $8bn market cap is still pretty peanuts for the resource base so i think its got some to run still, especially if gold motors.

Mainly Gold stocks at the minute, Silver is still lagging.

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On 17/02/2020 at 21:03, sancho panza said:

Japan sees quite a GDP contraction in spite of the Bank of Japan buying 8% of the equity market

This leaves the Japanese establishment in quite a pickle. The government has already announced one stimulus programme and is suggesting it may begin another. This poses a challenge to the whole Abenomics programme which intended to improve the fiscal position by fiscal stimulus leading to economic growth. I am sure you have spotted the problem here.

Isn't this in many ways the background muzak of this blog - in many ways isn't Japan the failed economic experiment our politicians dare not speak of? (so many comparisons and contrasts with West: high debt, aging population, consumerist, tech driven; but low immigration, servile populace).

I'm an avid follower of this blog and consider its thinking correct - but in practical terms what does the above 'failed Japanese experiment' mean for us here in the UK?

For me, the following four questions would go a very long way to helping clarify things... I believe i know some of these already, but wanted to set out my thinking and would appreciate comment and/or rebuttal.

 

1. Will our governments still go on a similar spending spree/enact grand interventionist programmes - fully aware 'that such policies will ultimately not work?

2. Will such policies inevitably end in failure/collapse of money system around 2030? i.e. why so soon when Japan has hobbled on for 30 years?

3. Is the real agenda to cause inflation/wipe out debt? i.e. a small success maybe, but still a political win. 

4. And perhaps the difficult one - If a collapse of the money system occurred (around 2030) would this lead to societal collapse - short/sharp or prolonged-pain - but in whatever form, would this provide a 'political bandwidth'/excuse to 'reset' society? i.e. Many say this is just conspiracy thinking, but is it not true that conventional politics is failing us and is just far too weak to have any real impact on the types of rising social problems facing us?      

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16 minutes ago, Majorpain said:

Miners are finally starting to move:

HOC back to 175.

Sibanye is up another 10% pre-market, now above $13.  $8bn market cap is still pretty peanuts for the resource base so i think its got some to run still, especially if gold motors.

Mainly Gold stocks at the minute, Silver is still lagging.

Everything blue for me today except for Fres and K&S. But Fres also catching up.

Wondering whether to start adding oil or top up gold holdings before the likely bull kicks off. Decisions decisions.

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1 hour ago, Democorruptcy said:

What a sickener that the best you can hope for, is the council to swipe your tax threshold change, that in the budget the  governbankment will tell you it puts more money in your pocket. Now you see it now you don't!

I always avoid putting money in council pension machines in car parks.

Iv hand made maps for all the main towns around me where i can park for free.Its getting harder,but iv never paid in over a decade.Darlington i park outside the Mosque ,you can get a cresent moon decal on Ebay for £2.50 does the trick.Durham is getting tricky because the council are building a new headquarters on the floodplain where there was free parking.Now i park for free at the Oriental Museum or the Oriental University and put a few Oriental Studies books i picked up on Ebay on the passenger seat.There are also a lot of one car slots where you can park,but the council are slowly putting lines on them,or people build on them etc.

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56 minutes ago, Majorpain said:

Miners are finally starting to move:

HOC back to 175.

Sibanye is up another 10% pre-market, now above $13.  $8bn market cap is still pretty peanuts for the resource base so i think its got some to run still, especially if gold motors.

Mainly Gold stocks at the minute, Silver is still lagging.

Aaaarrrrggghhhh!

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4 hours ago, DurhamBorn said:

On the BTL front the immigration news today on the new system has in the small print "no access to means tested benefits until settled status",settled status is after 5 years.So no tax credits,no Universal Credit,no Housing Benefit.That will hammer BTL over the mid term.

Im not 100% but i think that means they cant claim for children,unless maybe if the child is born here.Have to dig deeper into that,but its a massive change.

Places like central boro will empty.

Its insane that areas like Gresham have streets filled up with various EE nationalities and Kurds. All doign fuckall bar scamming TCs by working in a Sklep.

https://www.bbc.co.uk/news/uk-england-leeds-37909182

Parliament Road in the Gresham neighbourhood is one street where the influx of different cultures can clearly be seen.

A Romanian restaurant is on the brink of being opened. A Polish convenience store and a Middle Eastern mini market share the street with curry houses. Chip shops are selling local delicacy parmo (a flattened slab of breaded chicken, deep fried and topped with white sauce and cheese, served with chips and salad. It was even mentioned in a parliamentary debate, when it was described as "a heart attack on a plate").

Shop windows hold posters advertising English classes and tuition for "life in the UK" tests.

It's only a couple of streets over from a demolition zone, where the houses still standing have metal shutters nailed over the windows and doors. Mechanical equipment and workmen are on site, turning the remaining buildings to rubble.

A woman with a pushchair hurries past, head bowed against the wind. Kelly was 15 when she had her daughter Shavvaun.

"I'm lucky really. She lives with me mam. I'm lucky my mam could do that. Lots of lasses have their bairns taken away.

"I want the best for her, you know? I had a job in a salon but then it closed. But there's a chance I'll be taken on by someone else.

"I'm on benefits now, but to be honest, that's not the life I want for my kid.

"I'd like to go to college, get some qualifications," she says with quiet optimism.

Kelly isn't unusual. Local teenage pregnancy rates are higher than both the regional and national averages.

But at least Kelly is claiming her benefits.

It's estimated by the JSNA that between 11,500 and 16,300 people in Middlesbrough are not claiming benefits they are entitled to - which it says works out at between £17m and £28m that could contribute to the local economy.

5 years limits need applying to natives too.

 

 

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Democorruptcy

Liberum suggesting some RMG ladders might get taken out!

Quote

 

ROYAL MAIL STRATEGY IS 'UNDELIVERABLE', SAYS LIBERUM

(Sharecast News) - Royal Mail was under pressure on Wednesday as Liberum reiterated its 'sell' rating on the stock and slashed the price target to 120p from 175p, arguing that the company's strategy is undeliverable.

The broker said the fact that management openly questioned the achievability of its 2024 targets just nine months after its strategy launch is "hardly encouraging".

It pointed out that margins continue to be squeezed by declining revenues from the letters segment and poor productivity.

"Staff and union co-operation is needed to deliver the recovery, but industrial action seems more likely," it said. Liberum added that the dividend, which could be funded by additional debt, is potentially unsustainable and inadvisable.

The broker cut its 2021 earnings per share estimate by 56% and its 2022 estimate by 83%, to reflect high operational gearing and low margins.

In an update earlier this month, Royal Mail said recent trading was in line with expectations but warned that industrial unrest threatened its turnaround.

The company said its outlook for next year was "challenging" and that the threat of strikes by its workers put its transformation plans at risk. It said letter volumes would fall faster than expected next year and that the UK parcels and letters business was more likely to be loss-making.

At 0900 GMT, the shares were down 3.5% at 173.15p.

 

 

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On 17/02/2020 at 23:23, 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

If you prefer a city,

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

I like this for 158K in BA. You'll probably tell me that it's overpriced!!

https://www.rightmove.co.uk/property-for-sale/property-63613059.html

Is that French Revivalist style?

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3 minutes ago, CVG said:

I like this for 158K in BA. You'll probably tell me that it's overpriced!!

https://www.rightmove.co.uk/property-for-sale/property-63613059.html

Is that French Revivalist style?

Thats the main street.Really big terraces those.Not my cup of tea as i like a garden and quiet,but its a few yards from a leisure centre etc and buses everywhere a few yards away every 10 minutes.

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31 minutes ago, DurhamBorn said:

Iv hand made maps for all the main towns around me where i can park for free.Its getting harder,but iv never paid in over a decade.Darlington i park outside the Mosque ,you can get a cresent moon decal on Ebay for £2.50 does the trick.Durham is getting tricky because the council are building a new headquarters on the floodplain where there was free parking.Now i park for free at the Oriental Museum or the Oriental University and put a few Oriental Studies books i picked up on Ebay on the passenger seat.There are also a lot of one car slots where you can park,but the council are slowly putting lines on them,or people build on them etc.

I look for 'little victories' wherever I can DB, but my goodness you have me rubbing my hands with glee at your inventiveness. What a work ethic!

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1 minute ago, Heart's Ease said:

I look for 'little victories' wherever I can DB, but my goodness you have me rubbing my hands with glee at your inventiveness. What a work ethic!

The Darlo one was given to me by a guy i worked with.He retired at 50 bags of dosh,looked like he had nothing.He even knew the way the wind blew in car parks and deposited the buy one get one free KFC meal tickets on the back of parking tickets.He often had his wife crawling around the bush getting them out.xD

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2 hours ago, Majorpain said:

Sibanye is up another 10% pre-market, now above $13.  $8bn market cap is still pretty peanuts for the resource base so i think its got some to run still, especially if gold motors.

Palladium setting new new all-time highs on a daily basis and Rhodium doubling YTD had more to do with SBGL meteoric rise than precious metal, I think. Which in my opinion puts a lid on how high it can go and assigns disproportionate downside risk, but I've been super wrong about Sibanye before so what do I know.

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Talking Monkey
5 hours ago, DurhamBorn said:

Have you broke into my house and read my things :o .Sweden is key as you say,not many people know that or use their numbers.Their supply chains are lead indicators for Germany and most of Europe due to the nature of the products.

Hi DB could you elaborate on this bit if you have a few minutes

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