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

[PaulParanoia]

Looks like the wages scheme may only apply to furloughed employees.  I.e. those who have been laid off.

https://www.mirror.co.uk/news/politics/breaking-coronavirus-government-announces-unprecedented-21727122

[Frank Hovis]

3 minutes ago, JoeDavola said:

Wait....you retired? Congratulations, I missed that - when did that happen?

Today 

I've been wibbling on about that for a couple of years on here and have finally got there.

Your turn now: buy the house you've been wanting to buy for at least a couple of years.

[JoeDavola]

2 minutes ago, Frank Hovis said:

Today 

I've been wibbling on about that for a couple of years on here and have finally got there.

Your turn now: buy the house you've been wanting to buy for at least a couple of years.

Well congratulations! I think that's worth a topic of it's own, but I'll let you decide whether or not to do that!

May you have a long and enjoyable retirement.

[deathfunk]

1 minute ago, JoeDavola said:

Well congratulations! I think that's worth a topic of it's own, but I'll let you decide whether or not to do that!

May you have a long and enjoyable retirement.

I'm buying gold. Well I would be if the bastards were delivering it!

[Harley]

1 hour ago, Democorruptcy said:

I thought it was the other way.

The price of the bond includes the return on it and could be inflated further by the safety of a return of money. Say a £100 bond might be trading at £120 and a bond fund might buy it at that. Then in a crisis with margin calls the bonds are sold at at a value lower than £120 so the fund incurs a loss. You cannot assume a bond fund is buying every bond as cheap as par?

Warning bonds are not my area so I'm willing to be educated.  We could also be talking at cross purposes.  I'm assuming I'm being a bit thick!

I assumed you were advocating gilts when saying "Provided they are held to maturity how can they lose?"  Maybe I misunderstood and you were saying how can HMG lose!  If I buy a bond now, I will lose money (indexed) or almost lose money (gilts) if I hold to redemption.  If I buy through an ETF like VGOV, anything could happen but it is likely the same.   

I was not assuming the bond fund can buy any bond at par.  I was comparing the world off difference between us buying a bond and holding to redemption (at which point we'll have received the yield to redemption) versus a bond fund which which you cited which have to buy and sell to meet purchases and sales of their fund at whatever the market price is for their underlying at the time so do not always hold to redemption or buy at par.

Here is a list of some of the gilt yields to redemption:

For index linked, even worse:

Note linkers based on an assumed inflation rate.

[Democorruptcy]

1 hour ago, DurhamBorn said:

Government going to pay the wages of people sat at home by 80%.Also increase universal credit and tax credits for some reason.The most inflationary thing you can do,pay people not to produce anything.

 

I posted it would be helicopter money this time but the scale is larger than I expected.

[Harley]

1 minute ago, Democorruptcy said:

.........but the scale is larger than I expected

It has to be.  Shock and awe else not worth it.  US the same.

[Democorruptcy]

5 minutes ago, Harley said:

Warning bonds are not my area so I'm willing to be educated.  We could also be talking at cross purposes.  I'm assuming I'm being a bit thick!

I assumed you were advocating gilts when saying "Provided they are held to maturity how can they lose?"  Maybe I misunderstood and you were saying how can HMG lose!  If I buy a bond now, I will lose money (indexed) or almost lose money (gilts) if I hold to redemption.  If I buy through an ETF like VGOV, anything could happen but it is likely the same.   

I was not assuming the bond fund can buy any bond at par.  I was comparing the world off difference between us buying a bond and holding to redemption (at which point we'll have received the yield to redemption) versus a bond fund which which you cited which have to buy and sell to meet purchases and sales of their fund at whatever the market price is for their underlying at the time so do not always hold to redemption or buy at par.

Here is a list of some of the gilt yields to redemption:

Have you quoted the wrong person I didn't say that. I was making a case for why people could lose money buying in a bond fund. It was @sleepwello'nightswho seemed to think no money could be lost if held to maturity and seemed to be assuming every bond was bought at par.

[Democorruptcy]

So what does this do to the FTSE and sterling? Opinions?

[Majorpain]

1 hour ago, DurhamBorn said:

Government going to pay the wages of people sat at home by 80%.Also increase universal credit and tax credits for some reason.The most inflationary thing you can do,pay people not to produce anything.

That business support is very welcome, Finance Director's everywhere will be sleeping a little easier over the weekend.

I am intrigued about the loans however, the hordes of zombie firms would love nothing more than to leverage up to the max for a year with cheap government loans and leave the taxpayer with a very expensive bill when the inevitable "unfortunately" happens.  There must be some form of stress test to sort the wheat from the chaff...

[Iamcynical]

4 minutes ago, Democorruptcy said:

So what does this do to the FTSE and sterling? Opinions?

I'm thinking the same, and also pondering as to what shares will see a rise on Monday due to this...

[Option5]

3 minutes ago, Cattle Prod said:

Ive been told as an oil and gas worker I'm on the critical list and can get schooling for my kid if I need to. Its no comfort, there will still be redundancies, but I have to laugh at how quickly the green thing went out the window when the shit hit the fan and they have recognised it as a systemically important industry. Turns out we do need fossil fuels to keep the lights on after all. 

#metoo

[TheCountOfNowhere]

36 minutes ago, Harley said:

It has to be.  Shock and awe else not worth it.  US the same.

And still it falls.....

[TheCountOfNowhere]

56 minutes ago, Frank Hovis said:

I'm about.

Retired now so mind buzzing with new plans which are pushing aside my prior pre-occupations.

Money is no longer an issue so is no longer an interest.  Maybe when the days get colder and shorter I'll start doing some share dealing again for interest.

Dont...get toy 30K free money then retire!!!!!

[sleepwello'nights]

35 minutes ago, Harley said:

 

Here is a list of some of the gilt yields to redemption:For index linked, even worse:

Note linkers based on an assumed inflation rate.

I wish I understood.

There is a link on Vanguards website that details the gilts held in the fund. My mistake is that I assumed that they would have been purchased more or less at par, which is not necessarily the case as the DMO auction each issue. The other aspect is assuming they are held to maturity as some may need to be sold to meet redemptions. 

I'm surprised at the fluctuations in price since I purchased. The performance on my holding has ranged from +20% (Aug 19) to currently - 8% (when I last looked) over the four or so years I've held them.

Still relatively safe in a deflationary environment, (that is about to change)

[Barnsey]

29 minutes ago, Cattle Prod said:

I should say small comfort, not no comfort. A lot of people would like to have that facility but won't be offered it. Though if they get 80% pay, no worries!

80% pay to stay at home and chill or 100% pay for 40 hours a week, commuting time and expense, and greater risk of infection. Going to be some very interesting decisions and tensions for staff and bosses.

Edit: forgot cost of childcare

[Democorruptcy]

8 minutes ago, Barnsey said:

80% pay to stay at home and chill or 100% pay for 40 hours a week, commuting time and expense, and greater risk of infection. Going to be some very interesting decisions and tensions for staff and bosses.

Edit: forgot cost of childcare

Saving from not being able to go out socialising?

All a boost for their house deposits?

[Bricks & Mortar]

32 minutes ago, Cattle Prod said:

as an oil and gas worker I'm on the critical list and can get schooling for my kid

So you can go to work and risk getting bat-flu, while your kids go hang out with kids of all the other workers at risk of getting bat-flu.
With best wishes to you and yours. 

 

1 minute ago, Barnsey said:

80% pay to stay at home and chill or 100% pay for 40 hours a week, commuting time and expense, and greater risk of infection. Going to be some very interesting decisions and tensions for staff and bosses.

This!  Staff continuing to work have massive bargaining power now. 
And once we get the test for virus antibodies, (them wot got it already), those staff have even more.

Speaking without the benefit of the scheme details, I expect the staff will opt for the 80% and demand a bonus for coming to work.
DBs prediction of inflation later in the cycle looks like getting brought forward, if you ask me.

[Loki]

What about self-employed people?

[Option5]

1 minute ago, Loki said:

What about self-employed people?

They want all self employed to go paye hence IR35, then they control all the population

[Boon]

Surely the mortgage people would not be happy about seeing these people on the 80%... does that not imply a worker who would have been let go if it were not for the government intervention.

[Frank Hovis]

23 minutes ago, TheCountOfNowhere said:

Dont...get toy 30K free money then retire!!!!!

I have enough; there's no point being greedy when I'm not going to spend what I already have.

My job was secure anyway so wouldn't qualify me for anything.

[Harley]

1 hour ago, Democorruptcy said:

Have you quoted the wrong person I didn't say that. I was making a case for why people could lose money buying in a bond fund. It was @sleepwello'nightswho seemed to think no money could be lost if held to maturity and seemed to be assuming every bond was bought at par.

Yup, apologies if I misread, you and I agree.  Jim Puplava has spoken a few times about his concerns with bond funds.  I wanted to buy the actual bonds instead for quite a while and hold to maturity but you can't get anything close to par to make it worth while.

PS: These bond funds are an example of why I distrust the opaqueness of collective investments.

[Harley]

34 minutes ago, Barnsey said:

80% pay to stay at home and chill or 100% pay for 40 hours a week, commuting time and expense, and greater risk of infection. Going to be some very interesting decisions and tensions for staff and bosses.

Edit: forgot cost of childcare

I worked that out a long time ago.  And I was a lot better off and happier with far less than 80%.  But then I refused to spend right up to my income.  I think I'm about to get shafted, again.

36 minutes ago, sleepwello'nights said:

Still relatively safe in a deflationary environment, (that is about to change)

A bit of this and a bit of that BOTBOT is not such a bad strategy!  Bonds do my head in!

[Loki]

25 minutes ago, Option5 said:

They want all self employed to go paye hence IR35, then they control all the population

Good point