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


spunko

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leonardratso

... and yet most people will do nothing about it. Esp. not brokers, because they get their commission if its worth £1 or £10M.

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Noallegiance
1 hour ago, Harley said:

Spot on!  Especially in these times.

And to drive your point home, this (what people like to look at)....

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....becomes this when valued in gold.....

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....which is as much about the fall in GBP as the rise in gold as shown here...

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...where house prices were falling in gold before the gold price started to rise.

If I want a modest family home in my born and bred district I'd need 400 oz of gold. 

Ludicrous.

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Overall gross debt issuance hit an "eye-watering" record of $12.5 trillion in the second quarter, compared with a quarterly average of $5.5 trillion in 2019.

So more debt created JUST IN Q2 2020 THAN the entire value of all 'above ground' Gold.

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sancho panza

 

19 hours ago, JMD said:

SP, I agree that we need 'leaders', I've said as much many many times. Recently however I had a scary 'lightbulb moment' when I realised that the old adage of people getting the leaders they deserve is not mere cliche - that is what's going on here. After all we do live in a democracy (well sort of, but that is not really the crux of the problem now facing us) and so the voter that sustains and encourages our politicians is also complicit and far from blameless. It's not even about politics in my opinion, the last century or two have shown how empty and temporary 'political ideals' are, and the disfunctional Labour and Conservative parties of today tell me that we have come to the end of the road. Such parties are spectacularly incapable of governing, and I guess all we can now anticipate is having our own Trump 'anit-politician' in the near future. I confess things do look very gloomy, but for me the solution is for people to realise that rule of law, property rights, free association, free speech are the crucial elements and mostly all else is window dressing. I admit that the Covid-era we now find ourselves living under has made me more libertarian, and the thought of a more powerful centralised state Is I think a very scary but very real prospect.

I don't think you can blame voters when we have an electoral system that was designed by our public school elite,for our public school elite.They fight over a 150 seats at election time,stop aprteis like the Greens or Ukip getting seats(2015 Ukip polled 4 million,Greens 1 million,Tories 8 million-Tories got 300 seats,Greesn 1,Ukip 1)

I don't deserve the likes of bungling boris or takeaknee Starmer,but I get them because the odds are massively stacked against change.

You're bang on with that prediction in bold JMD.It's coming and I suspect the Tories and the takeaknee team will sorely regret not choosing to loosen their electoral grip a little earlier.

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sancho panza
12 hours ago, JMD said:

It's strange how the US is characterised as being extreme free market, but it has controlled rents and strictly enforced residential zoning. Away from the topic of housing and I'm reminded of the 1970 'Nixon shock', of course that was to prevent inflation, but still relevant I think to show how interventionist even Uncle Sam can be when it wants.

I don't think teh USA has been particualrly capitalist since Volcker.Crony capitalist maybe,but I think the defining elemtn of capitalism is that risk is allowed to set returns without govt distorion.The pwoer of the lobbies in washington mitigates against that.

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sancho panza
11 hours ago, JMD said:

Thanks SP, I plan to tread very carefully and do appreciate that there are very few worthwhile property investments these days.

I'm not against it.

See my recent reply to CP.When the current cohport of LL's start seeing their 60/40 pension pots implode in about 4 years time,i think it'll be worth your while.

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sancho panza
2 hours ago, Harley said:

Spot on!  Especially in these times.

And to drive your point home, this (what people like to look at)....

 

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....which is as much about the fall in GBP as the rise in gold as shown here...

 

Wow...................!!! an overused word sometimes but wow.

We've taken some profits in some of our goldies and going to redeploy the original stake across the sector into some more lowly rated plays.

If there was one chart that confirmed the need to maintain your PM exposure,it's that one Harley.Thanks for psoting.

 

1 hour ago, Loki said:

B einteresting tosee if they can get anything for it.2 years occupancy post deal .......

whos going to buy it? who'll rent it out when BP are gone?Chariddee?

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4 minutes ago, sancho panza said:

whos going to buy it? who'll rent it out when BP are gone?

As long as the price is high enough, they'll find someone looking for a safe investment. xD

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6 hours ago, Cattle Prod said:

I'm not sure he's actually created anything new. He just packages it well. Tesla tech is 100 years old, boring company - nothing new there. Even the self landing rockets are old tech but he is pushing the while space industry forward so full credit there. But a genuis inventor? Not fit to spitshine Nikola Tesla's shoes IMO. Decent engineer though, and genius level salesman.

CP, not nitpicking you - but I am always curious why Nikola Tesla is held in high regard - you write positively of Tesla, but isn't it the case that Tesla, despite his many patents and half-inventions didn't really achieve that much? There are many conspiracy stories surrounding him and even the great David Bowie (I'm a DB fan!) was apparently obsessed with him, but still isn't it mostly just mystique that surrounds Tesla? For example didn't Edison's AC tech win out at the time because it was more commercially viable? Subsequently it was replaced by DC, but Tesla own invention was not viable. You are an engineer so know about this which is why I ask. But I was always of the thinking that Musk's Tesla corporation was rather apply named, and if I understandnd your own criticism of the company it is because it doesn't produce new novel ideas, but instead it has captured (like Tesla the man) the zeitgeist?

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10 hours ago, wherebee said:

Sorry, yes, we have a whole forum for that stuff.  I'll stop.

Was not attempting to monitor your posts Wherebee. Hope it didn't come across like that? I actually think these topics are still valuable to touch on here, in very small doses anyway. DurhamBorn is correct to repeatedly remind us that it's the economics that informs the politics and that is indeed the focus of this excellent thread. But It is 'the politics' that most of us talk about in our everyday lives to friends etc, and so I just think it is valuable to be aware of the manipulations,  propaganda, fundamental social changes happening around us, but tragically not reported, so that we can pass some of our knowledge - dare I say insight(!) - on when the opportunity arises.

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geordie_lurch

More on the landlord stuff about a family who can't get back into their property they rented out to another family...

Some 600,000 tenants took the option to stop paying their rent, or to pay at a reduced rate as lockdown restrictions affected jobs, according to the Government.  

With courts usually dealing with up to 10,000 eviction requests a month, a significant backlog is expected once the restrictions are lifted.

The National Residential Landlords Association said 94 per cent of landlords rent property as an individual with 45 per cent renting out just one property and 38 per cent renting out between two and five.

https://www.dailymail.co.uk/news/article-8678889/amp/Tenant-staying-house-rent-free-amid-eviction-ban-says-forced-live-street.html

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5 hours ago, DoINeedOne said:

Been a few posts about property 

Property had been something i would like to get involved in but that changed over the years of sky high prices i have friends and family who all want to get into property developing etc.. but whilst i was a carpenter the dream to buy and sell houses is pretty much dead to me

When i think of the headaches landlords that i know have and some of them are no longer involved in property due to this headaches, fee's, empty flats, damage, silly tenants, complaints, maintenance etc...

 

I just keep thinking back to a post i made a year or so ago here from a book

IMG_5942.thumb.jpg.5b78bb1fdd81cd26a1ad249a1a9cdbc9.jpgIMG_5943.thumb.jpg.023a6e8fa1e297c09434dc54bf6fcaca.jpg

 

 

 

Then i look at this and think yes gold and silver have bad years but its just seems easier

 

 

 

1242898100_Screenshot2020-08-31at09_21_57.thumb.png.046076fedce7633a0fdc68817c7f6f2f.png

 

1545175339_Screenshot2020-08-31at09_36_58.thumb.png.5b7c298b63c6f410ed9368860fd6a7c4.png

 

 

Now one of my friends says he wants $1 million of property in a few years such a nice round figure more for the show and status i suspect, i just say oh nice but and think i just want investments that i can sell easily from a laptop in minutes and the only property i want is a nice family home to work on

I think your post is true Wisdom (or at least financial Zen!) Not being sarcastic either. Thing is I have the (envious!) problem of having (too much?) cash that I simply don't feel confident in investing, mainly because I already have a 'full' allocation in stocks/gold. My dilemma is if not property, then where? Especially as property would have provided income also. I know this is not an advise column, just wanted to make clear that this was not just idle speculation. Others on here in similar position i think put their 'spare' funds into gold, they 'went large' as it were and I now wish I had done the same before the recent turnup in pm markets. Oh well, hindsight is a wonderfull thing! Perhaps I'll get a second bite if some of the stock market commentators like David Hunter are correct and there is a big sell off. Thing is I can't see PM's/crypto etc going back down from here.

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leonardratso

i was fed up of watching the nasdaq only go up, so ive decided to day trade apple and tesla with some small amounts, makes me sick but hey, its no more repugnant than investing in fags/guns/gambling companies.

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6 hours ago, jamtomorrow said:

This on steroids. Putting your wealth into anything other than cash or property pretty much makes you a contrarian in the UK by default.

I've given up talking about wealth preservation with family/friends - eyes glaze over as soon as you stray a yard from the familiar comfort zones. God knows what they'd make of this our shining citadel of contrarianism.

Jamtomorrow, you say use anything other than cash or property? I'm tempted to agree, but would you care to hint at any of those other forms of 'Jam'? Just asking... as I feel I am personally maxed out on stocks/PM's.

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21 minutes ago, JMD said:

Jamtomorrow, you say use anything other than cash or property? I'm tempted to agree, but would you care to hint at any of those other forms of 'Jam'? Just asking... as I feel I am personally maxed out on stocks/PM's.

Commodities..... Land......and bitcoin....? 
 

(or ...... antiques..... old wine..... etc)

There are only so many places you can put your money....

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5 hours ago, DurhamBorn said:

Yes and for 40 years they have been right to do so.I think a lot of the problem in the UK is the fact we are now more socialist than Soviet Russia ever was.The amount of benefits is incredible and benefits are means tested against everything but a house.The problem is they simply have no memory now of inflation and even rising rates.House prices are now at such extreme levels that inflation wont help them.

The things i remember most,and i always remind myself of are the two truths of macro strategy.

Number 1,the cost of money is the most important thing in a western style economy,everything else is cross market, (US long bond mostly)

Number 2,the market always hurts the most people possible in time.Its never linear,but always a truth.

Given we are nearly at the start of a rising rate cycle,and the UK public have an unbroken belief in house prices (and their pensions in 60/40 passive funds) then both are going to slam them hard.

DB, Wow that's quiet a statement about the UK being more socialist than USSR. In terms of private capital it obviously is not (though I suppose watch this space re. Rishi's future wealth taxes!), but the point you make I think is about government ('kindness of strangers', I like to call it) support and benefits, which in our post-Covid economy is only set to grow and multiply (virus like if you will).                                                                                                 In terms of pure state control, I don't remember the politburo being as 'smiley' as our over familiar (but ironically out of touch) politicians, but everyday I can see the resemblances growing!

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5 hours ago, Harley said:

Interesting how many "proper" commentators are now mentioning how bad such an allocation could be.

What worries me Harley on them is the fact the equity part is passive.So you have by definition 40% in dis-inflation assets in bonds,but then probably 80%+ of the equity part in dis-inflation assets through tech stocks etc etc.People think its diversified,but actually its probably leaning 90% to dis-inflation.Going into draw down many remain or go into 20/80 portfolios.I think inflation adjusted they will lose 50%+ over the cycle from here +fees + draw down.

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11 minutes ago, JMD said:

DB, Wow that's quiet a statement about the UK being more socialist than USSR. In terms of private capital it obviously is not (though I suppose watch this space re. Rishi's future wealth taxes!), but the point you make I think is about government ('kindness of strangers', I like to call it) support and benefits, which in our post-Covid economy is only set to grow and multiply (virus like if you will).                                                                                                 In terms of pure state control, I don't remember the politburo being as 'smiley' as our over familiar (but ironically out of touch) politicians, but everyday I can see the resemblances growing!

73% of my home town rely on benefits and/or work for the council/ state.Welfare "free" money is higher by a massive amount here than it ever was in the USSR.It wasnt so until Brown of course,but the Tories have nothing much to roll it back.

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5 hours ago, Harley said:

Interesting how many "proper" commentators are now mentioning how bad such an allocation could be.

Not sure if this point should be placed here or in pension, but here goes...

many people (including myself) currently have a work-based DC pension with limited/a few options I.e a stock/bond life style option, a cash/short term bond option, a developing markets/high income option...

....given the propensity for a BK in the near future would it be wise to move into the cash option (thus sacrificing time in the market) in the short-term to protect the capital and move back after it has struck?...thoughts/comments?

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sleepwello'nights
4 hours ago, Harley said:

Versus:

 

Just running the numbers, if you had invested the £160,000 2005 average house price in liquid gold instead, it would now be worth:

 

PS:  BTW, that £160,000 at a compounded 5% inflation rate would now be worth £70,420!

Except most home owners would not have had £160k to invest in anything. Most would have had, what, a 10% deposit. And then where would they have lived?

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1 hour ago, JMD said:

I think your post is true Wisdom (or at least financial Zen!) Not being sarcastic either. Thing is I have the (envious!) problem of having (too much?) cash that I simply don't feel confident in investing, mainly because I already have a 'full' allocation in stocks/gold. My dilemma is if not property, then where? Especially as property would have provided income also. I know this is not an advise column, just wanted to make clear that this was not just idle speculation. Others on here in similar position i think put their 'spare' funds into gold, they 'went large' as it were and I now wish I had done the same before the recent turnup in pm markets. Oh well, hindsight is a wonderfull thing! Perhaps I'll get a second bite if some of the stock market commentators like David Hunter are correct and there is a big sell off. Thing is I can't see PM's/crypto etc going back down from here.

One other thing was in the Grant Williams and Anthony Deden interview on youtube he stats that they keep most of there cash in gold as its liquid and easy to sell it if they need to buy other investments my issue was banks are not paying me anything

I actually got sick and tired of Premium Bonds and what i had left in there i removed and bought silver at around £12

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Just watched some of the videos here and thought it may be useful for novices (like myself)

https://www.google.com/url?sa=t&source=web&rct=j&url=https://m.youtube.com/user/ukspreadbetting&ved=2ahUKEwjNrMyg48XrAhXGEcAKHf3dAUQQFjAKegQICxAF&usg=AOvVaw135u8scYS0VjpNm-KtmOzS

They are not only about spread betting/day trading, and I found some made me question/review my current understanding so far, so not a bad thing.

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8 minutes ago, MrXxxx said:

Not sure if this point should be placed here or in pension, but here goes...

many people (including myself) currently have a work-based DC pension with limited/a few options I.e a stock/bond life style option, a cash/short term bond option, a developing markets/high income option...

....given the propensity for a BK in the near future would it be wise to move into the cash option (thus sacrificing time in the market) in the short-term to protect the capital and move back after it has struck?...thoughts/comments?

Obviously none of us are really well placed to advise you, but ......

how long until retirement, e.g. wil time out of the market represent a large or small amount of time remaining? If small then being in cash for a few months wont hurt that much

Personally, I'd remain partially invested in a diverse range of assets and classes and perhaps weight an allocation to cash/equivalent.

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49 minutes ago, Vendetta said:

Commodities..... Land......and bitcoin....? 
 

(or ...... antiques..... old wine..... etc)

There are only so many places you can put your money....

Yup, stuff in bold would be my utlitarian answer i.e. return of/on capital.

If you think you can afford it, a few % for "spiritual" investing is important IMO - what in the world do you love? What should we be keeping around for future generations? Buy that stuff and hang onto it. Cars, antiques, fine wine, crap wine, vinyls, art, 80's erasers - whatever you value in the world.

Then there's "investing" in the wider sense. Things I've "invested" in lately: family resilience/preparedness; physical fitness; work enjoyment; more control over my time; house maintenance (esp things nobody else seems to bother with, like repointing, roof etc). All ultimately boil down to using a little bit of wealth to give you choices, IMO the most important investment of all.

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