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

[DurhamBorn]

34 minutes ago, Talking Monkey said:

Apologies DB, I wasn't clear, what I meant was if oil increases much further in the next few months won't that  bring forward the next expected recession, so I would expect oil price upside in the next say 6 months to be limited, bar any big supply shocks. Unless I misunderstood SP was mentioning he expects oil to increase in the coming months towards $100 as the dollar weakens, I suppose I was wondering could the economy in 2019/20 take that at the tail end of this cycle

Totally agree with the various discussion lines on this thread that point to oil heading to $200-300 by 2027/28

Probably not,if it went up now that sort of amount it would trigger a bust as it tends to do.

13 minutes ago, Errol said:

So silly that you can't buy oil related ETFs like XES because of the KID stuff.

Does XOP have a KID?

Its nuts isnt it.Can buy Italian bonds but not TLT .Be interesting to see if that changes once we get a trade deal with the US.

[Errol]

The one that really annoyed me is RSX (Russia ETF). Was buying it for years before the KID nonsense stopped me.

[Castlevania]

1 hour ago, Democorruptcy said:

Where did I mention Help to Buy?

 

Sorry, I meant the reason why McCarthy & Stone’s share price has massively underperformed relative to all the other builders over the past few years.

[Harley]

2 hours ago, Ashby said:

Do you largely recommend....

Oh no, I recommend nothing!  Just throw in some ideas for discussion and challenge.  And whatever I do may be terrible for another depending on circumstances.

I'm looking at the larger ETF holdings as a quick way of getting similar coverage to the overall ETF as a tracker.  The ETFs normally have a Pareto type distribution.  I would buy a smaller set of shares if just for dividends.

I held CEF for many years, which is now owned by Sprott.  Don't know about Sprott but there were best times to buy CEF depending on its premium.  You could watch this change on their website and time purchases accordingly.

[Democorruptcy]

3 hours ago, Castlevania said:

Sorry, I meant the reason why McCarthy & Stone’s share price has massively underperformed relative to all the other builders over the past few years.

Sorry, I was a bit slow on the uptake and didn't realise you just meant they had missed out on the gravy train.

What about Older Persons Shared Ownership (OPSO)?

Quote

For standard OPSO schemes, you will need to fill out the Help to Buy East and South East application form

I wonder if there is a grey area between 55 and retirement age? Funnily enough I've noticed my nearest new M&S development starts at age 55.

Re their share price it could largely be down to leasehold getting bad press?

[Eventually Right]

Random question for DurhamBorn (or anyone else who has an opinion)...

A lot of the time, the “accepted narrative” I hear on the state pension is “oh, in X years time there won’t be state pension, so you shouldn’t rely on it”, or that it’ll be means tested etc, so if you have other pensions/income you won’t get it .

Is that your opinion?

reason i ask is that there were a few years where I didn’t contribute enough NI to qualify for the year, and for the next couple of years, I could pay an extra contribution to HMRC to make them count. It works out at around £2k total for 4 years.

If I end up working til my mid-60s then I’d make up the years anyway, but I’ve got hopes/dreams of FIRE, so I’m wondering if it’s worthwhile finding the money to buy the years.

Cheers

 

[Majorpain]

39 minutes ago, Eventually Right said:

Random question for DurhamBorn (or anyone else who has an opinion)...

A lot of the time, the “accepted narrative” I hear on the state pension is “oh, in X years time there won’t be state pension, so you shouldn’t rely on it”, or that it’ll be means tested etc, so if you have other pensions/income you won’t get it .

Is that your opinion?

reason i ask is that there were a few years where I didn’t contribute enough NI to qualify for the year, and for the next couple of years, I could pay an extra contribution to HMRC to make them count. It works out at around £2k total for 4 years.

If I end up working til my mid-60s then I’d make up the years anyway, but I’ve got hopes/dreams of FIRE, so I’m wondering if it’s worthwhile finding the money to buy the years.

Cheers

 

Im personally assuming that i wont get a pension, or what i do get has been inflated away to be very limited in its purchasing power.  So anything above that is a bonus.

Luckily i have plenty of time to see which way the winds blowing.

[Bobthebuilder]

22 minutes ago, Majorpain said:

Luckily i have plenty of time to see which way the winds blowing.

lucky young you.

[MrXxxx]

9 hours ago, Majorpain said:

Im personally assuming that i wont get a pension, or what i do get has been inflated away to be very limited in its purchasing power.  So anything above that is a bonus.

Luckily i have plenty of time to see which way the winds blowing.

This is exactly the way I see it going.

They will drop the Triple Lock promise but to assuage the fears of OAPs (and their votes!) they will introduce a means tested OAP hardship benefit.

This way they can scrap the pension in all but name without actually scrapping it (and the retrograde legal issues this would require)  I.e, anyone who has made a private provision will have inadvertently opted themselves out of the OAP hardship benefit but will still get a `pension`,.....and as they had done it over a period of decades it will be too late!

[MrXxxx]

9 hours ago, Tdog said:

Youll be able to pay these contributions whenever you stop working ... alternatively set up a ltd company and pay yourself NI threshold ... or go the self employed route and paying a couple of hundred pound a year in (Class 2 NI) think its class 2 for self employed youd need to check.

Be aware, my understanding is that you have a limited time after the missing years to top-up at a lower rate; this is confirmed by going to your online contribution record/pension estimate.

[leonardratso]

18 minutes ago, MrXxxx said:

Be aware, my understanding is that you have a limited time after the missing years to top-up at a lower rate; this is confirmed by going to your online contribution record/pension estimate.

this is true, i underpaid while i was a contractor back in 98-2000, and i can no longer put in for those missing years, but it doesnt matter cos ive already blown the 30 year pay in even without those missing couple of years. so i will get a full state pension a day after i kick the bucket, which to be honest will have a NPV of about 40p a week by then.

[Talking Monkey]

33 minutes ago, Tdog said:

Its meant to be 6 years but i managed to pay 1 of the years from a decade ago. This was just a few months ago.

how did you manage that Tdog I got a few from way back I wouldn't mind paying so I can get the 30 years closed out quicker

[Sasquatch]

Regarding the state pension, don't assume that HMRC is competent! I recently checked my NI record and I had one year (13/14) that was missing one week and therefore was excluded from my overall record. It was a 100% HMRC cock up but I had to phone them and then ultimately pay another £3 (!) to complete the year.

[DurhamBorn]

13 hours ago, Eventually Right said:

Random question for DurhamBorn (or anyone else who has an opinion)...

A lot of the time, the “accepted narrative” I hear on the state pension is “oh, in X years time there won’t be state pension, so you shouldn’t rely on it”, or that it’ll be means tested etc, so if you have other pensions/income you won’t get it .

Is that your opinion?

reason i ask is that there were a few years where I didn’t contribute enough NI to qualify for the year, and for the next couple of years, I could pay an extra contribution to HMRC to make them count. It works out at around £2k total for 4 years.

If I end up working til my mid-60s then I’d make up the years anyway, but I’ve got hopes/dreams of FIRE, so I’m wondering if it’s worthwhile finding the money to buy the years.

Cheers

 

The state pension will never ever ever be scrapped.It will be paid the amount it is now and will increase.The increases could change though,as could the age you get it.The government are going to lift the NI allowance to £12.5k,given that is the tax rate allowance its likely they arent going to increase that.Once they are the same they might merge the two.That then means pensioners over £12.5k a year will pay NI.Its not certain they will do that,but id say its higher than a 50/50 chance.Another reason to try to structure pension income to £12.5k and the rest in ISAs.

Dont pay the £2k for NI.If you get grandchildren you can claim the extra years "specified adult childcare credits" im 3 years short of full NI and have probably retired last friday so il claim them once my oldest daughter has a child.If not you can also go self employed when you retired.Simply sell a pair of jeans on Ebay.Put tax form in with turnover of £20 for the year,but click the box to pay voluntary class 2 contributions.It will cost you £156 for the year,but that gets you a years full NI.Government was going to close that window,but havent.100% legal.

13 hours ago, Tdog said:

Youll be able to pay these contributions whenever you stop working ... alternatively set up a ltd company and pay yourself NI threshold ... or go the self employed route and paying a couple of hundred pound a year in (Class 2 NI) think its class 2 for self employed youd need to check.

I didnt see you had answered that Tdog as i did as well,but yes thats the best route,it is class 2 yes,you opt in on tax form.

[headrow]

Anybody selling into this rally? I'm at my all time record in my share account and isa but have spent the last 10 years looking for income not capital gains , i now have both but i feel as though i should become a bit more risk averse.

[DurhamBorn]

4 hours ago, MrXxxx said:

This is exactly the way I see it going.

They will drop the Triple Lock promise but to assuage the fears of OAPs (and their votes!) they will introduce a means tested OAP hardship benefit.

This way they can scrap the pension in all but name without actually scrapping it (and the retrograde legal issues this would require)  I.e, anyone who has made a private provision will have inadvertently opted themselves out of the OAP hardship benefit but will still get a `pension`,.....and as they had done it over a period of decades it will be too late!

They wont i doubt.The new state pension is just above pension credit level and so doesnt actually cost anymore,but it does mean people are just above the level for means tested benefits.That also means any income at all will be taken off for any rent etc.The auto pensions everyone gets opted into now will probably end up paying just enough to pay the rent.It will be much easier as well to increase tax on pensioners with higher pensions.

1 hour ago, Talking Monkey said:

how did you manage that Tdog I got a few from way back I wouldn't mind paying so I can get the 30 years closed out quicker

Its 35 years now not 30

[DurhamBorn]

4 minutes ago, headrow said:

Anybody selling into this rally? I'm at my all time record in my share account and isa but have spent the last 10 years looking for income not capital gains , i now have both but i feel as though i should become a bit more risk averse.

Im not selling anything that iv been buying.Almost everything i have now is for the next cycle.I did top slice a few where the bottom ladder was up over 30% including divis (Royal Mail is up 34% for instance).Iv still got a lot of cash though (around 30%) and that goes up to 50% when a pension transfer im doing lands in Jan/Feb.

[TheCountOfNowhere]

11 minutes ago, headrow said:

Anybody selling into this rally? I'm at my all time record in my share account and isa but have spent the last 10 years looking for income not capital gains , i now have both but i feel as though i should become a bit more risk averse.

Thinking about it. 

 

Nothing lasts forever and at some point biros will be found out. 

[JMD]

16 hours ago, Cattle Prod said:

I don't think the Arctic or ultra deep water will ever be exploited, demand destruction will set on before that and force the shift to alternative energies. Ultra deep water is currently unreachable.

Edit: Ive seen some of the deep seismic off Argentina and to the north and it looks very prospective, huge fans, anomalies etc. But it cant currently be drilled. The majors went in in the last round a bit shallower, so you could watch that, but I'm not interested. Mega projects with 7 year lead times kill companies, and I doubt many will get sanctioned even if drilling tech advances. What you want as an investor is cheap oil and gas with low breakevens. Thats what the majors have been scrabbling for for the last 5 years.

In terms of the companies making the shift - just follow the ones making cash. If they are making cash, they will diversify when it's profitable to do so. As I've said before, the big companies can afford to instantly take dominant positions in alternative energy whenever they want to. Equinor already has done so in wind. Shell looks to be repositioning and is gas heavy (the broadband I think is a hang over from the First Utility purchase, but I note they haven't divested it yet...). BP going toward gas, big internal changes in AI machine learning etc. Respsol taking responsibility for customers carbon emissions means they will soon make moves. ENI is apparently going into forestry in a big way (which I'm long on too). Exxon is pretty old school, they tend to sit back a while before moving. Total I think also has made carbon offset commitments. All these companies will have enotmous cash flow in the coming years and will buy what emerges.

Just follow the money 

thankyou CP for taking the time to reply so fully to my basic (prosaic/mundane!?) questions, really does help me understand the sector more, which is crucial before deciding how to personally invest.

Point of correction taken regarding both arctic and deep water exploration being too expensive. Though I guess Russia/Putin (via mega Russian energy companies), regardless of the commercials, will continue to explore the arctic - its own 'back yard' - for political points/vanity reasons?

 

[JMD]

4 hours ago, MrXxxx said:

This is exactly the way I see it going.

They will drop the Triple Lock promise but to assuage the fears of OAPs (and their votes!) they will introduce a means tested OAP hardship benefit.

This way they can scrap the pension in all but name without actually scrapping it (and the retrograde legal issues this would require)  I.e, anyone who has made a private provision will have inadvertently opted themselves out of the OAP hardship benefit but will still get a `pension`,.....and as they had done it over a period of decades it will be too late!

Personally, I think the OAP and all benefits, including Universal Credit (strange name if you think about it) will be replaced by a Universal Basic Income (ah there's that universal name again - coincidence?). 

Initially UBI will be used to 'encourage' people into affording to go part-time. But that encouragement will eventually become compulsory so that the jobs that do exist in 10-20 years time can be shared more equitably amongst the population... idle hands, etc. 

Weren't Labour talking of doing this, but got caught up in having to explain how the NHS could afford it? Anyway I think the Conservatives, in power i think for next 10-15+ years, will end up implementing it. Don't get me wrong, its not a panacea by any means, but I think it goes some way towards mitigating the damaging culture of in-work benefits that's infected most of the West.    

[headrow]

37 minutes ago, DurhamBorn said:

Im not selling anything that iv been buying.Almost everything i have now is for the next cycle.I did top slice a few where the bottom ladder was up over 30% including divis (Royal Mail is up 34% for instance).Iv still got a lot of cash though (around 30%) and that goes up to 50% when a pension transfer im doing lands in Jan/Feb.

I've owned most for over 10 years now , when i first started buying then i was just looking for yield as the interest rate on my savings had just about vanished . I bought all the Utilities , Telecoms , Pharma , Insurance , Asset Managers, Big Oil, industrials , tobacco that were yielding around 5-6% , i bought 3k chunks and spread myself wide , some of these at todays prices are yielding me about 10% which i have drip fed into other assets that at the time were yielding north of 5%. I've avoided the miners and banks. I have built up a portfolio that pays 20k into my ISA each year but i've had a 10 year bull run with very few sleepless nights and know that sometime in the future a huge wealth destruction downturn is coming. I quit work 2 years ago at 50 and don't think i could go to back to work , i've got used to doing very little.

[DurhamBorn]

1 hour ago, JMD said:

Personally, I think the OAP and all benefits, including Universal Credit (strange name if you think about it) will be replaced by a Universal Basic Income (ah there's that universal name again - coincidence?). 

Initially UBI will be used to 'encourage' people into affording to go part-time. But that encouragement will eventually become compulsory so that the jobs that do exist in 10-20 years time can be shared more equitably amongst the population... idle hands, etc. 

Weren't Labour talking of doing this, but got caught up in having to explain how the NHS could afford it? Anyway I think the Conservatives, in power i think for next 10-15+ years, will end up implementing it. Don't get me wrong, its not a panacea by any means, but I think it goes some way towards mitigating the damaging culture of in-work benefits that's infected most of the West.    

I agree on that and think its certain at some point.I dont live too far away from Hadrians Wall.Most people think it was built buy the Romans to keep the northern tribes out.It was really built though to give the legions something to do because Hadrian worried about idle hands thinking about taking over.

We have a crazy situation now where people working full time are not much better off (or worse off in many cases) than people doing nothing.That cant last.Its likely the welfare pie will be spread more so that those doing nothing will have to do something,and those doing the most will be able to do a bit less.

 

[DurhamBorn]

Iv spent my first full day unemployed doing some real work.

Iv done a complete dollar check using all my usual inputs.

The price the road map points to in the medium term from here is 89.3 on the dollar index.So its pointing to a fall of around 8%.Looking at the causes it seems like all the main currencies will be moving up against it,its not just based on the Yen or the Euro.Lets see.

Key question for me here is how does oil trade in that scenario.My oil road map is still showing $43 as a target based on GDP data cross market to each sized market.However thats very hard to tie in with a weak dollar so im sitting on my hands a bit.

I do think though its likely that UK cyclicals will keep running higher as sterling gains strength.Luckily we picked up on that move 6 months ago and so already have some big gains.Given 99% of the market got the call wrong on sterling,its likely they are very very underweight the UK cyclicals,and lots of shorts getting whacked should snap the rubber band back.

In the two trading days since i left work i had the biggest increase in cash terms in my portfolio ever,some were underwater though.Hopefully sterling strength should open up the door to US assets for us getting cheaper as well.

An interesting thing to note.Woodford had a lot of the stocks showing big increases.If he hadnt bought so much crap its likely he would way outperform most funds at the moment,especially if income had been re-invested.The irony is Link sold all his liquid holdings the last few months,so his investors got cashed out at the bottom.Talk about wounds and salt.

 

[JMD]

22 minutes ago, DurhamBorn said:

I agree on that and think its certain at some point.I dont live too far away from Hadrians Wall.Most people think it was built buy the Romans to keep the northern tribes out.It was really built though to give the legions something to do because Hadrian worried about idle hands thinking about taking over.

We have a crazy situation now where people working full time are not much better off (or worse off in many cases) than people doing nothing.That cant last.Its likely the welfare pie will be spread more so that those doing nothing will have to do something,and those doing the most will be able to do a bit less.

 

DurhamBorn, yes in fact I think there could be many more positives (as I think i''ve posted on this topic before I shan't repeat)... but for example if you take a two parent family, and each does a 3-day week, the child care problem is kinda solved, not to mention other money savings/health issues that would stem from greater free time. So reduced employment income wouldn't necessarily make the average family poorer. 

btw, I was hesitant about mentioning in my post the political parties (such as they are) as this thread is a politics free zone and all the better for it. But anyway for me its not about politics - its about the macro environment - which I think is your take on things.

As an aside for those interested in human behaviour and the reasons why people adopt different beliefs (dogmas?), the psychologist Jonathan Haidt explains the area very well - please don't let the 'american TED talker' put you off! In fact it is refreshingly common sense, and although not strictly economics/finance related, at 20mins long its well worth watching to help rationalise current 'modern' thinking/ranting.

 

[Noallegiance]

6 minutes ago, JMD said:

DurhamBorn, yes in fact I think there could be many more positives (as I think i''ve posted on this topic before I shan't repeat)... but for example if you take a two parent family, and each does a 3-day week, the child care problem is kinda solved, not to mention other money savings/health issues that would stem from greater free time. So reduced employment income wouldn't necessarily make the average family poorer. 

 

I do 4 nights a week. The missus does 4 days. Three under 7s.

We have no debt costs. No childcare costs. No holidays aside from maybe one per year/18 months to a caravan park. 13 year old car. No 'benefits'. In SE. 

We couldn't be poorer unless we started using a visa for the weekly shop.

Living debt-free is getting harder when competing against debt users.