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

[Hancock]

14 minutes ago, ThoughtCriminal said:

I've mentioned before that I'm considering doing the same just down the road from you in teesside, inspired by you and your wrongthink 😂

 

3 bed ex council terraces here for 60k and 500 a month rent. 

 

How would you do it DB? Hypothetically speaking of course. 

 

10-15% deposit then one of those 10 year fixes? 

If you could give them to the council to put their tenants in and let them deal with damage, otherwise it seems like a lot of hassle for a crashing asset class.

BTL deposits are closer to 25% these days if you're wanting a good mortgage deal.

https://www.money.co.uk/mortgages/buy-to-let-mortgages.htm?track=885127&gclid=CjwKCAjw3pWDBhB3EiwAV1c5rM3sLM2kgZARvPCna16NJ2GC6r71rw3ss7YjjXpereIcaV9rQ7fx1hoC6gEQAvD_BwE

[ThoughtCriminal]

3 minutes ago, Hancock said:

If you could give them to the council to put their tenants in and let them deal with damage, otherwise it seems like a lot of hassle for a crashing asset class.

BTL deposits are closer to 25% these days if you're wanting a good mortgage deal.

https://www.money.co.uk/mortgages/buy-to-let-mortgages.htm?track=885127&gclid=CjwKCAjw3pWDBhB3EiwAV1c5rM3sLM2kgZARvPCna16NJ2GC6r71rw3ss7YjjXpereIcaV9rQ7fx1hoC6gEQAvD_BwE

15k deposit then, not too bad. 

 

I never worry about damage as I never rent to shit heads and I look like a serial killer. 

 

That's what all my tinder dates say anyway.........🤷‍♂️

 

I lean towards DBs idea that the northeast should be ok as far as houseprices go, but you're right, could turn into a complete illiquid cluster fuck if there's a real crash. 

[Loki]

 

 

[Fully Detached]

As a beginner to this thread can someone tell me does this David Hunter guy see a a short melt up before a BK, or a longer melt up to eventual currency collapse?

[Hancock]

2 minutes ago, Fully Detached said:

As a beginner to this thread can someone tell me does this David Hunter guy see a a short melt up before a BK, or a longer melt up to eventual currency collapse?

I thought the melt up was going to be caused by "further" actions from the FED, i don't believe they have done anything for a full few weeks now.

The melt up in 2020 never happened, which was one reason why people were buying in the run up to March 2020.

[Lightscribe]

2 minutes ago, Fully Detached said:

As a beginner to this thread can someone tell me does this David Hunter guy see a a short melt up before a BK, or a longer melt up to eventual currency collapse?

Short melt up before BK. I get where he’s coming from, I just don’t see a bond buying frenzy at current yields with the money supply so I would have thought it the yields would continue to 2% and beyond this year. But then again he maybe right, big money piling in now with the expectation of selling as yields go lower before the BK.

[Loki]

8 minutes ago, Fully Detached said:

does this David Hunter guy see a a short melt up before a BK, or a longer melt up to eventual currency collapse?

Both - BK this year, currency collapse (Dollar?) end of the decade after durhamborn's reflationary cycle 

[Fully Detached]

1 minute ago, Loki said:

Both - BK this year, currency collapse (Dollar?) end of the decade after durhamborn's reflationary cycle 

Ah perfect, that's what I was hoping, because I'm attempting to position myself for exactly this scenario. So I hope he's bloody right 

[Loki]

Just now, Fully Detached said:

Ah perfect, that's what I was hoping, because I'm attempting to position myself for exactly this scenario. So I hope he's bloody right 

Same here 

[Hancock]

10 minutes ago, Loki said:

Both - BK this year, currency collapse (Dollar?) end of the decade after durhamborn's reflationary cycle 

I thought his reasoning for the BK, was going to be due to the FED raising interest rates when the economy was flying.

Thus the markets seeing an end to the free money.

 

[Loki]

Just now, Hancock said:

I thought his reasoning for the BK, was going to be due to the FED raising interest rates when the economy was flying.

Thus the markets seeing an end to the free money.

 

As far I remember it was Fed tightening at the wrong time/wrong speed/wrong way, rather than rates, but I could be wrong.

[Hancock]

1 minute ago, Loki said:

As far I remember it was Fed tightening at the wrong time/wrong speed/wrong way, rather than rates, but I could be wrong.

Raising rates is the FED tightening.

[Loki]

Just now, Hancock said:

Raising rates is the FED tightening.

Oh right, I assumed he meant less BRRRRRRRRR

[Noallegiance]

24 minutes ago, Hancock said:

Raising rates is the FED tightening.

Reducing liquidity is tightening as well.

50 minutes ago, Fully Detached said:

As a beginner to this thread can someone tell me does this David Hunter guy see a a short melt up before a BK, or a longer melt up to eventual currency collapse?

DH sees major deflationary bust where nothing will remain untouched. Fed withdrawing liquidity wouldn't help.

He sees a melt-up to a top in markets in the next 3-6 months. By his own estimation his targets of 4700 S&P, 37000 DJIA and 17000 Nasdaq could be conservative, which may also apply to his metals targets, too. Bust possible maybe by year-end. Top could last a little while, bust with a depression feel but a recession length (12-24 months).

The response could be God-like levels of money printing in a recovery.

[Hancock]

1 hour ago, Loki said:

As far I remember it was Fed tightening at the wrong time/wrong speed/wrong way, rather than rates, but I could be wrong.

I think you're more right then me ... but i'm sure not so long ago he said it was going to be the FED raising rates as inflation went higher .... then having to bring them down when it all crashed.
https://contrarianpod.com/content/podcasts/season3/david-hunter-markets-to-peak-q2-2021-before-bust/

[leonardratso]

thought his last BK estimate was Q2 2021, mind you that covers 3 months, i assume end of Q2, but im sure that was Q1 2021 last year in his estimates. His timing is a bit lousy i suppose, but theres little doubt the stuff does look like it gets to where he said it would (or close) eventually i suppose. Thats no consolation though if you are too late or too early, think id rather be early on a BK to be honest, big problem to sit on your hands with a huge wedge of cash burning a hole in your pocket.

And by big i mean 8.32 great british pounds. Yes more than 5.

 

[Talking Monkey]

3 hours ago, Hancock said:

If you could give them to the council to put their tenants in and let them deal with damage, otherwise it seems like a lot of hassle for a crashing asset class.

BTL deposits are closer to 25% these days if you're wanting a good mortgage deal.

https://www.money.co.uk/mortgages/buy-to-let-mortgages.htm?track=885127&gclid=CjwKCAjw3pWDBhB3EiwAV1c5rM3sLM2kgZARvPCna16NJ2GC6r71rw3ss7YjjXpereIcaV9rQ7fx1hoC6gEQAvD_BwE

I didn't know that was an option if the council deals with it all could be doable

[goldbug9999]

1 hour ago, Noallegiance said:

 

The response could be God-like levels of money printing in a recovery.

Money printing is the only tool that anyone in control of govs and ecbs in developed countries has any stomach for now. It seem to me that global monetary policy has entered a Nash Equilibium https://en.wikipedia.org/wiki/Nash_equilibrium from which it cannot escape.

[goldbug9999]

16 minutes ago, goldbug9999 said:

Money printing is the only tool that anyone in control of govs and ecbs in developed countries has any stomach for now. It seem to me that global monetary policy has entered a Nash Equilibium https://en.wikipedia.org/wiki/Nash_equilibrium from which it cannot escape.

Of course one way to break the equilibrium is for some country to default on its debt and switch to direct government issued non-debt currency, if I was in charge thats what I would do anyway.

[Don Coglione]

16 minutes ago, goldbug9999 said:

Money printing is the only tool that anyone in control of govs and ecbs in developed countries has any stomach for now. It seem to me that global monetary policy has entered a Nash Equilibium https://en.wikipedia.org/wiki/Nash_equilibrium from which it cannot escape.

 

 

[Noallegiance]

20 minutes ago, goldbug9999 said:

Money printing is the only tool that anyone in control of govs and ecbs in developed countries has any stomach for now. It seem to me that global monetary policy has entered a Nash Equilibium https://en.wikipedia.org/wiki/Nash_equilibrium from which it cannot escape.

Well! What do you get if you cross a Nash Equilibrium with a Zugzwang?!

Answers on a postcard...

[DurhamBorn]

4 hours ago, ThoughtCriminal said:

I've mentioned before that I'm considering doing the same just down the road from you in teesside, inspired by you and your wrongthink 😂

 

3 bed ex council terraces here for 60k and 500 a month rent. 

 

How would you do it DB? Hypothetically speaking of course. 

 

10-15% deposit then one of those 10 year fixes? 

 

 

If we bought two it would be cash.If four maybe cash or 50% LTV.My dad has to be careful with inheritance tax though and so do i.Being not married i only have the one allowance and the owner occupier allowance so my SIPP is very important as im on the IHT allowance outside of SIPP.We have a trust set up we can use,but its not tax efficient unless the person taking the income has their tax allowance spare though i have now.

[Hancock]

1 hour ago, Talking Monkey said:

I didn't know that was an option if the council deals with it all could be doable

Yes they do.

My friend and his young family became homeless, so the council put them in some shithole half way house that was full of smackheads. It was 2 rooms for a family of 5 with a shared bathroom and kitchen ... it was truly disgusting.

After 6 weeks there, the council then moved them to what is deemed another form of half way house or emergency accommodation .... but to you and I it was a 3 bed council house in a shit estate.

Anyway the person who owned this "emergency accommodation" bought it off the council several years earlier for a fraction of the market price as they were a previous long term tenant ..... Then he was renting back to the council at what would have been about twice the market rate.

In simplistic terms the council sold it to him for £30,000 in the 90s, and were renting it back for £1000 a month in the early 00s.

As it was "emergency accommodation the council were paying far more in rent and far more than they'd normally pay in housing benefit.

[SpectrumFX]

4 minutes ago, Hancock said:

Yes they do.

My friend and his young family became homeless, so the council put them in some shithole half way house that was full of smackheads. It was 2 rooms for a family of 5 with a shared bathroom and kitchen ... it was truly disgusting.

After 6 weeks there, the council then moved them to what is deemed another form of half way house or emergency accommodation .... but to you and I it was a 3 bed council house in a shit estate.

Anyway the person who owned this "emergency accommodation" bought it off the council several years earlier for a fraction of the market price as they were a previous long term tenant ..... Then he was renting back to the council at what would have been twice the market rate.

In simplistic terms the council sold it to him for £30,000 in the 90s, and were renting it back for £1000 a month in the early 00s.

One of my first jobs was working for the job centre, and while I was there they were in the process of selling all of their estate and renting it back.

Madness. But I'm sure somebody dressed it up as a good idea and got a fat bonus out of it.

[JMD]

5 hours ago, Harley said:

Indeed.  I just scan the markets using these sorts of metrics for my holds (i.e. longer term trades).  Some are maddeningly tough (for today's new normal) like a Price to Tangible Book value of under 2 which takes out most stocks, the US in particular.  I do however flex the metrics now and then to see how many companies I'm losing out on (result: a surprisingly small number given this "nuts nuts" has spread everywhere).  I don't want to be blinkered and led by just the "talk" but do cull those in the very wrong industries without a good story.  I also avoid buying even those that pass when the charts have the prices as overbought.

Not sure about the Debt to Equity ratio - would it not remain as-is (it not being based on the share price), and for most would it not (economically) become even even harder, maybe even critical if covenants are broken?  Debt is fixed, everything else is more flexible, especially in a downward manner (e.g. asset valuations). 

So yes, these are my sort of rules and it's a no bid for long term holds atm, hence my break.  But time to take a look.  I'm far more flexible for trades though but have now decided to "pursue other interests"!  I was nicely up on my trading but didn't have the constant focus and b*gger all else to do to enjoy it!  Why bother with a small position on say Zoom for a 20% uplift when I could be 89% up on some longer term Russia steel company paying good divs with a one off trade! 

PS:  At 50% off the glow from my scans would be seen from Mars!

Yes good spot, I was confusing the debt to equity ratio with ev/EBITDA, or maybe another ratio entirely! As I regularly mention, i am not good at the financials and with hindsight should have paid for a subscription service where I could have made full use of stock screener tech. However think wouldn't be that useful for me now as I am much more allocated.