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

[Sugarlips]

2 hours ago, sancho panza said:

The bit in bold and then some DB.

Just had a bit of a run in with my LL.Nothing major.But it suddenly dawned on me how little he's making every month with Section 24,repairs(my kids wreck everything even if it's tested as kid proof),jsut had to stick scaffolding up for the roof and all of it financed by what is a current 3% gross yield.And then there's the mortgage financed at about 3%...........

By the end of it,I was feeling bad about the guy.And he doesn't even know his main home is on the line if he defaults on my house..I suspect he's running at barely any profit and that's before rates rise for BTLers.

The outlook for him and so many with these 60/40 funds is jsut pistpoor in a rising inflationary environment..

Sold EQNR today after a lot of thought.Proceeds with get recycled into some inflation hedges.

As ever thanks to DB and all those basement dwellers who've educated and enlightened me in equal measure and helped me fight the machine.

Surely the drip drip of inflation must be waking a few of the sharper LL’s up to the fact that they finally need to sell assets at market (rather than just kite flying) just to retire debt before the ‘slowly then all at once’ inevitable happens?

[Mapper]

Looking at the difference between the business headlines on RT and the BBC reveals something about people's perspectives.

 

RT Top 5 Business Stories

Dumping the dollar: Russia gets ready to shift currency liquidity to the euro

AMC stock soars over 20% as Reddit-fueled rally extends to another week

China’s vast foreign reserves grow to $3.22 TRILLION

Russia-China trade turnover soars nearly 25% since beginning of 2021

Oil slips from 2-year peak on prospect of higher Iranian exports & OPEC+ discipline

 

BBC Top 5 Business Stories

Donald Trump calls Bitcoin 'a scam'

What's happening with foreign travel?

The fight to find work: ‘I’ve applied for 200 jobs’

Economy faces 'long Covid' if debts not tackled

'Five-day office week will become the norm again'

 

This is where you get the "Nobody saw it coming!" cries from.

[wherebee]

1 hour ago, Sugarlips said:

Surely the drip drip of inflation must be waking a few of the sharper LL’s up to the fact that they finally need to sell assets at market (rather than just kite flying) just to retire debt before the ‘slowly then all at once’ inevitable happens?

If I was a LL with adequate income to cover the mortgage, I'd hang onto property in a non-urban hellhole.  Property always does OK in an inflationary era compared to cash.

[Lightscribe]

7 hours ago, Hancock said:

Oh they want me to play, but my willingness to fight, and tell authority to get fucked all my life means ive opted out of their shitty game. 

I'll have my kids school fees set aside by the end of August to pay for her to attend until end of summer 2024, 150k in a SIPP, soon to have 250K in inflationary shares ... and a soon to be sourced new fund to buy a house in BKK.

Not to mention a job where i can work several a year for 30k, of which i'll have to save another £45k in school fees to pay for school up until aged 16.

Im trying to get my head around it, but at age 46, It would seem i'm almost able to cash my chips in and live the good life (though frugal), and get my kid a top end education. (more importantly kids happy)

Not bad for someone with a dreadful work ethic, that can't work for a boss, making me unemployable for a PAYE job, uneducated, ex-con, thats raised a kid alone. 

And good on you too. That’s pretty much why we’re all here I suspect. The game is rigged, we all know that. It’s just the case of setting up our chips to opt ourselves out of the game as early as possible and be able to support ourselves.

They need the masses to be reliant on the governments for everything in order for the 4th industrial revolution to be implemented. No doubt the majority will from the get go. It’s just the case on how they coerce stragglers like us on here to fall in line.

[MrXxxx]

21 hours ago, nirvana said:

right 'EV bashers', check this out, it's the future! Actually, who fancies a laugh, I'll set up a gofundme, if I get enough dosbodders to back me then I'm off to China to buy one of these and see how far I can get driving it back 

$4500 new and only $1.56 for 100km.....beat that with your carbon monoxide belching shit boxes 

https://www.bloomberg.com/news/articles/2021-06-04/china-s-top-ev-maker-stakes-its-future-on-a-4-500-mini-car

I've found the website, I quite like the green one 

https://www.wuling.com/evmcr.html

You are Mr Bean and I claim my £5!

[MrXxxx]

12 hours ago, Hancock said:

I doubt Boris or his gang know what side of the bed they're predicted to get out of in the morning.

The one thing about UBI which i cant get my head around is, how can we in Britain be gifted enough money to survive on ... yet workers in most of the rest of the planet have to continue to graft their bollocks off for shite housing, minimal education, health care, social security and barely enough food to survice etc...

Not even our property market can work hard enough to gift us this kind of easy money.

Perhaps we will become the latter of the two scenarios you have pointed out about...."The poor man of Europe", but as we Brexited we can't even `suckle on that teat` the way others have done!

[Green Devil]

35 minutes ago, Lightscribe said:

And good on you too. That’s pretty much why we’re all here I suspect. The game is rigged, we all know that. It’s just the case of setting up our chips to opt ourselves out of the game as early as possible and be able to support ourselves.

They need the masses to be reliant on the governments for everything in order for the 4th industrial revolution to be implemented. No doubt the majority will from the get go. It’s just the case on how they coerce stragglers like us on here to fall in line.

Surely its easier to opt out at 18, sort yourself out a bird and an extended family and go on welfare? Working for a living dont pay. By my reckoning you can retire 50 years younger and have guarateed inflation busting returns from day one. 

[MrXxxx]

9 hours ago, mh9000 said:

Are these employers going to be to considering moving plants overseas to the EU workers (or further afield) if govt won’t give the visas?

 

 

If the businesses need the employees the government will give the visas, and will deflect public with some bull£hit story (or another distraction) that they will swallow.

[MrXxxx]

9 hours ago, DurhamBorn said:

Noticed today house prices are starting to really move up here.Any decent 3 bed semi that comes up is selling very quickly.I suspect what we expected is starting to play out as southerners sell up and move north.It should show up in house prices increasing north by more than south,then south in outright falls.Roadmap said an inflation pulse would see this happen and looks like its started now.

So in a few years time I will be posting on here how The South is much cheaper, less multicultural, more yellow stickers, and `The Birds are fitter`....so some of you may like to get in early before the rush starts and the prices climb! :-)

[jamtomorrow]

22 minutes ago, MrXxxx said:

If the businesses need the employees the government will give the visas, and will deflect public with some bull£hit story (or another distraction) that they will swallow.

Amazed it took them this long to cotton on to the endless possibilities for distraction in "the war on woke".

If they play it right and get everyone worked up enough about this latest imaginary bogeyman, they'll be able to do pretty much anything they like for the next 5 to 10 years.

We'll all be too busy getting steaming mad at the woke and leaving messages on the "report a woke neighbour" hotline to pay attention to what they're up to.

[Lightscribe]

1 hour ago, Green Devil said:

Surely its easier to opt out at 18, sort yourself out a bird and an extended family and go on welfare? Working for a living dont pay. By my reckoning you can retire 50 years younger and have guarateed inflation busting returns from day one. 

Which is exactly what I told my nephew and his girlfriend. But they don’t want to listen.

Problem is that they see the rest of the family working in their particular fields and self-employed businesses doing well, and also their mates joining and learning trades etc. Grand plans and aspirations when you’re young and that’s how a society should work.

In the benefit culture however the opposite happens. You have multi-generations playing the game as well as your peers. The mentoring comes from all sides so it becomes a hand-me-down trick of the trade for getting the maximum whilst doing the minimum.

The issue tagged onto all that is that one example leads to battling as saving for a house and making a life for yourself pretty hard. Having a family of your own is a long way down the list of priorities.

The other example is dependent entirely on having the maximum number of kids as possible, often out of family unit and with limited role models. It can also add on other encouraged behavioural factors that increases the parents benefit income. This goes hand in hand with low quality access to education and low quality opportunities, which starts the whole perpetual cycle again.

Although we’re on a population decline like all other developed western nations, you can see where our actual population growth is encouraged to grow from.

 

[Green Devil]

7 minutes ago, Lightscribe said:

Which is exactly what I told my nephew and his girlfriend. But they don’t want to listen.

Problem is that they see the rest of the family working in their particular fields and self-employed businesses doing well, and also their mates joining and learning trades etc. Grand plans and aspirations when you’re young and that’s how a society should work.

In the benefit culture however the opposite happens. You have multi-generations playing the game as well as your peers. The mentoring comes from all sides so it becomes a hand-me-down trick of the trade for getting the maximum whilst doing the minimum.

The issue tagged onto all that is that one example leads to battling as saving for a house and making a life for yourself pretty hard. Having a family of your own is a far down the list of priorities.

The other example is dependent entirely on having the maximum number of kids as possible, often out of family unit and with limited role models. It can also add on other encouraged behavioural factors that increases the parents benefit income. This goes hand in hand with low quality access to education and low quality opportunities, which starts the whole perpetual cycle again.

Although we’re on a population decline like all other developed western nations, you can see where our actual population growth is encouraged to grow from.

 

The way things are going, you're not going to own a home except with a 40yr or 50yr mortgage. In effect you have better security of tenure if you secure a council house and live there. The whole societal system now penalises savers and workers. Its happened for many decades and shows no sign of changing. Save and you get no return or unentilment to hand outs. If i was starting again, id go down the benefits route.

[No One]

29 minutes ago, Lightscribe said:

Which is exactly what I told my nephew and his girlfriend. But they don’t want to listen.

Problem is that they see the rest of the family working in their particular fields and self-employed businesses doing well, and also their mates joining and learning trades etc. Grand plans and aspirations when you’re young and that’s how a society should work.

In the benefit culture however the opposite happens. You have multi-generations playing the game as well as your peers. The mentoring comes from all sides so it becomes a hand-me-down trick of the trade for getting the maximum whilst doing the minimum.

The issue tagged onto all that is that one example leads to battling as saving for a house and making a life for yourself pretty hard. Having a family of your own is a long way down the list of priorities.

The other example is dependent entirely on having the maximum number of kids as possible, often out of family unit and with limited role models. It can also add on other encouraged behavioural factors that increases the parents benefit income. This goes hand in hand with low quality access to education and low quality opportunities, which starts the whole perpetual cycle again.

Although we’re on a population decline like all other developed western nations, you can see where our actual population growth is encouraged to grow from.

 

 

[planit]

9 hours ago, sancho panza said:

Intersting points there Planit.for me they both measure the rough market value of the company.The more realistic is the market cap as that's what people in the trade think it's worth.Thats my point really.

Barclays(or Nat West whatever) are claiming shareholder equity of £40 bn but Mr Market says £20bn.....

The other point you make is bang on and one I hadnt pondered ie the treatment of hybrids.Amazing find in that BP AGM....really does make you realsie the importance of spray n pray investing when these go wrong as they sometimes do.

You are getting closer but you are still missing something on the company financial statement 'equity' is.

 

Debt and Equity are both the same things on the balance sheet.

It is money that the company owes back to someone that has lent them money.

 

The only difference is that on the Debt side (liabilities), the company is obliged to pay the lender cash, even if they can't afford it.

Exactly the same loan would be equity if the agreement said the company only needs to pay the money if it can afford it. (normally, the equity also has a promise to a certain share of the company in return for having no promise of money) 

 

To illustrate the difference in value of market cap take this as an example:

I have knowledge in my head to be able to print free legal money. But I need a printer.

 

So I start a company and issue 100 shares of £1 each. You give me £50 for 50 shares and I also put in £50.

I buy the printer so the balance sheet looks like this:

Assets - (printer) £100

Equity - (ordinary share capital) £100

 

It is clear that your shares are worth much more than £1 as you have an expectation of millions in future earnings. 

So the market value of the shares might be £10m each, market cap £1bn.

The equity on the accounts still shows £100. The accounts are backwards looking and don't include the value the company adds or internally generated goodwill. If the accounts included 'everything' then you are correct, the market cap would equal the equity section and investing would be really boring.

 

Just realised I have recreated Teslas accounts in the example above, just that all the investors believe Musk has a printer and he doesn't LOL.

[nirvana]

[JMD]

10 hours ago, sancho panza said:

The bit in bold and then some DB.

Just had a bit of a run in with my LL.Nothing major.But it suddenly dawned on me how little he's making every month with Section 24,repairs(my kids wreck everything even if it's tested as kid proof),jsut had to stick scaffolding up for the roof and all of it financed by what is a current 3% gross yield.And then there's the mortgage financed at about 3%...........

By the end of it,I was feeling bad about the guy.And he doesn't even know his main home is on the line if he defaults on my house..I suspect he's running at barely any profit and that's before rates rise for BTLers.

The outlook for him and so many with these 60/40 funds is jsut pistpoor in a rising inflationary environment..

Sold EQNR today after a lot of thought.Proceeds with get recycled into some inflation hedges.

As ever thanks to DB and all those basement dwellers who've educated and enlightened me in equal measure and helped me fight the machine.

That 3% (gross!) yield would give me sleepless nights i think.

SP, i've been meaning to ask before about a BTL'ers own residential home being at risk if he/she defaults on their BTL mortgage, but keep missing the opportunity, so here goes...

If the btl property is owned within a ltd company is that still the case? Or is it more nuanced, say for example if the BTL deposit funds came originally from remortgaging the residential property? Or maybe its just that all/most btl mortgage contracts have a 'nasty claw-back clause' in the small print?

[DurhamBorn]

BAT and BT doing nicely today,doubled BT bottom buy today, and Brazilian telcos still catching a bid 

 

Not advice etc,but iv been buying some Ingredion Inc with a few potash profits.They have been slowly growing their plant protein side for meat alternatives etc.As the roadmap moves along likely meat alternatives will grow hugely,government will push the health and environment side,but really its because meat is going to get expensive and hit lower earners.

This is a cross market buy from work on the lags of inflation,not inflation itself.Im looking more mid roadmap now as the primary areas are/have already delivered big profits,or decent.

Id rather buy it in a BK of course ,but see a chance this area becomes a hot one later in the cycle,and these are a quality company.DYOR etc,not advice.

[JMD]

2 hours ago, Lightscribe said:

Which is exactly what I told my nephew and his girlfriend. But they don’t want to listen.

Problem is that they see the rest of the family working in their particular fields and self-employed businesses doing well, and also their mates joining and learning trades etc. Grand plans and aspirations when you’re young and that’s how a society should work.

In the benefit culture however the opposite happens. You have multi-generations playing the game as well as your peers. The mentoring comes from all sides so it becomes a hand-me-down trick of the trade for getting the maximum whilst doing the minimum.

The issue tagged onto all that is that one example leads to battling as saving for a house and making a life for yourself pretty hard. Having a family of your own is a long way down the list of priorities.

The other example is dependent entirely on having the maximum number of kids as possible, often out of family unit and with limited role models. It can also add on other encouraged behavioural factors that increases the parents benefit income. This goes hand in hand with low quality access to education and low quality opportunities, which starts the whole perpetual cycle again.

Although we’re on a population decline like all other developed western nations, you can see where our actual population growth is encouraged to grow from.

 

Agreed, perhaps someone should write a book on how all those terrible policies eventually play out... oh, wait thy have - Atlas Shrugged, Ayn Rand.

But imagine if a similar book were written today, could it ever get published?

...Having said that, Lionel Shriver seems the only author around today who has a pretty good stab at this type of social-comment writing. She's even had a go at the aftermath of a 2029 economic collapse (The Mandibles)... i wonder what her research sources were for that book!?

[nirvana]

44 minutes ago, DurhamBorn said:

Ingredion Inc

producing mainly starch, modified starches and starch sugars as glucose syrup and high fructose syrup

 

sounds disgusting, good luck

[Nomad]

6 hours ago, wherebee said:

If I was a LL with adequate income to cover the mortgage, I'd hang onto property in a non-urban hellhole.  Property always does OK in an inflationary era compared to cash.

I think property has been in an inflation bubble all on its own for the last decade. What I'm going to find interesting is what happens to property once inflation in the wider economy gets a hold. Will property increase even further? If rates start to rise I don't see how it can in many areas. Areas that have not seen big inflation busting increases over the last 10 years may grow, but the rest I'm not so sure. Interesting times.

[sancho panza]

11 hours ago, Starsend said:

The Canadian mid tiers are cheap.

Any particularly?I'll have a butchers'.Dyodd natch

[JMD]

17 hours ago, Hancock said:

The one thing about UBI which i cant get my head around is, how can we in Britain be gifted enough money to survive on ... yet workers in most of the rest of the planet have to continue to graft their bollocks off for shite housing, minimal education, health care, social security and barely enough food to survice etc...

Not even our property market can work hard enough to gift us this kind of easy money.

Great question about UBI affordability, plus whilst at the same time other countries continue to have to do actual 'work'.

Isn't the answer that every country that reaches its own post-industrialisation phase - for want of a better phrase (this is most countries today), must switch to some form of interim support. Eventually automation and tech will catch up (Japan is the forerunner here i think) and 'work' and 'reward' (money) will be redefined/figured-out by the great and the good.     

 ...i know, there are far too many 'ifs'/'buts'/'maybes' in my above description, however that is my basic take on things.  

Thing is, the West needn't be where it is now, the risks and problems are too many, both broad and deep, for manageable economic/social choices to be found. I say this because even Keynes and others back in the 30/40's predicted 3-day working weeks happening within decades, he saw the cogs of expansive capitalism/growth/productivity locking and grating, not meshing smoothly together, but instead the (debt) can has been repeatedly kicked by our leaders. Although i do think that the world wars of the 20th century and the subsequent entrenched East/West stand-offs tied the hand of our politicians.   

[sancho panza]

8 hours ago, Sugarlips said:

Surely the drip drip of inflation must be waking a few of the sharper LL’s up to the fact that they finally need to sell assets at market (rather than just kite flying) just to retire debt before the ‘slowly then all at once’ inevitable happens?

It must be.I suspect he's leveraged at 50%(conservatively,likely more) with a purachse price at 2011.

1) 20% of rental income goes in S24(possibly more as he has four houses and might be a 40% tax payer when including his earnings and all rents).

2) Then he loses 62% in mortgage payments on the 2011 purchase price (25 yr repayment,3.5%)

3) Then he loses 10% in management fees.

4)voids,unquantifiable but an issue

Which leaves 8% for repairs and all the regulations he's legally got to do eg gas safety cert,elecrtical safety cert.

 

And my LL is one of the more solvent ones.(He should have no problems selling tbh but it's a nice hosue)

The reall issue is who he going to sell to and I think this is the issue for most LL's.Thanks to the tax breaks they've nejoyed,asset prices are elevated beyondf the reach of msot ordinary working people using earned income.

Look at LE2.A psotcode with 44,000 households,likely some 20,000 terraces.There were 44 sales in feb 21.Again,I'd ask,who msot LL's are going to sell to??? There are no bidders on terraces here at the minute to the point that nearly as many detached are swaoping hands every month

[Talking Monkey]

58 minutes ago, JMD said:

Agreed, perhaps someone should write a book on how all those terrible policies eventually play out... oh, wait thy have - Atlas Shrugged, Ayn Rand.

But imagine if a similar book were written today, could it ever get published?

...Having said that, Lionel Shriver seems the only author around today who has a pretty good stab at this type of social-comment writing. She's even had a go at the aftermath of a 2029 economic collapse (The Mandibles)... i wonder what her research sources were for that book!?

I'm gonna read that it sounds interesting

[Don Coglione]

9 minutes ago, Talking Monkey said:

I'm gonna read that it sounds interesting

Which one?

Atlas Shrugged is pretty hard going at times.

The Mandibles is a must-read. Lionel Shriver gets it.