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

[Hancock]

Oh and does anyone know if Sunak is having a budget this autumn, or does he not bother with them when it doesn't involve giving hundreds of billions away?

[Phil]

2 hours ago, sancho panza said:

BK will occur when a lot of sellers try to squeeze through the exit at the same time for a variety of reasons,downward price spiral reinforcing waves of selling reinforcing waves of selling.

Net effect is that banks with Dowd Buckner ratios sub 20/1 survive,those above dish out haircuts to bondholders (which is likely most of the Western ones),who then start selling other bonds to cover their bank bond losses etc etc.Fishers paradox then kicks in as more people paying down debt reduces the ability of otehr people to pay down debt(job loses) which reinforces downward spiral in bond prices etc etc.

In the meantime,western currenceis drop hard into the abyss and the price of fuel goes up jsut as people can leasdt afford it.

it was laid out here many eyars ago by someone who relfected hard on what he got wrong.

note rising interest rates not needed.

https://en.wikipedia.org/wiki/Irving_Fisher

1. Debt liquidation and distress selling.
2. Contraction of the money supply as bank loans are paid off.
3. A fall in the level of asset prices.
4. A still greater fall in the net worth of businesses, precipitating bankruptcies.
5. A fall in profits.
6. A reduction in output, in trade and in employment.
7. Pessimism and loss of confidence.
8. Hoarding of money.
9. A fall in nominal interest rates and a rise in deflation-adjusted interest rates.

XR really are lame aren't they.As you say,we don't see them going to China and protesting rather they stay here where the polcie protect them as they dig up/blockade bits of Londinium

 

Sounds like what is needed IMO. I stopped spending on stuff ( with the exception of the things that keep me and Mrs alive)  a long time ago. Went to Aldi for food and tins Friday and unfortunately witnessed a foul mouthed fat cunt of a bloater complaining to probably another fat whale on the phone “ it’s not me, it’s everyone else “. The lard arsed twat went on to say “ no you can’t fuckin have the crisps to the 2 yet to be Ferrell 5yr olds“ “ ok have the fuckin crisps”.  It was at this I felt like punching the fat smelly super obese slag in the mouth, but, the size of the bitch put me off and I thought better of that.

if that’s what it’s come to bring on 1 to 9 inc. i fuckin hate what this country has become.

[HousePriceMania]

On 24/08/2021 at 10:06, Bobthebuilder said:

Must admit, I set my alarm clock this morning and sold them off. 6 months living expenses for me, as they were not in a ISA or SIPP.

Choccy croissants for me this morning.

You caught that just right !!!

 

 

 

[Phil]

Just now, Phil said:

Sounds like what is needed IMO. I stopped spending on stuff ( with the exception of the things that keep me and Mrs alive)  a long time ago. Went to Aldi for food and tins Friday and unfortunately witnessed a foul mouthed fat cunt of a bloater complaining to probably another fat whale on the phone “ it’s not me, it’s everyone else “. The lard arsed twat went on to say “ no you can’t fuckin have the crisps to the 2 yet to be Ferrell 5yr olds“ “ ok have the fuckin crisps”.  It was at this I felt like punching the fat smelly super obese slag in the mouth, but, the size of the bitch put me off and I thought better of that.

if that’s what it’s come to bring on 1 to 9 inc. i fuckin hate what this country has become.

I apologise for the coarse language.

[HousePriceMania]

3 hours ago, sancho panza said:

BK will occur when a lot of sellers try to squeeze through the exit at the same time for a variety of reasons,downward price spiral reinforcing waves of selling reinforcing waves of selling.

Net effect is that banks with Dowd Buckner ratios sub 20/1 survive,those above dish out haircuts to bondholders (which is likely most of the Western ones),who then start selling other bonds to cover their bank bond losses etc etc.Fishers paradox then kicks in as more people paying down debt reduces the ability of otehr people to pay down debt(job loses) which reinforces downward spiral in bond prices etc etc.

In the meantime,western currenceis drop hard into the abyss and the price of fuel goes up jsut as people can leasdt afford it.

it was laid out here many eyars ago by someone who relfected hard on what he got wrong.

note rising interest rates not needed.

https://en.wikipedia.org/wiki/Irving_Fisher

1. Debt liquidation and distress selling.
2. Contraction of the money supply as bank loans are paid off.
3. A fall in the level of asset prices.
4. A still greater fall in the net worth of businesses, precipitating bankruptcies.
5. A fall in profits.
6. A reduction in output, in trade and in employment.
7. Pessimism and loss of confidence.
8. Hoarding of money.
9. A fall in nominal interest rates and a rise in deflation-adjusted interest rates.

XR really are lame aren't they.As you say,we don't see them going to China and protesting rather they stay here where the polcie protect them as they dig up/blockade bits of Londinium

 

Seems a few of those items on the list are being report right now

Looking on rightmove I cannot believe that we wont see some sort of fall in asking prices now, the prices are truly ludicrous given what the world has gone though.

 

[HousePriceMania]

33 minutes ago, Hancock said:

I agree there will be a once in a lifetime bust at some point, but does is it come in the next 12 months when the FED tighten faster than is expected, hence just a taper tantrum on steroids ... or does it come in several years when the next cycle comes to an end and no one wants to borrow as interest rates are in double figures, thus a deflationary bust.

"There are more questions than answers" - https://www.youtube.com/watch?v=DDTvLldOgZs

 

Given you expect one or the other, position yourself accordingly.

 

[Phil]

Just now, HousePriceMania said:

Seems a few of those items on the list are being report right now

Looking on rightmove I cannot believe that we wont see some sort of fall in asking prices now, the prices are truly ludicrous given what the world has gone though.

 

Desperation, stupidity, financially backward and super low interest rates. I remember watching look northwest, 80’s , seeing loads getting thrown out due to recession. It’s sad I hope it happens again.

[HousePriceMania]

6 hours ago, sancho panza said:

via kaplan

The stars are aligning....

The Hindenburg Omen, which measures the ratio between the new 52-week highs and lows, was triggered on back-to-back days last week

https://uk.finance.yahoo.com/news/an-inconsistent-crash-indicator-triggered-giving-fuel-to-bears-194627661.html

[HousePriceMania]

10 minutes ago, Phil said:

Desperation, stupidity, financially backward

I am seeing all those things.

I witnessed a lady find out that the Cock-a-shit dog she'd paid £2650 for 18 months ago could now be purchased for £650 ( and falling ).

She then proceeded to lie about how much she'd really paid ( or had lied the previous time ), then lied to her husband about how much she'd found out they'd fallen then look disgusted when I mentioned I'd have one when they get below £100.

Now, the icing on the cake was the look I got when I said...house prices will follow this now.

[Chewing Grass]

5 minutes ago, HousePriceMania said:

Seems a few of those items on the list are being report right now

Looking on rightmove I cannot believe that we wont see some sort of fall in asking prices now, the prices are truly ludicrous given what the world has gone though.

 

Just done my first 3 digit postcode search and 132 properties for sale, 10 years ago it would have been around 200 and since the it has been new-build crazy, so more houses and less to buy.

On my estate, about 200 houses, there isn't a single one for sale (or rent).

Nobody is moving because they can't afford anything better and Covid hasn't killed any of the oldsters, some of who have been retired over 25 years.

[Phil]

4 minutes ago, HousePriceMania said:

The stars are aligning....

The Hindenburg Omen, which measures the ratio between the new 52-week highs and lows, was triggered on back-to-back days last week

https://uk.finance.yahoo.com/news/an-inconsistent-crash-indicator-triggered-giving-fuel-to-bears-194627661.html

25% is something to hold onto. Interesting. Cheers.

[HousePriceMania]

Just now, Chewing Grass said:

Just done my first 3 digit postcode search and 132 properties for sale, 10 years ago it would have been around 200 and since the it has been new-build crazy, so more houses and less to buy.

On my estate, about 200 houses, there isn't a single one for sale (or rent).

Nobody is moving because they can't afford anything better and Covid hasn't killed any of the oldsters, some of who have been retired over 25 years.

The stamp duty costs and insane prices/cost of moving along with job insecurity must be killing the market

UK Property Lion has shown the number of available listings on RM has collapsed, except in London, where they rose.

The only thing, ironically, that can  save the housing market is a massive crash, if the bankers need to lend, guess what will happen....

1 minute ago, Phil said:

25% is something to hold onto. Interesting. Cheers.

Worth remembering that in the 1930s when the stock market collapsed, it stayed collapsed, so no need to be rushing in to buy if it looks like a massive event happens.

 

[Chewing Grass]

10 minutes ago, HousePriceMania said:

Worth remembering that in the 1930s when the stock market collapsed, it stayed collapsed, so no need to be rushing in to buy if it looks like a massive event happens.

IIRC it took a quarter of a century to get your money back on average on stocks.

[Boon]

I'm looking in London, no way have available listings risen, much less is available nowadays.

Good stuff goes immediately or never makes it on there. So the listings are either crap properties or overpriced properties, many are both.

In fact I think this lack of supply in London has actually helped stall the falls. With some ingrained mindsets such as 'renting is dead money' and 'property only goes up' there could be actually forced buyers: those who have sold and want to lock in gains, but also don't want to rent. 

I don't think you can have a massive crash without lots of things coming onto the market. A standard trigger for this would be interest rate increases. But I do wonder whether increased power + food costs is already the equivalent of a c.1% raise in rates. If I had to guess I reckon these items are up 20%+ pre-pandemic.

[Bobthebuilder]

42 minutes ago, HousePriceMania said:

You caught that just right !!!

 

[Hancock]

43 minutes ago, HousePriceMania said:

Given you expect one or the other, position yourself accordingly.

 

About 1/3rd of everything i own is in the stock market in a SIPP, the rest is cash.

I do think things will go tits up in the next 6 months. But i'm about as good at predicting crashes as your good self; my savings have been decimated in comparison to house price inflation due to thinking the next crash is just around the corner.

[Phil]

Just now, Hancock said:

About 1/3rd of everything i own is in the stock market in a SIPP, the rest is cash.

I do think things will go tits up in the next 6 months. But i'm about as good at predicting crashes as your good self; my savings have been decimated in comparison to house price inflation due to thinking the next crash is just around the corner.

Me too. (Not that one)

[AlfredTheLittle]

30 minutes ago, Boon said:

I'm looking in London, no way have available listings risen, much less is available nowadays.

Good stuff goes immediately or never makes it on there. So the listings are either crap properties or overpriced properties, many are both.

In fact I think this lack of supply in London has actually helped stall the falls. With some ingrained mindsets such as 'renting is dead money' and 'property only goes up' there could be actually forced buyers: those who have sold and want to lock in gains, but also don't want to rent. 

I don't think you can have a massive crash without lots of things coming onto the market. A standard trigger for this would be interest rate increases. But I do wonder whether increased power + food costs is already the equivalent of a c.1% raise in rates. If I had to guess I reckon these items are up 20%+ pre-pandemic.

Yes there won't be a house price crash unless people are forced to sell, because at the moment selling only means you have to pay very high rent. 

I think it's possible a change would come if it becomes less worthwhile keeping second and subsequent properties as there are a lot which could be sold, so only really if interest rates rise so it's preferable to have the cash, or if there are tax changes that make having 2 homes more expensive (seems unlikely)

[DurhamBorn]

https://www.dailymail.co.uk/money/share-investing/article-9922671/Investor-sentiment-upbeat-green-energy-favour.html

So the sectors they all think will do worst are tobacco ,oil and gas and mining 

Green energy ,healthcare and technology to do best.

Music to a contrarians ears.Always looking the wrong way.At $70 Brent BP will be on a cashflow yield of around 6.5 and should see shareholder equity increase at around 7%pa after 5.5% dividends.A near 13% compounding minimum.

Somebody needs to explain that gas use is going to keep going up slightly in Europe,even with a fast renewable rollout,and treble in value terms in Asia.Copper needs to double to bring marginal production back to even get close to demand for rolling out renewables.

 

 

[wherebee]

1 hour ago, DurhamBorn said:

https://www.dailymail.co.uk/money/share-investing/article-9922671/Investor-sentiment-upbeat-green-energy-favour.html

So the sectors they all think will do worst are tobacco ,oil and gas and mining 

Green energy ,healthcare and technology to do best.

Music to a contrarians ears.Always looking the wrong way.At $70 Brent BP will be on a cashflow yield of around 6.5 and should see shareholder equity increase at around 7%pa after 5.5% dividends.A near 13% compounding minimum.

Somebody needs to explain that gas use is going to keep going up slightly in Europe,even with a fast renewable rollout,and treble in value terms in Asia.Copper needs to double to bring marginal production back to even get close to demand for rolling out renewables.

Edit: ADE watch: moderna/pfizer sliding down slowly.

 

 

that's all I have now.  I have sold off everything else in the past month, either at a profit or a small loss.  Oh, and ARB which is now breaking even.

I'm either going to be very rich, or the ADE wipeout comes and everyone dies and my share portfolio will be the least of my worries as I fight bogans for rats.

[HousePriceMania]

10 hours ago, AlfredTheLittle said:

Yes there won't be a house price crash unless people are forced to sell, because at the moment selling only means you have to pay very high rent. 

I think it's possible a change would come if it becomes less worthwhile keeping second and subsequent properties as there are a lot which could be sold, so only really if interest rates rise so it's preferable to have the cash, or if there are tax changes that make having 2 homes more expensive (seems unlikely)

https://www.standard.co.uk/homesandproperty/property-news/london-house-prices-fall-furlough-stamp-duty-holiday-b940950.html

 

https://www.mylondon.news/news/property/london-property-east-london-borough-21441471

 

https://www.mylondon.news/news/property/london-property-london-boroughs-house-21358299

 

High prices/Low IRs = High IRs/Low prices.

The more the prices go, the more chance of a crash.

[HousePriceMania]

11 hours ago, Bobthebuilder said:

 

I have no idea what that means.

[belfastchild]

15 hours ago, Hancock said:

The taxi driver said this is nothing it'll be -30C later on in the week ... and he was right, it was fucken horrific, i could have cried when walking outside.

I did laugh out loud at that. Ive spent a lot of time in Canada, sask and alberta mainly.
I thought about emigrating there about 10 years ago. House prices were insanely cheap just outside of the cities. I couldnt understand how you could get a ranch 20 mins drive time out for the same price as a three bedroom condo in the city. I wouldnt even have to sell the house here. Canadian friends explained that 20 mins away in summer might be 2 weeks or more in winter... They then asked me to compare the pantry/larder sizes in the two types of houses. The country pantries were bigger than my bedroom here.
They told me to come out in winter before deciding to move there. I got off the plane and it was -20C and that was the warmest it got the whole month. By week 3 in sask I was sneezing blood and my eyes didnt work (very low humidity).
Car parks are underground and heated and have the equivalent of our yellow box on entry. Why? Well when you go in from -20C the outside of the windscreen steams up and you cant see a thing the first 10m or so, so you dont stop in the box or someone runs into you.
Whole areas of Toronto have underground or overground walkways between the shops/offices.

I was in rural sask one morning and got up at sunrise and went for a walk. It was about -25C and I had never seen the like of it, beautiful blue skies, flat prairie just white to the horizon. Hoar frost about 2 inches thick, absolutely beautiful.
About 10 mins in I saw a couple of guys on skidoos in the distance, I waved (like you do) They waved back and turned on their blue and red lights. A couple of mins later a squad car pulled up behind me. The very polite canadian police officer told me in no uncertain terms to get into the car. He explained to me that the guest house had seen me go out and then couldnt find me so raised the alarm and all 3 of the towns part time cops went out looking for me. He explained that if I slipped and twisted my ankle in this temperature it would be less than 10 mins before I was unconcious and it might be spring before they found my body. I didnt go out walking alone again.

Going back on topic (ish) Potashcorp was everywhere (now called nutrien), they sponsored everything going, charities, arts, local stuff, etc etc, pretty much kept the economy going in certain places (oil in others, try to get a hotel in yellowknife ffs, oil company prices). Lot of money in digging that stuff out of the ground although I doubt you can do it without oil...

[Festival]

18 hours ago, DurhamBorn said:

I think both are different.Imps will use buybacks of around 6% a share at this price within 18 months i suspect.I think they should be able to hold profit steady without that for another few years,maybe four or five.Then price increases wont cover use falls.However then the question is will use falls be more than price increases and 6% buybacks.I dont think they will.Without doing anything i think Imps can increase the divi 3% a year for a decade.I also think they will be a fast follower on heat not burn and vapes etc.They are smaller,but big enough.Retailers will always stock their range to keep the couple of bigger players from squeezing their margins too much.

BATs is a machine.Its only weakness at the moment is too much debt.It cant buy back shares at the moment as it needs to de-leverage more.However i think they might be tempted to launch 3% buybacks a year within 18 months for a while and flatline the debt for a while.I think they would do this with the shares below around £34,and stop and do debt above that.BAT will also end up with a huge vape/new products business.Its reach is incredible.If cannabis etc takes off as a legal drug in any way in big markets then big tobacco will clean up.

Outside of debt one risk is they decide to splurge cash on buying other companies.Small bolt ons they can expand are good,big ones arent.However with the share where they are they cant do an equity funded deal,and they cant do a big debt one.

One lesson iv learned about the sector,and BAT the most is dont try to 2nd guess it.When the sector is left for dead and ignored buy it.You could even use the divs every year to simply buy gold and silver,or pay down a mortgage etc.

 

Thanks DB much appreciated. Having seen how hard it is for family members to quit (and even become multiple users of fags, vape and nicotine replacement gum) there's a business there even if its changing in nature with younger generations. I like both companies and expect tobacco will remain both unloved and a home for good dividends for at least another decade.

[HousePriceMania]

I remember when workers were up in arms about this

https://www.bbc.co.uk/news/uk-scotland-scotland-business-58403087

 

Scotland to trial a four-day week

 

"Scotland is to trial a four-day week, but without a loss of pay. A report out today includes some ideas for how it could be done, drawing on experience in Iceland and New Zealand."

• 
  
  Scotland to trial 20% pay rises.