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

[Harley]

1 hour ago, kibuc said:

If you believe BK might happen then I honestly can't imagine how it could be a good idea. A combination of broad market collapse and house price drop might result in a very urgent call from your bank with a simultaneous lack of funds to cover the equity requirement. Might easily end up in the red big time.......

I've often wondered if this is the last shoe to drop in the journey to "you'll own nothing and be happy"!

[Harley]

1 hour ago, harp said:

Totally agree! Problem I have is that my wife doesn’t share the same thoughts and spends like crazy on shit. I remember when you said similar about your husband? Maybe we should do a partner swop? 😂

As they say in farming (in praise of the ladies), wife first, tractor second.

[Starsend]

2 hours ago, Loki said:

Pretty sure the standard advice would be "Don't do it"...but if I was in a position to, I would.  I assume you're still working?  (Just in case)

I see it is as front-loading the 'benefits', buying at the lows and the interest on the mortgage being negligible compared to gains

Yep, still working, recently went back for another year or two. 

[Starsend]

2 hours ago, kibuc said:

If you believe BK might happen then I honestly can't imagine how it could be a good idea. A combination of broad market collapse and house price drop might result in a very urgent call from your bank with a simultaneous lack of funds to cover the equity requirement. Might easily end up in the red big time. I feel plans such as this belong in the "everything's going up forever" world (which may or may not be our world), just like that Norwegian (?) guy who sold everything and went full bitcoin (seems to have worked for him btw, as there was no BK along the way).

Exactly that. It's all about risk analysis. My personal view is that there is considerably less downside risk than upside. I spent a decade in rented saving while house prices kept going up and up. I was convinced they would fall because I was looking at the situation from the perspective of a sane and reasonable person - that was a mistake.

We know what they' re going to do - inflate because they have no other choice. There may be a BK or even more than one along the way but then they'll print whatever it takes to get things going again.

Is it possible that they stop printing and just allow a gigantic slump in everything? Highly unlikely imo but not impossible.

I should add that I have the funds elsewhere to clear the mortgage I would be taking out. So if it all went to shit I could at least get my house back.

It's good to get other people's idea on the level of risk.

[leonardratso]

6 hours ago, Noallegiance said:

That's not too bad but not quite as wide as mine.

choad

[Starsend]

2 hours ago, wherebee said:

Be aware that a number of those products that are 'fixed' can be anything but in a real black swan event.  The UK has form for letting banks rip up the T&Cs if they can prove that the market is behaving in a way that 'nobody could have foreseen'.

Oops, sorry mr starsend, your fixed rate is now variable rate.  Take us to court if you wish.

I have, in fact, borrowed 25k on an offset mortgage (balance was zero) so I am paying zero interest as I keep 25k in that account anyway for bills etc, annual fee of 200 bucks, and have used that to invest 25k in oilies that have already given me 300 bucks in dividends.  With an offset I can justify the counterpartyfuckeryrisk (TM) in that if they suddenly change the T&Cs I just transfer the money over and pay it off for no charge.

Yes that's certainly a risk but take them to court I would.

I do have other funds available so if I was forced onto a high rate I'd clear the mortgage pronto and then go down there and fuck them up 

[Noallegiance]

5 minutes ago, leonardratso said:

choad

Mines more a choad stool.

[Hancock]

5 minutes ago, Starsend said:

Yes that's certainly a risk but take them to court I would.

I do have other funds available so if I was forced onto a high rate I'd clear the mortgage pronto and then go down there and fuck them up 

Why not remortgage and wait for a BK, if one happens then pile in ... if it doesnt you can pay them back and just lose the £1000 fee.

[kibuc]

22 minutes ago, Starsend said:

I should add that I have the funds elsewhere to clear the mortgage I would be taking out. So if it all went to shit I could at least get my house back.

Out of curiosity, why not use those funds for your initial investment instead of leveraging with cash or liquid assets as collateral (also, if it's indeed assets then those wouldn't be immune to BK either).

[Don Coglione]

14 minutes ago, Hancock said:

Why not remortgage and wait for a BK, if one happens then pile in ... if it doesnt you can pay them back and just lose the £1000 fee.

Plus the interest!

I plan to do exactly what you have suggested: take possibly £200k on an interest-only basis, so £2k pa in interest, plus £995 fee - total cost of £11k to have access to £200k for 5 years. I too have the funds to clear the mortgage if things turn to shit, but that would rather fuck up my future, as I don't have sufficient years to recover from a hit that big.

[Don Coglione]

5 minutes ago, kibuc said:

Out of curiosity, why not use those funds for your initial investment instead of leveraging with cash or liquid assets as collateral (also, if it's indeed assets then those wouldn't be immune to BK either).

That is the dilemma - pray for a BK and pile in with the bank's cash, which of course will threaten my existing holdings, unless I time things well and liquidate pre-BK, or cross my fingers and add to existing positions...

I tend to agree with @Starsend that everything will be chucked into the mixer to stop any kind of crash. Which is fine, until they can't, at which point we are all fucked anyway.

[Starsend]

17 minutes ago, kibuc said:

Out of curiosity, why not use those funds for your initial investment instead of leveraging with cash or liquid assets as collateral (also, if it's indeed assets then those wouldn't be immune to BK either).

Already invested but in different asset classes, gold/silver, USTs and cash. They could also get hit in a BK but I reckon I could scrape together enough to clear the mortgage. It's all about rightsizing the risk, working out various different BK scenarios.

[Starsend]

36 minutes ago, Hancock said:

Why not remortgage and wait for a BK, if one happens then pile in ... if it doesnt you can pay them back and just lose the £1000 fee.

It's quite a lot of hassle to remortgage so I need to get some return - what if the BK doesn't happen!

I would certainly ladder in over a period of time.

19 minutes ago, Don Coglione said:

Plus the interest!

I plan to do exactly what you have suggested: take possibly £200k on an interest-only basis, so £2k pa in interest, plus £995 fee - total cost of £11k to have access to £200k for 5 years. I too have the funds to clear the mortgage if things turn to shit, but that would rather fuck up my future, as I don't have sufficient years to recover from a hit that big.

I'd also prefer interest only but my understanding was that these are harder to get. Is that something you've looked into?

[Don Coglione]

9 minutes ago, Starsend said:

I'd also prefer interest only but my understanding was that these are harder to get. Is that something you've looked into?

Yes, discussed with the bank on Tuesday. Certain criteria need to be met and they don't shout about offering interest-only. Going through the application process next week, although I am not 100% committed yet.

I mentioned previously that holding some debt is a hedge against a potential jubilee; I am convinced that the Government will want to get its hands on at least some of the equity locked into housing (another reason they won't allow prices to crash), so effectively reducing my level of housing equity would hedge against this too.

[Mapper]

Whatever money you have invested in China you ought to be prepared to lose it all.

Xi Jingping could not give a fuck about property rights, and that applies exponentially for non-Chinese.

All he is interested in is that China lasts another 4000 years.

[Talking Monkey]

46 minutes ago, Don Coglione said:

Yes, discussed with the bank on Tuesday. Certain criteria need to be met and they don't shout about offering interest-only. Going through the application process next week, although I am not 100% committed yet.

I mentioned previously that holding some debt is a hedge against a potential jubilee; I am convinced that the Government will want to get its hands on at least some of the equity locked into housing (another reason they won't allow prices to crash), so effectively reducing my level of housing equity would hedge against this too.

But wouldn't they take people's equities before they take their housing equity. I would have thought they'd take control of private pensions first. 

[Don Coglione]

Just now, Talking Monkey said:

But wouldn't they take people's equities before they take their housing equity. I would have thought they'd take control of private pensions first. 

Most people don't have equities. Most private pensions have about 2 and sixpence in them.

I think everything will fall into the sights of Government, nothing will be "safe".

[Talking Monkey]

Just now, Don Coglione said:

Most people don't have equities. Most private pensions have about 2 and sixpence in them.

I think everything will fall into the sights of Government, nothing will be "safe".

Agree on that nothing will be safe. I thought the big companies had billions in pension funds wouldn't the government take hold of those. Somebody like HL have billions in AUM. 

[Starsend]

16 minutes ago, Mapper said:

Whatever money you have invested in China you ought to be prepared to lose it all.

Xi Jingping could not give a fuck about property rights, and that applies exponentially for non-Chinese.

All he is interested in is that China lasts another 4000 years.

Agreed. I steer well clear of China. Can't believe that Musk built a great big factory there. He's gonna get that nicked for sure, I bet they're pissing themselves.

59 minutes ago, Don Coglione said:

Yes, discussed with the bank on Tuesday. Certain criteria need to be met and they don't shout about offering interest-only. Going through the application process next week, although I am not 100% committed yet.

I mentioned previously that holding some debt is a hedge against a potential jubilee; I am convinced that the Government will want to get its hands on at least some of the equity locked into housing (another reason they won't allow prices to crash), so effectively reducing my level of housing equity would hedge against this too.

Can you elaborate on the criteria for interest only? I've not looked into it at all yet.

[Don Coglione]

4 minutes ago, Talking Monkey said:

Agree on that nothing will be safe. I thought the big companies had billions in pension funds wouldn't the government take hold of those. Somebody like HL have billions in AUM. 

Pensions are a tricky, political hot potato. Encouraging people to be prudent and save for their retirement is all well and good, any Government then helping itself to those funds would struggle to spin it as being for the greater good, though it may happen in some form.

If we accept the premise that the free market has no answer as to how to fund the lives of many excess people, then we accept that the future is socialism. All private property then becomes fair game.

[Hancock]

1 hour ago, Starsend said:

It's quite a lot of hassle to remortgage so I need to get some return - what if the BK doesn't happen!

I would certainly ladder in over a period of time.

You lose your time and the £1000 fee.

[DurhamBorn]

The government doesnt need to pick assets to take really,far too messy.It just lifts base money up by printing massive amounts then takes the extra tax.This is a distribution cycle we have entered.Inflation is always the mechanism in western style Fiat economies.The rest is just noise.They wont be taking any assets as such,but they will be with inflation.

They will look for areas they have lifted that dont pay tax though,so extra on houses is likely in some form,probably on BTL,and getting more tax out of pensioners,NI if they dare.

[Loki]

Just now, DurhamBorn said:

The government doesnt need to pick assets to take really,far too messy.It just lifts base money up by printing massive amounts then takes the extra tax.This is a distribution cycle we have entered.Inflation is always the mechanism in western style Fiat economies.The rest is just noise.They wont be taking any assets as such,but they will be with inflation.

They will look for areas they have lifted that dont pay tax though,so extra on houses is likely in some form,probably on BTL,and getting more tax out of pensioners,NI if they dare.

What about end of next cycle? (Give me your first thought no matter how crazy it might seem!)

[Talking Monkey]

4 minutes ago, Loki said:

What about end of next cycle? (Give me your first thought no matter how crazy it might seem!)

That's what I was thinking in terms of the government taking assets, might they do it at the end of the next cycle, not in the next few years. 

[Starsend]

5 minutes ago, Loki said:

What about end of next cycle? (Give me your first thought no matter how crazy it might seem!)