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

[Loki]

1 hour ago, AWW said:

Anyone else finding it very hard to contain their emotions in this crazy market?  My holding in PetroTal halved last week, but having sworn to follow the "buy more or sell" mantra after my brush with CNA, I didn't do anything and am sitting here kicking myself.  I knew it was a knee-jerk spike down, I knew I should have doubled my holding at half price, but the fear gripped me and I missed out on  £500 of upside.

Today's 'emotions'

Look at HOC go, should have bought more

Look at AFC go, now it's only -35%

Look at CNA, now it's oh never mind. 

We need blinkers for hindsight.  No point kicking yourself unless you forgot to use your crystal ball

[JMD]

2 hours ago, Democorruptcy said:

I wouldn't put much store in the 3 month mortgage holidays expiring any time soon. Even before the furlough scheme was extended the FCA were suggesting mortgage holidays would be extended. An article in The Times suggested a year. Got to protect those mortgagees banks.

Democorruptcy, I think your right and I'm looking out for what happens to mortgages as I think it will be a key indicator for future government interventionist policy, etc.

e.g. I've heard of the creation of 'Bad' Banks (to 'soak up' so called 'non-performing' debt), but how about a 'Bad' Building Society? ...government 'blue sky thinking' could include 100 year inter-generational mortgages (a la Japan); or house-equity-buyout-relief (it sounds so good i'm already convinced Boris is chumping at the bit to announce it!) where gov. buys 50% of your house.

...a new parlour game perhaps, what other wonder schemes can others think up?

[Yellow_Reduced_Sticker]

FROM: moneyweek

"A warning from history about the return of inflation"

Frisby mentions a book: Dying of Money

he says ONLY 1,000 copies were ever printed and they go for $600 a pop!

 

you can get it of amazon for around $150... BUT ...save ya moolah!

 

AS...I got ya's covered with a YRS FREE copy of course!

 

Grab the PDF here:

http://s000.tinyupload.com/?file_id=00280129011341445312

 

anyways enjoy the read, i haven't read it yet...i'm sure its @DurhamBorn's cup of tea...CAN'T hang around here got to get cracking on the spare room, gotta rent a room out now that house PRICES are CRASHING! (only way to soften the blow, when ya buy near the TOP!)

 

[DurhamBorn]

39 minutes ago, M S E Refugee said:

A question for DurhamBorn, what do you think of the Oil,Gas pipeline and transportation companies?

I have bought Oneok,Magellan Midstream Partners,Kinder Morgan,Omv and Valero.

They all have done very well in a short space of time and pay decent dividends,Oneok is up 20% since I bought it and pays a 10% dividend.

 

I decided not to buy any and sold the couple i had for small profits,the tax implication on the income are difficult for none US citizens and they also seem to have unlimited liability.Im not 100% but i dont like the sound of that.I decided there was no need to own them given the amount of other stocks in energy etc.Its up to an individual of course,but for me id be taking the lovely profit and spreading it among other reflation areas.

[Castlevania]

They’ll just jack up Housing Benefit to “help” all those “hard working” tenants

Labour’s roll out of LHA was what saved the London housing market after the GFC. House prices were falling, rents were falling, it was all good then suddenly LHA gets rolled out. Rents shouldn’t soar by 20-30% in a year in the middle of a recession. 

[Democorruptcy]

Windfall taxes anyone?

Monday was an up day for the markets but such as Ocado, Tesco & Morrisons lagged. Presumably because of an FT article over the weekend. It was a small sample size though!

Quote

 

Majority of UK public supports windfall taxes

More than half of the UK public would welcome a windfall tax on companies such as food retailers that have thrived during the coronavirus crisis, according to an opinion poll. The survey of 1,682 people by YouGov also found that 61 per cent would approve of a wealth tax for those with assets of over £750,000.

https://www.ft.com/content/b7441bee-6bf7-46c2-ab75-916fec31f521

 

 

Severn Trent upped it's divi today

Quote

 

The FTSE 100 company increased its final dividend by 7.2% to 60.05p a share taking the annual payout to 100.08p a share, up from 93.37p a year earlier. Severn Trent said the increase was in line with its policy of increasing the dividend by at least retail price inflation plus 4%.

https://www.hl.co.uk/shares/shares-search-results/s/severn-trent-plc-ordinary-97-1719p/share-news

 

Anybody think utilities be a target?

[JMD]

1 hour ago, DurhamBorn said:

I based in on all past silver bull markets and house price falls,it actually came out at 900 times,but i rounded it up 10% for the way UK housing tends to over price even when crashed.Its part of the silver road map,but the interesting thing is the liquidity to silver tracker i use also comes out at between $200 and $300oz.I think we have a very good chance of seeing those prices and im going to stick to the roadmap on at least some of my silver miners.Il sell some on the way up though,i even took a few profits in one yesterday (20% of holding) and put into potash.Il juggle all the reflation sectors a bit if some move a lot quicker than others.

DB, that is fascinating to me. Also think it is great practical information - not for guiding my pm investment I hasten to add ('I did my own research' as the mantra dictates, in fact now have most of my pm's) - Instead, I feel more comfortable having an exit value. I bang on(?) about my risk/reward thing a lot, and having an approx. target helps my overall investment strategy. As said on here before, knowing when to buy is difficult decision, but knowing when to sell is equally as important. (...then again, Eisenhower said 'plans are useless, but planning is indispensable', so what do I know!)    

[JMD]

3 hours ago, DurhamBorn said:

North is interesting and i think there will be differences.Crap terraces i think will go back down to £40k everywhere,or below.4 bed detached type around the £230k mark will come down 20% as you say,i think thats probably about right.The nice 3 bed semis that are in the £130k,£140k range i think will drop 10% and maybe staight back up.They might even increase slightly.

I think most of the pain in the north will be on the new build estates.They really are terrible.The 3 bed that have been going for £140k on HTB will probably come down to £80k.One estate in Darlington i go to is still being built but mostly finished.The first part has zero grass,trees,open space,none,zip.Its already looking poor,the local housing association took 15% of them and moved in benefit class already and its sinking.The HTB houses nearly all have an Audi and a Mini etc on the drive,obvious younger people up to their necks.The thing is on those though, i wouldnt buy them at any price lower than a 15% yield on rent.

I think that will become the 'go-to yield' for most landlords in terms of their expected returns in future. Falling prop. prices allied with increasing inflation, plus higher int. rates, not too mention lots more added prop. regulations, will make it unattractive at any lower return. It used to be 20% returns before the days of easy BTL finance. 

[DurhamBorn]

30 minutes ago, Democorruptcy said:

Windfall taxes anyone?

Monday was an up day for the markets but such as Ocado, Tesco & Morrisons lagged. Presumably because of an FT article over the weekend. It was a small sample size though!

 

Severn Trent upped it's divi today

Anybody think utilities be a target?

This country is nuts.Wanting to tax companies that have done very well handling a crisis.Id tax the teachers sat at home and give it to Morrisons.

[JMD]

1 hour ago, The Idiocrat said:

I'd quite like to see a misselling case brought against the Government itself! (Yes, I know people who signed up to HTB are idiots/naive kids and shouldn't be bailed out by the rest of us, but that seems to apply to pretty much all previous misselling scandals). Help to Bribe was/is purely to help the builders and banks and as usual is throwing youngsters on the bonfire.

Isn't it more to do with the attraction of the 'shiny and the new'? I don't think you can look at one sector, its more depressing and much more endemic than that. For example, 2nd hand prams are not good enough for the children of many/most aspiring young parents. The west has lived beyond it means for decades. Debt, consumerism, advertising, political leadership, etc, etc, its all a house of sand.

 

[The Idiocrat]

38 minutes ago, JMD said:

Isn't it more to do with the attraction of the 'shiny and the new'? I don't think you can look at one sector, its more depressing and much more endemic than that. For example, 2nd hand prams are not good enough for the children of many/most aspiring young parents. The west has lived beyond it means for decades. Debt, consumerism, advertising, political leadership, etc, etc, its all a house of sand.

 

I'd agree a little but HTB is only for new builds I believe, so it's not really to help FTB's, but to help builders, and new builds are always at least 10% overvalued due to that "shininess". 

[Alifelessbinary]

4 hours ago, CVG said:

Certainly fair worse than if they only have to liquidate. (Teasing)

Things are different this time, so we’ll be liquidising assets rather than liquidating! 😂 
 

[Talking Monkey]

4 hours ago, DurhamBorn said:

North is interesting and i think there will be differences.Crap terraces i think will go back down to £40k everywhere,or below.4 bed detached type around the £230k mark will come down 20% as you say,i think thats probably about right.The nice 3 bed semis that are in the £130k,£140k range i think will drop 10% and maybe staight back up.They might even increase slightly.

I think most of the pain in the north will be on the new build estates.They really are terrible.The 3 bed that have been going for £140k on HTB will probably come down to £80k.One estate in Darlington i go to is still being built but mostly finished.The first part has zero grass,trees,open space,none,zip.Its already looking poor,the local housing association took 15% of them and moved in benefit class already and its sinking.The HTB houses nearly all have an Audi and a Mini etc on the drive,obvious younger people up to their necks.The thing is on those though,i wouldnt buy them at any price lower than a 15% yield on rent.

So over the next say 7-8 years DB the nice semis will probably stay level or a slight increase in nominal terms but will fall in real terms

[JMD]

1 hour ago, Yellow_Reduced_Sticker said:

FROM: moneyweek

"A warning from history about the return of inflation"

Frisby mentions a book: Dying of Money

he says ONLY 1,000 copies were ever printed and they go for $600 a pop!

 

you can get it of amazon for around $150... BUT ...save ya moolah!

 

AS...I got ya's covered with a YRS FREE copy of course!

 

Grab the PDF here:

http://s000.tinyupload.com/?file_id=00280129011341445312

 

anyways enjoy the read, i haven't read it yet...i'm sure its @DurhamBorn's cup of tea...CAN'T hang around here got to get cracking on the spare room, gotta rent a room out now that house PRICES are CRASHING! (only way to soften the blow, when ya buy near the TOP!)

 

YRS, your self sacrifice to this forum is legendary ('buy-at-top human-guinea pig' being just one of your many guises).You now entreat us to your latest money offer, this time purporting to save us many $hundreds. Thank you, I shall certainly download and take a look... But rest assured none of this goes unnoticed, and nor should it go unrewarded - I therefore publicly pledge to clap you every Thurs. evening, 8:05 - 8:05:01 (start modestly and build; just like Captain Tom, however can't promise you a knighthood) the campaign starts here, who will join me!? 

[DurhamBorn]

1 hour ago, JMD said:

Isn't it more to do with the attraction of the 'shiny and the new'? I don't think you can look at one sector, its more depressing and much more endemic than that. For example, 2nd hand prams are not good enough for the children of many/most aspiring young parents. The west has lived beyond it means for decades. Debt, consumerism, advertising, political leadership, etc, etc, its all a house of sand.

 

We got all our prams for the grandkids on Facebook marketplace £50 for £300 prams then we sell on for the same price when finished,so free use.My daughter got a £1000 silver cross system for £130 immaculate,middle class grandparents selling,probably been used a few times.Its incredible the bargains you can get on there.My partner is an expert at haggling as well,i wait in the car usually., sofas,furniture,you name it.I even got some fantastic hand made curtains for £50 would of been over £500 i reckon from a retired council worker,she said she got bored so changed the colour scheme in her house every two years.Have to get your council tax back somehow.

[DurhamBorn]

20 minutes ago, Talking Monkey said:

So over the next say 7-8 years DB the nice semis will probably stay level or a slight increase in nominal terms but will fall in real terms

In the north i think yes,but the older ones,the HTB crap will be hammered i expect,50% off likely on a lot of those.I could see northern quality semis seeing 10% off then getting that 10% back then probable going up about half of inflation.Some houses up here are back to 1991 prices already,the crapper terrace houses.I could see the 4 bed £220k area coming down 20%.The north has some bubbly prices in places,but is nowhere near the south,and the north will see much more investment this cycle.

[JMD]

34 minutes ago, The Idiocrat said:

I'd agree a little but HTB is only for new builds I believe, so it's not really to help FTB's, but to help builders, and new builds are always at least 10% overvalued due to that "shininess". 

Thanks Idiocrat, yes I know which point you were really making, its just that your point involved suing the government - and that action would necessitate using lawyers. The thing is, these days my knee jerk reaction to anything involving lawyers is to react rather poorly/negatively (ever since reading how many lawyers/capita US had, and spreading to over here, compared to 'better functioning' societies such as Japan/Korea that have many more engineers/capita. I bet you tell me that you are a lawyer now i've said this!).   

Anyway as a (attempted) humerous aside to all this talk of new-builds, and to further illustrate that all that glitters/shiny isn't gold. A work colleague told me he had once tried to reposition his bathroom toilet roll holder in his own new-build house. But because of the cheap partition walling, he ended up damaging the wall to such an extent that he needed to get a plasterer in to repair the damage! 

[JMD]

1 hour ago, Alifelessbinary said:

Things are different this time, so we’ll be liquidising assets rather than liquidating! 😂 
 

Actually I thought your original reference was correct and very apt, as I thought it related to those Russian (property) oligarchs... I hear they take things personally if you get my drift!

[JREWING]

Thoughts. Not my post but I wanted to share it...

 

  22 minutes ago, scepticus said:

The goal of NIRP is to ensure credit markets can clear and that money keeps circulating during contractionary and deflationary periods. In turn this serves to protect jobs, sustain innovation and to maintain a fair and balanced economy that is not predicated on eternal inflation and expansion. 

Here are some assertions about its effects. See if you agree.

   1. It is not a stimulus, it is a mechanism to accommodate deflation without preventing it.  
   2. It will only apply during a deflationary economic period; thus the negative nominal rate of return on money should be at least partly offset by falling asset prices.
   3. It cannot work unless banks pass negative rates on bank reserves onto retail customers in the form of a negative interest rate, or fixed banking fees.
   4. The income the central bank receives from the negative interest rate is not spent back into the economy, it is simply deleted. This in turn means that the money supply will shrink during NIRP - another reason why NIRP is not stimulative. In fact, there is no stimulatory way of spending this CB interest income back into the economy that is not contractionary.
   5. It does not hurt the poorest in society since the poorest in society who: have no savings, exist entirely on benefits, benefit the most from falling price levels. The most badly affected are the rich with large cash holdings or with assets that suffer losses due to deflation.
   6. NIRP is a free-market competition in a deflationary environment to see who can lose the least money in nominal terms, like PIRP is (or should be) a competition in an inflationary environment to see who can acquire the most money. NIRP is therefore perfectly compatible with capitalist and free-market ideas.
   7. NIRP would only persist as long as the desire for saving outweighs desire for borrowing. As soon as this ceases to be the case, market rates and then central bank rates should become positive again and credit expansion and later, inflation would return.
   8. The NIRP interest rate is determined by the credit markets, and the central bank simply reflects its estimate of that credit market rate in its own rates. Alternatively, the central bank may attempt to follow a deflation target, this works like an inflation target, but they try to prevent the actual level of deflation exceeding target, in order to stave off the possibility of a deflationary spiral.
   9. If the government takes the opportunity of negative rates to borrow excessively, then sooner or later government borrowing demand matches private sector saving demand and rates turn positive again. If the government has spent the borrowed money unwisely, it will still be in a hole.
   10. NIRP does not necessarily mean that retail borrowers can borrow at negative rates. It simply means that the return a bank expects on lending is negative in aggregate and that to make a reasonable profit it has to charge interest or fees to its depositors.

So, NIRP, combined with PIRP, and sensible deficit/public spending decisions, is a monetary framework that is symmetrical and can offer global society a means of dealing with contractionary circumstances like pandemics, climate change and demographics, as well as working during the good times. Cash and electronic bank reserves are a debt liability of the central bank/government (and thus by an extension a debt liability of all society), there is therefore no inherent moral reason why society must choose to promise any particular attributes of those liabilities.

Why should we be limited to having a monetary system that only works for growth and good times? How is that sensible?
 

[BearyBear]

All stars seem to be returning to HPC... I also saw Realistbear posting yesterday after a 3 years break!

[Loki]

If things carry on like this I'll be down to a single digit 'loss' in my portfolio! From 23%...

That includes dogs like INFA and NGD!

[Starsend]

4 hours ago, DurhamBorn said:

I think thats right on the 3 bed semis spy in the north,the decent to good will be between £100k and £130k,HTB is stuffed,massive losses there and like you say only way out is live there forever or go bankrupt for most people.Im have zero sympathy for people who bought them and id line their parents up against a wall who didnt try to talk them out of it.Insane.£20k could be right on the crap terraces,maybe the nicer ones hold the £40k to £50k area down from the £80k.

Il never understand how HTB ever came in,and il never understand the crazy regs that force so many houses on plots.Its a disaster in every area.My daughters friend bought a 4 bed in Darlo last year and the estate is already getting flooded with bennies from the housing association,those prices are going to get hammered.Likely almost all HTB has no equity by the time the fixed rates end,they are all going onto SVR,unless the government bails them even more.

Most people are utterly stupid when it comes to money. Few people have parents that understand these things and can point them in the right direction. My parents are hopeless, I've learnt what I know through curiosity and the intuition that things were not right. Very few people are like those of us on this thread, how many people even understand relatively simple mechanisms such as deficit spending and inflation that Governments use to steal from us! How many understand how to work out fair value for a house even! All they know is they need somewhere for their family to live.

I don't blame the average person for being a financial thicky. I blame the scum at the top, Government, corporations, central bankers who have lost control of their greed and turned life into a nightmare for so many of us. It is the Governments job to manage the economy sensibly, to keep house prices reasonably affordable, to not give all the work to cheap foreigners. Mr and Mrs Thicky Dumbo just want to buy a house at a sensible price, work hard and live their lives - all made impossible by the thieves at the top. Having said that there is an argument along the lines of getting the Government you deserve.

Up where you live it's still possible to live a normal life. Down here in the South it's been truly awful for a long time. My children are all grown, are desperate for their own homes so they can get on with their lives but they can't. I've personally earned way over what most people earn for decades but most has been stolen in one way or another because I needed a roof over my head to keep the rain off.

Nope, don't blame the average person, feel sorry for them trying to make a life for themselves in the mess that Governments and Central Bankers have made.

Your kids are very lucky to have you, sounds like you're doing a fantastic job setting them up for life. Trying to do the same for mine.

 

 

[Loki]

@DurhamBorn and the contributors to his threads have taught me more about finance than all of my friends and family put together.

I've given up trying to talk to my folks about it.  The old man won't even contact his pension company to see how much is in bonds.  Neither of them have shown any inclination to open a S&S ISA despite me talking them through what I'm doing and why.

[Democorruptcy]

There's no limit to the reach of this forum. This afternoon we even had a man on location in what used to be the largest copper mine in the world. Look at all that shiny stuff glistening in the sun! I bet you all wish you were there panning and tipping it into your little sacks?

 

[DurhamBorn]

44 minutes ago, Starsend said:

Most people are utterly stupid when it comes to money. Few people have parents that understand these things and can point them in the right direction. My parents are hopeless, I've learnt what I know through curiosity and the intuition that things were not right. Very few people are like those of us on this thread, how many people even understand relatively simple mechanisms such as deficit spending and inflation that Governments use to steal from us! How many understand how to work out fair value for a house even! All they know is they need somewhere for their family to live.

I don't blame the average person for being a financial thicky. I blame the scum at the top, Government, corporations, central bankers who have lost control of their greed and turned life into a nightmare for so many of us. It is the Governments job to manage the economy sensibly, to keep house prices reasonably affordable, to not give all the work to cheap foreigners. Mr and Mrs Thicky Dumbo just want to buy a house at a sensible price, work hard and live their lives - all made impossible by the thieves at the top. Having said that there is an argument along the lines of getting the Government you deserve.

Up where you live it's still possible to live a normal life. Down here in the South it's been truly awful for a long time. My children are all grown, are desperate for their own homes so they can get on with their lives but they can't. I've personally earned way over what most people earn for decades but most has been stolen in one way or another because I needed a roof over my head to keep the rain off.

Nope, don't blame the average person, feel sorry for them trying to make a life for themselves in the mess that Governments and Central Bankers have made.

Your kids are very lucky to have you, sounds like you're doing a fantastic job setting them up for life. Trying to do the same for mine.

 

 

Welfare spending has caused most of the problems as the rich have used that to suck assets and tax from the working working class and middle class and run it through welfare to themselves.This coming recession would be the perfect time to reform welfare,but with the left crying for all the wrong people governments avoid it.I see it as a duty to only earn the minimum now and lawfully avoid paying tax.Only council tax gets me.The government will use inflation to try to get on top of things,and thats why the young have a chance here to get themselves back into the game.