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

[Barnsey]

Just when you think pent up demand for housing is running out of steam...

 

[MrXxxx]

10 hours ago, sancho panza said:

average two-year fixed rate 90 per cent mortgage now charges an interest rate of 3.76 per cent, significantly more than the 2.57 per cent available before the first lockdown.'

 

Yes, and look at what has happened to the savings rates during this period!

[MrXxxx]

11 hours ago, sancho panza said:

I think anyone who can access these ten year rates,wants to stay in the hosue 10 years + and has an overpayment startegy would be mad not to take it.Mad.....it's hard to envision how mortgage moeny gets cheaper here with some of the data coming out.

Barclays are doing a 10 yr 2% fix at 60% LTV ffs............no wonder they're not making any money.

I assume at some point if you have the capital to buy outright, there is going to be a `sweet spot` where it is better to have a fixed rate mortgage deal and invest your own capital in low risk liquid investments?

[MrXxxx]

8 hours ago, DurhamBorn said:

You horrible lot are tempting me to pick up a few more 

Sorry I shouldn't have asked the question and put temptation in your way! :-) :-) :-)

[crashmonitor]

On 07/11/2020 at 15:03, Harley said:

 

Well, now that you ask, I just completed this piece of work.......!

A list of some (not all) "Communication Services" (as defined by others, not me) Ordinary Shares over about £1bn cap at the time of study in the markets I can invest in, and several other filters and caveats.  DYOR - no responsibility accepted for errors, omissions, etc and I do indeed make mistakes as probably do the data providers.  I already own Vodafone (hence the blue shading).  I own some others too but not enough!

PS: Telefonica was excluded as it appears to have a negative PTBV ratio.  That is, it's equity is exceeded by the Goodwill and Intangibles held in its balance sheet.  Actually, exceeded by either of them!

D day for Vod tomorrow. So much could go right  ( or wrong) for the  price.. H1 results, dividend announcement, debt paydown details  and they could even throw in a cash raise at a discount which would really not be good for the price tomorrow.

Stormed up about 3% on the Nasdaq after our close, 16:35 GMT; so the Yanks are betting on good news. Share price has really built into tomorrow's announcement in the latter half of this week, after initially being sluggish on the vaccine euphoria.

You can probably tell I am in Vod with my interest. Just one of many internationals  I have bought in to last month, as a  bit of a hedge against Bozza's Socialist Republic of the NHS which  is in danger of sinking UK plc. Nurse worship and lockdowns instead of worrying how we are going to pay for everything.

[jamtomorrow]

24 minutes ago, crashmonitor said:

D day for Vod tomorrow. So much could go right  ( or wrong) for the  price.. H1 results, dividend announcement, debt paydown details  and they could even throw in a cash raise at a discount which would really not be good for the price tomorrow.

Stormed up about 3% on the Nasdaq after our close, 16:35 GMT; so the Yanks are betting on good news. Share price has really built into tomorrow's announcement in the latter half of this week, after initially being sluggish on the vaccine euphoria.

You can probably tell I am in Vod with my interest. Just one of many internationals  I have switched to last month, as a  bit of a hedge against Bozza's Socialist Republic of the NHS which  is in danger of sinking UK plc. Nurse worship and lockdowns instead of worrying how we are going to pay for everything.

+1 - FTSE-listed companies with predominantly global exposure look like very good value at the minute. Beaten down by COVID, then beaten down some more by the Brexit bogeyman. 

That latter worry is misplaced in my book - most of these global exposure companies derive the vast majority of their income outside the EU. Brexit will barely qualify as a bump in the road.

You can also see this in how their share prices respond to forex fluctuations - they're the most (negatively) correlated of all vs GBP. So also handy as a "what if sterling tanks" hedge.

Whittle it down some more to the ones that are more likely to enjoy some inflation, and it's quite the list.

Damnit, think I talked myself into increasing my allocation to the FTSE global exposure thesis.

[Democorruptcy]

11 hours ago, sancho panza said:

I think there's a real problem for some of these BTLers in that the assumption that underpins their thesis is that if peolle can't hokiday abroad,they'll holiday here.

If IR's rise and people can't afford a holiday here either,most of them will still have rising mortgage payements to make.

Having said that I can see why someone who went into BTL on 4% gross yields would find the holiday BTL game attractive.ANd I can see why they'll eventiully want out ofthat for an easier life as well.

Hopefully this year was a one-off due to furlough but where I am the holiday let owner told me she could have let her cottages 10 times over. People were ringing up repeatedly asking if there had been any last minute cancellations.

My cousin was renting a 5 bed farmhouse for £600 a month in Scotland that changed to a £1,500 a week in summer holiday let. They only need to let the summer holiday to cover the annual long term rent. That's the problem in the UK, it's  under occupancy, too many houses only partially occupied.

[MrXxxx]

16 hours ago, Erewhon888 said:

I also found it very difficult to get my head around. You may find this whiteboard review from Gammon relevant.

 

Thanks @Erewhon888 this helped me 'get my head around it' a little better; we must both be visual learners. So bear with me everyone this may appear like a ramble but its to help me rationalise what I have understood; feel free to confirm/correct/comment.

Q1. Assets being pumped up - is this why the UK govt has continued to ramp property?

Q2. Ramped assets 'hidden' in Fed (read BoE for UK) system - is this why property isn't part of RPI/CPI measure i.e. so 'the man in the street' is kept in ignorance?

Q3. Why should 'Belief' decrease when M2 is increasing i.e why can 'Belief' not continue increasing in parallel; is it due to wages not keeping up with inflation so that 'the man in the street' can then 'see' the charade?

Q4. So following the point made at 21.10-21.20, is the worst possible place to be putting your capital into anything to do with banks/finance as this is eventually going to 'blow-up' in your face...at least assets will have some value, even if it far below the price that you may have paid if you had bought it at an inflated price?

Q5. Following from Q4 where to put your capital for maximum preservation?..Gold (once again value is based on 'belief') or something more tangible that can have a utility? AND does it need to be something that is fairly liquid so that you can sell 'little and often' when you need the FIAT currency, but not hold sums due to being affected by its decreasing value over time?

Hopefully all the above makes sense?....although the whole scenario (FIAT & QE) seems like a confidence scam to me!

[Democorruptcy]

1 hour ago, jamtomorrow said:

+1 - FTSE-listed companies with predominantly global exposure look like very good value at the minute. Beaten down by COVID, then beaten down some more by the Brexit bogeyman. 

That latter worry is misplaced in my book - most of these global exposure companies derive the vast majority of their income outside the EU. Brexit will barely qualify as a bump in the road.

You can also see this in how their share prices respond to forex fluctuations - they're the most (negatively) correlated of all vs GBP. So also handy as a "what if sterling tanks" hedge.

Whittle it down some more to the ones that are more likely to enjoy some inflation, and it's quite the list.

Damnit, think I talked myself into increasing my allocation to the FTSE global exposure thesis.

Your reply was to a post about VOD but an article here suggests 75% of their revenue in 2019 came from the EU.

Quote

 

Vodafone operates in about two dozen countries, but Europe accounts for more than 75% of the firm's revenue. The company is especially dependent on Germany (30% of sales), the UK (13%), Italy (13%), and Spain (10%).

https://www.simplysafedividends.com/intelligent-income/posts/230-vodafone-a-high-yielding-telecom-facing-growth-challenges

 

 

 

 

[DurhamBorn]

1 hour ago, crashmonitor said:

D day for Vod tomorrow. So much could go right  ( or wrong) for the  price.. H1 results, dividend announcement, debt paydown details  and they could even throw in a cash raise at a discount which would really not be good for the price tomorrow.

Stormed up about 3% on the Nasdaq after our close, 16:35 GMT; so the Yanks are betting on good news. Share price has really built into tomorrow's announcement in the latter half of this week, after initially being sluggish on the vaccine euphoria.

You can probably tell I am in Vod with my interest. Just one of many internationals  I have bought in to last month, as a  bit of a hedge against Bozza's Socialist Republic of the NHS which  is in danger of sinking UK plc. Nurse worship and lockdowns instead of worrying how we are going to pay for everything.

This years results should be the bottom of the cycle for the telcos,all of the big ones.It could stretch into next years results as well with another small down draft but then macro conditions move in their direction.Look at VODs debt and the way it is structured.Its all at fixed rates,most of it very very low,its mostly coming off at $2/$3 billion a year so can be paid off from free cash if they want too.The incumbents will raise prices on the networks and everyone will follow.Mid cycle capex costs should fall,or at worst flatline as prices increase leading to fast growth in free cash.

The telcos have too much debt,but they mostly used it to buy assets that can increase prices with inflation while fixing the coupons at very low levels.

Key number for VOD and other telcos is their return on capital employed.Watch for what they say on that going forward.Id expect them to say they expect it to improve.That improving from a debt base thats fixed is the key to the cycle for them all.

I should add they have too much debt for a dis-inflation,but you could argue not enough for a reflation (the more invested at 2% interest the better)

[Yadda yadda yadda]

3 hours ago, Barnsey said:

Just when you think pent up demand for housing is running out of steam...

 

From Manchester to Liverpool. I wonder what they'll make of Wigan? Perhaps they'll get a taste for pies.

Would be a culture shock moving from Hong Kong to the UK. Even London doesn't have that type of high density living where you've got near zero space but all the services you need are on your doorstep.

I don't see a lot of Hong Kongers moving but they'll surely buy housing just in case they do need it.

[sleepwello'nights]

1 hour ago, Democorruptcy said:

That's the problem in the UK, it's  under occupancy, too many houses only partially occupied.

And in a nutshell. Many people I know whose children have grown up and left the parental home still live in their family size homes. We rattle around in our house, which isn't particularly large. 

What is the solution? We will be moving soon to a larger house! My wife want's us to downsize  to a bigger house! Still the same number of bedrooms though, each room is larger than our current home. The decision is because we need the room for when family and friends visit and maybe stay a few days.

We've looked at smaller houses but its easier to get used to more room than less room. 

Again why should I  be forced to live in a smaller house than I want. We live in a society where we can make our own choices. My mother lived on her own in the house we grew up in for many years. Would it have been fair to force her to move into a smaller house or apartment. I don't think so.

 

Sorry this really belongs in another thread. 

Anyway along with everyone else my portfolio has been nicely boosted by the price jumps last week. Except my index linked gilts. So looks as though asset allocation is sort of balanced.

 

[Yadda yadda yadda]

12 minutes ago, sleepwello'nights said:

And in a nutshell. Many people I know whose children have grown up and left the parental home still live in their family size homes. We rattle around in our house, which isn't particularly large. 

What is the solution? We will be moving soon to a larger house! My wife want's us to downsize  to a bigger house! Still the same number of bedrooms though, each room is larger than our current home. The decision is because we need the room for when family and friends visit and maybe stay a few days.

We've looked at smaller houses but its easier to get used to more room than less room. 

Again why should I  be forced to live in a smaller house than I want. We live in a society where we can make our own choices. My mother lived on her own in the house we grew up in for many years. Would it have been fair to force her to move into a smaller house or apartment. I don't think so.

 

Space is a luxury. Why should you give it up? It isn't your fault that we haven't built enough housing for the growing population.

It is the Government's responsibility to ensure that there is sufficient housing and that it isn't so cramped. It is planning regulations that restrict supply (edit: this is why it is the Government's responsibility, they have taken that responsibility through their actions). Ideally lots of us would have second homes as is common in countries with less dense populations. Eg Scandinavia and to a lesser extent France. 

People shouldn't be demanding your home, they should be demanding the same opportunity you had and more.

[jamtomorrow]

59 minutes ago, Democorruptcy said:

Your reply was to a post about VOD but an article here suggests 75% of their revenue in 2019 came from the EU.

Ha, I perhaps should have mentioned the relevant detail that VOD doesn't make the list 

Interestingly, it doesn't get as far as the EU income filter - if you're specifically looking for non-domestic revenue, there's plenty to choose from above VOD in that respect.

[Democorruptcy]

Another 5 years going this week

Quote

 

British Prime Minister Boris Johnson plans to announce next week a ban on the sale of new petrol and diesel cars from 2030, five years earlier than previously planned, the Financial Times reported on Saturday. Britain had originally planned to ban the sale of new petrol and diesel-powered cars from 2040, as part of efforts to reduce greenhouse gas emissions, and in February Johnson brought this forward to 2035.

https://www.carandbike.com/news/uk-to-ban-sale-of-new-petrol-and-diesel-cars-from-2030-2325411?pfrom=home-lateststories

 

 

[DurhamBorn]

VODs income is a big chunk from Germany and its eastern neighbours.If the Euro fails those currencies will fly up against sterling.Deutsche Telecom has massive amounts of debt and will struggle against VOD now it has those cable assets as well.Telcos will see lots of mergers,but to get around national governments it will likely be mergers of towers,shared services etc rather than full on mergers.

[DurhamBorn]

4 minutes ago, Democorruptcy said:

Another 5 years going this week

 

UK will do a Cuba and everyone will be driving old cars and keeping them on the road for decades.The ban also doesnt include hybrids so stick a small battery in and good to go.There are still 33,000 Trabants running in Germany on a two stroke engine.The worst car ever built.

It would be a fantastic business stocking up on popular cars to break over the decades following the ban.I will never own an electric car myself.Il buy a common diesel,another Peugeot probably and keep it on the road forever.Cars are simply parts bolted together on a chassis welded together and can be ket going forever really.

 

[DurhamBorn]

https://www.thetimes.co.uk/edition/news/commuters-face-big-increase-in-rail-fares-to-bail-out-train-companies-7xnhn3rtz?utm_medium=Social&utm_source=Twitter#Echobox=1605358461

Notice how everything is going inflation + now.Transports inflation +1%

Telcos inflation +3.9% 

https://www.ispreview.co.uk/index.php/2020/10/uk-isp-plusnet-joins-bt-and-ee-in-cpi-3-9-price-hike-change.html

Dont worry you can shop around,,er maybe not,

https://www.thetimes.co.uk/article/coming-soon-a-shock-in-your-phone-bill-smv6q9qmr

https://www.thesun.co.uk/money/13109165/three-mobile-vodafone-inflation-busting-hike-bills-increase/

Food inflation is holding down in many areas as energy cost falling lag hits,but they will start to increase from spring next year.Although a small outright deflation number being printed isnt out of the question inflation should start to register by next summer and then build.

Companies who can front run this inflation or leverage it are key to protecting family finances this cycle.

 

 

[Chewing Grass]

Transport = Fake Economy (especially Rail)

Power Generation = Fake Economy

Telco's = Fake Economy

Water = Fake Economy

All privatised in the name of competition but so regulated there isn't any.

Shop around and literally say a couple of quid per month max.

[Option5]

5 minutes ago, DurhamBorn said:

https://www.thetimes.co.uk/edition/news/commuters-face-big-increase-in-rail-fares-to-bail-out-train-companies-7xnhn3rtz?utm_medium=Social&utm_source=Twitter#Echobox=1605358461

Notice how everything is going inflation + now.Transports inflation +1%

Telcos inflation +3.9% 

https://www.ispreview.co.uk/index.php/2020/10/uk-isp-plusnet-joins-bt-and-ee-in-cpi-3-9-price-hike-change.html

Dont worry you can shop around,,er maybe not,

https://www.thetimes.co.uk/article/coming-soon-a-shock-in-your-phone-bill-smv6q9qmr

https://www.thesun.co.uk/money/13109165/three-mobile-vodafone-inflation-busting-hike-bills-increase/

Food inflation is holding down in many areas as energy cost falling lag hits,but they will start to increase from spring next year.Although a small outright deflation number being printed isnt out of the question inflation should start to register by next summer and then build.

Companies who can front run this inflation or leverage it are key to protecting family finances this cycle.

Rail companies can't win now, if the continue with the prices they have they go bust because a lot of people have got out of the habit of commuting so revenues will fall. If they increase the prices enough to make a difference a lot of people won't be able to afford to commute or want to travel for leisure because of the expense.

Car sharing will make more sense financially.

The only way forward is to nationalise the railways.

Telecos now have many customers who willwant to continue to work from home and will have to swallow the increases. The telecos will say are to cover infrastructure improvements (5G, fibre to house etc) that people will want.

[Option5]

3 minutes ago, Chewing Grass said:

Transport = Fake Economy (especially Rail)

Power Generation = Fake Economy

Telco's = Fake Economy

Water = Fake Economy

All privatised in the name of competition but so regulated there isn't any.

Shop around and literally say a couple of quid per month max.

With water you can't even shop around, it's location dependant.

[CVG]

3 hours ago, Yadda yadda yadda said:

From Manchester to Liverpool. I wonder what they'll make of Wigan? Perhaps they'll get a taste for pies.

Would be a culture shock moving from Hong Kong to the UK. Even London doesn't have that type of high density living where you've got near zero space but all the services you need are on your doorstep.

I don't see a lot of Hong Kongers moving but they'll surely buy housing just in case they do need it.

They already have the umbrellas. They're good to go.

[Option5]

4 hours ago, Democorruptcy said:

That's the problem in the UK, it's  under occupancy, too many houses only partially occupied.

"I like living in one room and have never known what people do with the room they are not in."

Quentin Crisp  (Resident Alien)

[Democorruptcy]

5 minutes ago, Option5 said:

"I like living in one room and have never known what people do with the room they are not in."

Quentin Crisp  (Resident Alien)

I'm sat in a lounge/kitchen/diner, triple aspect with sea and far reaching countryside views. I like a separate bedroom though, avoids fridge noise etc. You see a lot of warehouse style flats on US TV and I've always thought we should have more of them instead of box rooms.

[Democorruptcy]

20 minutes ago, Option5 said:

Rail companies can't win now, if the continue with the prices they have they go bust because a lot of people have got out of the habit of commuting so revenues will fall. If they increase the prices enough to make a difference a lot of people won't be able to afford to commute or want to travel for leisure because of the expense.

What about the union involvement? Insisting on extra staff, there's a bloke at my last local station who just walks about on the platform all his shift seemingly doing nothing, except watching when a train comes in. Wage rises using using stuff like the Olympics as leverage. No wonder ticket prices are so high.