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

[AWW]

No CGT on SIPP gains. It gets taxed as income on the way out.

That's not to say there will never be...

[DurhamBorn]

@Vendetta i think GSK fits in nicely with the thesis in my post as well and iv been buying anytime they went under £13.50,of course i worked for them for 10 years and i sold all of my shares in them when they went over £20 when i left the company 20 years ago.

Other companies are timber companies etc,but they have already ran up hard.I also think the new industry of factory farming will be massive and likely some 100 baggers there,but i havent done any research yet.

Gas pipeline companies will also be big winners,Enbridge being the building block for that sector.

I must admit if i was younger id be doing a lot more work in finding companies that fit the bill with the chance of bigger capital gains,however given im already at the level i need to be able to retire i focus my work on meeting inflation minimum first so not everyone on the thread will have the same goals.

 

[geordie_lurch]

Lyn Alden's new newsletter is a good one: The Hindsight Depression

https://www.lynalden.com/january-2021-newsletter/

[DurhamBorn]

9 minutes ago, AWW said:

This is an excellent point DB and not something I had considered. I've just turned 40. I know, young for a London FTB :-)

So you can access the tax free lump sum in 18 years.If you can pay the mortgage down between now and then you wont need to and can retire earlier,if you do need to then you do.I always thought of the 4 things together and how to interact them,mortage,ISA/investments/SIPP/cash ,i also hold physical metals but never count them in my assets or thoughts,as my dad says those are to bribe the guards.

SIPPs are fantastic,but,and its a big but,you cant access until 55,rising to 58.So iv always kept enough in other investments and cash to get me from my present age to 55.So at 30 i was putting more in investments,PEPs until 1999/Isas etc.Once i had enough to cover the years between to 55 i put everything above tax into pension.

So say i was 45 and needed £10k a year then i needed £100k in assets i could get at.The rest could be in a SIPP.I never actually kept it exact,and my ISAs are way way above what id need,they could actually cover my retirement without using my SIPP,but it means flexibility.

People dont talk about it or think about it enough,but the interaction between them is crucial.The other huge thing for a SIPP is inheritance tax,it doesnt count if you die before 75,and for me thats a huge thing because im not married so only have my allowance.

[DurhamBorn]

I think green hydrogen will fail compared to blue hydrogen and carbon capture.That will be one of the shocks of the cycle.It might work in the UK and Holland though due to the amount of wind and maybe in some solar power regions.

Big oil knows this and although covering their bets they are going hard for carbon capture and blue because it means their gas.Its why DRAX was such a good investment and the market knocking it down to £1.50 was a gift.The key to watch if Bp on Teesside and when they build there.

[Loki]

38 minutes ago, DurhamBorn said:

I must admit if i was younger id be doing a lot more work in finding companies that fit the bill with the chance of bigger capital gains

What is your strategy for this?  I know nothing compared to most on this thread but I am making my way through David Dreman's contrarian investor book and he puts big emphasis on not trusting forecasts, analysts, and to be wary of information overload.

[AlfredTheLittle]

1 hour ago, Vendetta said:

@AWW

I think it is very relevant.

I’m a higher tax payer, but I’m still not convinced about a SIPP. I much prefer to use the ISA allowances for long term pension building, (and the CGT £12.5k a year allowance for short term trading).

Maybe I’m wrong but surely with a SIPP you’re paying tax and CGT on any profits you make? (Not the case with an ISA). I am not too sure how a SIPP works - does the government pay in automatically and can you access it before your pension date. I don’t like the idea of money tied up in stocks. I need an accountant.

Had a Finacial Advisor come around (would he explain the above...,,would he fuck.... I told him to go to fuck). 
 

Edit to add: just seen @DurhamBornpost. I need an ‘idiots guide’ I’m not getting my head around a SIPP at all. 

ISA you pay in out of taxed income, all growth is tax free and no tax or restrictions on withdrawals.

Sipp you pay in out of untaxed income, all growth is tax free (and you should have more money to grow as it hasn't yet been taxed) but your money is stuck there until pension age and you pay income tax when you take the money out, less 25% you can take out tax free.

I'm an idiot, so that's your idiot guide 🙂

[Sasquatch]

2 hours ago, AWW said:

That's what I'm wondering V.

I currently have some money sitting in a Ltd Co that I'm not going to be using anymore. I'd also like to buy a house this summer.

Question is, do I pile half the cash into my SIPP using the 3 year rule, making a huge tax saving but reducing the amount left over for a house deposit, or do I take the hit and have cash available for deposit and refurb?

The SIPP is by far the best option in the long term, but the kids are young right now and our current flat doesn't really suit family life.

I've never had a problem delaying gratification, but I feel my hand being forced by circumstances. I really hate paying tax when I see what it gets spent on.

Sorry, not hugely relevant to the thread, just thinking aloud...

Same dilemma here although perhaps slightly different circumstances. I take max divi each year out of our Ltd Co. We have a nice cash surplus though and I'm way behind on employer contributions to my SIPP. I could throw in £80,000 to £100,000 before April and then invest predominantly in inflation stocks. This would reduce this years corporation tax bill to close to zero (which would be rather pleasing come December 2021). I'm 55 next year but have decided to continue working for a few more years, maybe through to about 2026/27. At that point hopefully I could retire*, and then review the state of the SIPP at that point. Would probably carry on with some hobby business though at that point. Like others on here, I'm keen to avoid paying to much tax to The Man!

 

* I do have a suspicion though that the construction marketplace will be very messy by the middle of the decade especially if inflation is running hard. I suspect my services will in high demand by then but equally the workload will be much more stressful. Tricky balancing act...

[Jesus Wept]

Any miners out their good value? 

I wanted to get exposure to some and have been looking at:

Rio Tinto, BHP, Anglo, VALE, Glencore, even EVRAZ (steel) etc.... they are all up 50-100% since I added them to my watch list in April. Dividends for most of these are all now between 3-5% max, most are less. 

I had some Freeport McMoran at about $8.50 gleaned from this thread in April, but sold them at $16 .... they are now $30++ (idiot!).

Maybe look further afield ..... or at some smaller upcoming miners for the leverage? 

What do you guys think? I keep thinking I’ll wait until a pullback but not sure that will happen? FOMO building.

 

[Yadda yadda yadda]

1 hour ago, AlfredTheLittle said:

ISA you pay in out of taxed income, all growth is tax free and no tax or restrictions on withdrawals.

Sipp you pay in out of untaxed income, all growth is tax free (and you should have more money to grow as it hasn't yet been taxed) but your money is stuck there until pension age and you pay income tax when you take the money out, less 25% you can take out tax free.

I'm an idiot, so that's your idiot guide 🙂

SIPPs are a little better than that. 25% is tax free when you take it. As is £12,500 for any period before you take state pension. Or £12,500 minus state pension when you start claiming that. As things currently stand there will be no NI on it either. Plus it is unlikely that any will reach the 40% tax band.

[Jesus Wept]

https://amp.theguardian.com/business/2021/jan/09/is-hysterical-market-speculation-pushing-us-towards-another-crash
 

Hmmm 🤔 ....? Maybe what to do.... what to do..... ? 

[Talking Monkey]

17 minutes ago, Vendetta said:

Any miners out their good value? 

I wanted to get exposure to some and have been looking at:

Rio Tinto, BHP, Anglo, VALE, Glencore, even EVRAZ (steel) etc.... they are all up 50-100% since I added them to my watch list in April. Dividends for most of these are all now between 3-5% max, most are less. 

I had some Freeport McMoran at about $8.50 gleaned from this thread in April, but sold them at $16 .... they are now $30++ (idiot!).

Maybe look further afield ..... or at some smaller upcoming miners for the leverage? 

What do you guys think? I’m keep thinking I’ll wait until a pullback but not sure did that will happen? FOMO building.

 

FOMO is very much building but the end of that must be a pullback to a fair bit lower than where we are today, some of the PE multiples out there are insane, that mispricing must get purged at some point. Personally I'll be adding to PM miners once we have a pullback.

[Democorruptcy]

18 hours ago, harp said:

Is it me? But every time I see this graph over the last couple of months I just think that's a lovely cup and handle. When the handle was just about forming I was thinking how I could play this.

Why have they labelled the bitcoin chart as "Infections"?

[Democorruptcy]

3 hours ago, DurhamBorn said:

So you can access the tax free lump sum in 18 years.If you can pay the mortgage down between now and then you wont need to and can retire earlier,if you do need to then you do.I always thought of the 4 things together and how to interact them,mortage,ISA/investments/SIPP/cash ,i also hold physical metals but never count them in my assets or thoughts,as my dad says those are to bribe the guards.

SIPPs are fantastic,but,and its a big but,you cant access until 55,rising to 58.So iv always kept enough in other investments and cash to get me from my present age to 55.So at 30 i was putting more in investments,PEPs until 1999/Isas etc.Once i had enough to cover the years between to 55 i put everything above tax into pension.

So say i was 45 and needed £10k a year then i needed £100k in assets i could get at.The rest could be in a SIPP.I never actually kept it exact,and my ISAs are way way above what id need,they could actually cover my retirement without using my SIPP,but it means flexibility.

People dont talk about it or think about it enough,but the interaction between them is crucial.The other huge thing for a SIPP is inheritance tax,it doesnt count if you die before 75,and for me thats a huge thing because im not married so only have my allowance.

I did think that 58 would move up but now I'm not so sure. Currently they have decided it is 10 year gap below normal state pension age. I would be very surprised if part of our covid costs didn't include an increase in the pension age, which could increase the 58 with it.

However one way to bring more spending forward from the future would be to leave it at 58 or increase the gap to 15 years, so the 53's would have access to more money. No government of the day are bothered what happens when people are pension skint later on? Though the 53's would then be able to afford to work less hours and so pay less income tax. Not all bad if you want to free up jobs for the young and reduce unemployment numbers? Win win?

Edit: forgot to say they could up pension age to 70 drop pension access back to 55 at the same time?

Re GSK what do you think about the split? Is neither part much better than the other, so it's not worth waiting?

[JMD]

4 hours ago, DurhamBorn said:

@Vendetta i think GSK fits in nicely with the thesis in my post as well and iv been buying anytime they went under £13.50,of course i worked for them for 10 years and i sold all of my shares in them when they went over £20 when i left the company 20 years ago.

Other companies are timber companies etc,but they have already ran up hard.I also think the new industry of factory farming will be massive and likely some 100 baggers there,but i havent done any research yet.

Gas pipeline companies will also be big winners,Enbridge being the building block for that sector.

I must admit if i was younger id be doing a lot more work in finding companies that fit the bill with the chance of bigger capital gains,however given im already at the level i need to be able to retire i focus my work on meeting inflation minimum first so not everyone on the thread will have the same goals.

 

DB, when you mention the 'industry of factory farming' do you mean lab produced artificial meat? Already chicken products are being trialled commercially in Singapore with fish and beef products to follow. I think this will be huge... many vegetarians are already saying they will eat it, plus agriculture produces 15% of world co2, so the 'moral case' is already made!                                                                                                                    Would be interested if anyone is aware of some good companies in this new sector, or perhaps some of the big established companies like Siemens, etc who will no doubt have/will have a division, to get at least some exposure to this emerging market?                                                                                                                                               Btw, talking of Singapore, am more and more convinced that it will become the new Hong Kong. So worth considering if can buy Singapore stocks or perhaps an Singapore etf just to get exposure. Eg. Singapore bank DBS group holdings looks good, Ive put it on my watch list, it does the basics well, but it is also setting up a digital assets division for institutional investors. Not investment advice of course. In fact would welcome others thoughts?

[DurhamBorn]

31 minutes ago, Democorruptcy said:

I did think that 58 would move up but now I'm not so sure. Currently they have decided it is 10 year gap below normal state pension age. I would be very surprised if part of our covid costs didn't include an increase in the pension age, which could increase the 58 with it.

However one way to bring more spending forward from the future would be to leave it at 58 or increase the gap to 15 years, so the 53's would have access to more money. No government of the day are bothered what happens when people are pension skint later on? Though the 53's would then be able to afford to work less hours and so pay less income tax. Not all bad if you want to free up jobs for the young and reduce unemployment numbers? Win win?

Edit: forgot to say they could up pension age to 70 drop pension access back to 55 at the same time?

Re GSK what do you think about the split? Is neither part much better than the other, so it's not worth waiting?

Yes there are lots of moving parts around pensions.I would probably leave at 55,but the worry is they keep pushing back,or make you buy an annuity to get you over pension credit level etc.I dont think they will enact changes with less than 10 years notice though.They are more bothered about tax relief on the way in i think.

Iv been buying GSK at £13.50 or lower.I think the split is good news.The pharma side was superb,but when the Smithkline merger happened accountants took over and they started to destroy the company.For instance they made redundant a few hundred skilled people and opened a plant in South America to save money.That plant then fiddled its quality reports ending in a $700 million FDA fine.They saved £7mill a year moving the work there.In the past when bringing in new drugs the skilled guys would be kept on until the plant was ready,so once in place mistakes werent made.

During that time the pharma side was sloppy in reasearch etc and was leaning on profits from the over the counter/healthcare business.By splitting i think both companies will be able to expand and use capital better.The healthcare side is probably worth double what its valued at inside Glaxo,so id expect 20% up from here just on that.The pharma side might merge with Sanofi.They would be a real powerhouse in a lot of areas together.The problem is Glaxo probably needs to re-rate up 20% to 25% to make a merger doable for their shareholders.

My worry is Glaxo itself will become pray,great as a shareholder,but not great for the UK,unless Zeneca went for it.

[DurhamBorn]

@JMD yes that sort of thing,but also normal food but grown in high level warehouse etc.I have very little knowledge on the companies involved,but in a rising price cycle it could prove a really got sector.

[JMD]

23 minutes ago, DurhamBorn said:

@JMD yes that sort of thing,but also normal food but grown in high level warehouse etc.I have very little knowledge on the companies involved,but in a rising price cycle it could prove a really got sector.

Yes hydroponics, as well as lab produced meat, etc, will be massive I'm sure, and think we are on the actual cusp of this happening. Risky to try and select individual start ups. But maybe some here might be able to mention a few good ones, or perhaps the safer way to play it is to buy the big agri companies that will benefit by buying up the small innovative players, or perhaps already have a division already developing this tech? Could be wrong but this seems like an area that the UK would be good at?

[Talking Monkey]

1 hour ago, Democorruptcy said:

I did think that 58 would move up but now I'm not so sure. Currently they have decided it is 10 year gap below normal state pension age. I would be very surprised if part of our covid costs didn't include an increase in the pension age, which could increase the 58 with it.

However one way to bring more spending forward from the future would be to leave it at 58 or increase the gap to 15 years, so the 53's would have access to more money. No government of the day are bothered what happens when people are pension skint later on? Though the 53's would then be able to afford to work less hours and so pay less income tax. Not all bad if you want to free up jobs for the young and reduce unemployment numbers? Win win?

Edit: forgot to say they could up pension age to 70 drop pension access back to 55 at the same time?

Re GSK what do you think about the split? Is neither part much better than the other, so it's not worth waiting?

I've always found the bumping to 57 58 strange, they could increase consumption if they let us loose earlier on our SIPPs as you've mentioned. I wonder if they'll ever bring it forward

[Loki]

Pack it up and go home boys.  Crash cancelled.

(Dave H just made it onto Zerohedge via Peak Prosperity)

Now we just need durhamborn to tell us to "Trust the Plan" 

[DurhamBorn]

1 hour ago, Talking Monkey said:

I've always found the bumping to 57 58 strange, they could increase consumption if they let us loose earlier on our SIPPs as you've mentioned. I wonder if they'll ever bring it forward

Its to keep people working.The UK has a massive amount of people who wont work and they need paying for.People who at 55 have enough to retire have probably worked hard for decades,so the government wants them to work hard for longer.

Another problem they have is people getting a big inheritance in their mid 50s as then can often retire.Lots of the reason house prices have suited governments is because the higher the debts,the less likely someone can retire.Our whole system is set up so the middle 40% pay for all the scroungers below them so it can all go through them all and end up with the 1%.

Pension freedoms are a fantastic thing yet very few people understand them.Maybe its good for us that they dont.

[Bobthebuilder]

2 hours ago, JMD said:

Yes hydroponics, as well as lab produced meat, etc, will be massive I'm sure, and think we are on the actual cusp of this happening. Risky to try and select individual start ups. But maybe some here might be able to mention a few good ones, or perhaps the safer way to play it is to buy the big agri companies that will benefit by buying up the small innovative players, or perhaps already have a division already developing this tech? Could be wrong but this seems like an area that the UK would be good at?

About 2 years ago on this thread I mentioned Thanet Earth. Big supermarkets behind them apparently but look a very interesting set up.

[Democorruptcy]

7 minutes ago, DurhamBorn said:

Its to keep people working.The UK has a massive amount of people who wont work and they need paying for.People who at 55 have enough to retire have probably worked hard for decades,so the government wants them to work hard for longer.

Another problem they have is people getting a big inheritance in their mid 50s as then can often retire.Lots of the reason house prices have suited governments is because the higher the debts,the less likely someone can retire.Our whole system is set up so the middle 40% pay for all the scroungers below them so it can all go through them all and end up with the 1%.

Pension freedoms are a fantastic thing yet very few people understand them.Maybe its good for us that they dont.

I don't think you have joined the dots!

If people 55 can access pensions and then afford to stop working it creates movements up the jobs ladder. They get off the top rung, several others are freed including the bottom rung to create a job for someone who might be unemployed and claiming benefits. I once argued a similar point with David Blanchflower that low rates kept older people working longer and blocked the jobs ladder because they didn't get off.

Also if people get access to spend their pensions early, it reduces the chance of them leaving a large inheritance. After the pension is gone it will be equity release next!

[DurhamBorn]

2 minutes ago, Democorruptcy said:

I don't think you have joined the dots!

If people 55 can access pensions and then afford to stop working it creates movements up the jobs ladder. They get off the top rung, several others are freed including the bottom rung to create a job for someone who might be unemployed and claiming benefits. I once argued a similar point with David Blanchflower that low rates kept older people working longer and blocked the jobs ladder because they didn't get off.

Also if people get access to spend their pensions early, it reduces the chance of them leaving a large inheritance. After the pension is gone it will be equity release next!

The problem is the UK has around 30% of the population who dont want to work and wont.Its like Aldi having Polish girls on the till near me who came 1000 miles to work there while a few hundred single mothers live in under a mile from the shop but dont want a job.Most jobs arent careers they are just jobs.Id agree it should work,but they need to cut benefits hard first.55 seems like a good age to allow access,moving the age to 58 sends out the message that they cant be trusted and might keep increasing.

[Democorruptcy]

6 minutes ago, DurhamBorn said:

The problem is the UK has around 30% of the population who dont want to work and wont.Its like Aldi having Polish girls on the till near me who came 1000 miles to work there while a few hundred single mothers live in under a mile from the shop but dont want a job.Most jobs arent careers they are just jobs.Id agree it should work,but they need to cut benefits hard first.55 seems like a good age to allow access,moving the age to 58 sends out the message that they cant be trusted and might keep increasing.

I agree there is a part of the population who don't want to work and just rely on the state, in many ways I don't blame them. When the system works against you why bother working for it. However now they have trashed the economy to save a few coffin dodgers and to stop the NHS being exposed as an investor's cash cow (PFI payments weren't cut to 80% furlough!), there's going to be more grafters looking for jobs. Seems like a good time to retire some earlier to me.