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

[ThoughtCriminal]

2 hours ago, MrXxxx said:

Just bear in mind Sweden has its own immigration problems and where do you think they are going to `farm` them out to?......its not all ABBA and pornstars you know! :-)

They're all in Malmo, Gothenburg and Stockholm. 

 

The stabby, rapey "let me molest your kid or you're racist innit" UK is in no position to lecture anyone on immigration. 

[ThoughtCriminal]

4 minutes ago, Hancock said:

Since when has giving money to inflate the property bubble been a political view? Its corruption and aimed at destroying lives of 10s of millions of working families, but its most certainly not a political view.

 

Yeah, I can't get my knickers in a twist over someone wishing death on a corrupt, warmongering race baiting psychopath. 

 

What's weird is making a cult of democracy to the point where, if someone is elected, then anything goes. 

 

This is going to be the most radically left administration in history. I think there's economic black swans coming down the road as we see America start the process of disintegrating and being usurped by China as the premier economic and political power over the next few years. 

[Hardhat]

Relevant

 

[Hancock]

58 minutes ago, ThoughtCriminal said:

Yeah, I can't get my knickers in a twist over someone wishing death on a corrupt, warmongering race baiting psychopath. 

What's weird is making a cult of democracy to the point where, if someone is elected, then anything goes. 

This is going to be the most radically left administration in history. I think there's economic black swans coming down the road as we see America start the process of disintegrating and being usurped by China as the premier economic and political power over the next few years. 

Extreme left wing for us, not for those with vast money and power. But for those in power that have destroyed society in the last 2 decades their demise is the best thing that can happen. (apologies for now raising political views)

[Don Coglione]

14 hours ago, ThoughtCriminal said:

As we're having a bit of a HPC moment tonight I just had to post this as an illustration of how fucked we are when it comes to house prices here. 

 

https://european-property.com/property/4-bed-house-for-sale-in-mellansel--sweden-37761

 

4 bed house in a village in Northern Sweden (FUCKING SWEDEN!), huge gardens, parking for 6 cars, sauna. 

 

95k. And he's open to offers. 😳

 

I'm in North Yorkshire and that would be 400K here all day long. 

 

This fucking country............. 🤦‍♂️

 

Anyway, got that off my chest.

 

Apologies.

 

Thread derailment over. 

 

And yet Stockholm is one of the world's largest property bubbles...

[JMD]

5 hours ago, DurhamBorn said:

Im on about the divi ,£30k of shares pays the interest on a £100k 2.7% mortgage.I dont think the shares will do a lot in capital terms,maybe 50% over the cycle with 8% a year divis.

DB, its great that you have put a figure on it (useful info. i think to help gauge personal risk/reward), but regarding BAT - why do you think it will only do a 50% uplift from here over the next decade/cycle? The last two years their price has been low, but effectively BAT hasn't been as cheap for 10 years. And their free-cash flow (so long as they pay down debt) will make them into great 'cash machines'. Steady/boring, inflation protected/front running, divi paying companies should become very attractive things to own - do they not fit this thread's thesis almost perfectly? ...Tbh, i was looking at BAT and other - divi paying, utility like - companies as becoming kinda like a new asset class in their own right, especially as income from bonds is/continue to be, so unattractive. 

[sancho panza]

21 hours ago, janch said:

This was covered by Shaun Richards today and does seem to be significant.  I'm not sure about the implications and would welcome some thoughts from @DurhamBorn.  Is it a big deal in the scheme of things and has it been factored into the roadmap?

https://notayesmanseconomics.wordpress.com/

He ahsa great piece on UK inflation today.As ever,one of the few economists who has tried to bring light to the area where working people are most abused by the politcal/statistical class.

https://notayesmanseconomics.wordpress.com/2021/01/20/the-uk-has-an-inflation-problem-which-it-is-trying-to-hide/

Comment

There are always issues with inflation measurement as who is the typical household? But you can make a decent fist of it if you try. But sadly back in 2002/03 the UK decided to join the European trend in ignoring owner occupied housing costs. This is a great swerve for civil servants as it means they can claim wealth effects but the reality of higher house prices is inflation especially for first time buyers. There is always a weasel word and the one here is consumption because you see assets are not part of consumption whereas if we switch to the consumer then even the ECB admits up to a third of income is spent on housing.

There are efforts to improve this such as the Household Costs Index but sadly the same trend of it being manipulated is in play. Last week there was an official Zoom seminar on the subject given by Dr.Martin Weale who use to be at the Bank of England. To give you a clue I still remember him trying to explain to me how the UK house price rises should be recorded as negative inflation. That is why the establishment push his views in spite of the mess he made of the average earnings numbers.

 

16 hours ago, Barnsey said:

Thanks Demo and everyone else, fixed mortgage (portable) for 15 years at 2.59% 

Who's that with Barnsey.I've been lsitening to the macrovocies Luke Gromen podcast.May have to consdier selling some stock and l;evering Mrs P's income.15 years really piques my interest.

[sancho panza]

1 hour ago, Cattle Prod said:

Entertaining story here about the Oxy-Anadarko takeover battle, and the subsequent share price decline which some people here like @sancho panza didn't enjoy very much...

https://www.texasmonthly.com/news/how-the-most-hyped-u-s-oil-merger-in-a-decade-went-bust/

I didn't know much about Vicky Hollub before reading this, but one thing the interviewer doesn't explore is that she is an engineer. Petroleum engineers and petroleum geolscientists are very different. They have completely different brain wiring, and are ususally in some form of conflict in work. Both are necessary and neither are wrong, but in a nutshell, engineers tend to think lineraly, black and white, and hate uncertainty or risk. Geoscientists are more creative, vague, and comfortable with the unknown. So engineers bloody love shale, because there is no risk or uncertainty, just how to turn it into an efficient factory. I think her driver, more than anything else, was to dominate the Permian. She is clearly obsessed with it. At high prices, Oxy will print money from the Permian shale play. At low prices, they don't have enough conventional stuff to offset the losses, and if they have abandoned their wildcatting past, the exploration pipeline to keep feeding in. I didn't like the shale concentration after the deal was announced, and exited. Now I can see the CEO was blinded by it. But I'll be watching them post BK when sustained high prices are in the pipes.

Also, executive compensation in the US is astonishing, I can't believe they get away with it.

Illuminating read CP.Really interesting to read about the way she was drawn into the deal and the various wanring flags there were for all to see if they dug deep enough-which I didn't- as well as how the engineers think differently in terms of risk.I also at the time saw Buffet's role as a plus when it was clearly a negative at the price extracted.

We bought as part of a 'spray n pray' of US shale/small oilies,the rest of which got sold ahead of covid for a small profit.Don't know why I kept Oxy-most likely greed-but we've paid the price and didn't average down at $10.Flashbacks to the Scottish play.

The key thing I think with losses is to try and learn from them-what went right,what went wrong.

 

PS have you listend to the Luke Gromen Macrovocies podcast?
 

[Barnsey]

39 minutes ago, sancho panza said:

He ahsa great piece on UK inflation today.As ever,one of the few economists who has tried to bring light to the area where working people are most abused by the politcal/statistical class.

https://notayesmanseconomics.wordpress.com/2021/01/20/the-uk-has-an-inflation-problem-which-it-is-trying-to-hide/

Comment

There are always issues with inflation measurement as who is the typical household? But you can make a decent fist of it if you try. But sadly back in 2002/03 the UK decided to join the European trend in ignoring owner occupied housing costs. This is a great swerve for civil servants as it means they can claim wealth effects but the reality of higher house prices is inflation especially for first time buyers. There is always a weasel word and the one here is consumption because you see assets are not part of consumption whereas if we switch to the consumer then even the ECB admits up to a third of income is spent on housing.

There are efforts to improve this such as the Household Costs Index but sadly the same trend of it being manipulated is in play. Last week there was an official Zoom seminar on the subject given by Dr.Martin Weale who use to be at the Bank of England. To give you a clue I still remember him trying to explain to me how the UK house price rises should be recorded as negative inflation. That is why the establishment push his views in spite of the mess he made of the average earnings numbers.

 

Who's that with Barnsey.I've been lsitening to the macrovocies Luke Gromen podcast.May have to consdier selling some stock and l;evering Mrs P's income.15 years really piques my interest.

Accord via broker, or 2.75% with YBS (same company), 75% LTV.

[geordie_lurch]

11 minutes ago, Barnsey said:

Accord via broker, or 2.75% with YBS (same company), 75% LTV.

I have my eye on the 10 year fixed at Barclays at 1.99% but that's with a max LTV of 60% but that Accord 15 Year fix one (and their 10 year one) is 75% LTV and looks good at 2.59% and 2.36% respectively.

 

[Boon]

@Cattle Prodthat's a great commentary. Nice one.

[geordie_lurch]

7 hours ago, DurhamBorn said:

Im on about the divi ,£30k of shares pays the interest on a £100k 2.7% mortgage.I dont think the shares will do a lot in capital terms,maybe 50% over the cycle with 8% a year divis.

As per the following notes on hl.co.uk, dividends are never guaranteed but they seem like a decent buy and hold to me in keeping with this thread for all the reasons DB has mentioned before

Quote

A lot of that cash is currently tied up in stabilising a balance sheet that's carrying considerably more debt than we would like, but it still leaves a sizeable surplus that can be returned to shareholders through dividends (which have grown every year since 1999 to date) - but are never guaranteed.

 

[Democorruptcy]

Just saying....

<insert name>

[leonardratso]

uncle terry sent out his annual letter if its of interest to anyone, probably not liking the sectors he has but i find he does talk a lot of sense, he may well be in for a shock this decade but hes made me some money and ive duly accepted it and pissed it up the wall spent it wisely;

https://www.fundsmith.co.uk/docs/default-source/analysis---annual-letters/annual-letter-to-shareholders-2020.pdf?sfvrsn=4

 

[geordie_lurch]

10 minutes ago, Democorruptcy said:

Just saying....

<insert name>

Maybe I should buy my first at current prices and join you lot

[Loki]

7 minutes ago, geordie_lurch said:

Maybe I should buy my first at current prices and join you lot

Absolutely, no time to lose. 

[leonardratso]

19 minutes ago, geordie_lurch said:

Maybe I should buy my first at current prices and join you lot

go big (you might move it and we can all get out).

[DurhamBorn]

@Cattle Prod really good stuff .Nice to see the options about hurting bond holders because i have my roadmap set at rates being ran 2% to 3% behind inflation.It could be some of the pain is taken by cutting welfare/state wages etc,but that is yet to be seen.

[Talking Monkey]

13 minutes ago, DurhamBorn said:

@Cattle Prod really good stuff .Nice to see the options about hurting bond holders because i have my roadmap set at rates being ran 2% to 3% behind inflation.It could be some of the pain is taken by cutting welfare/state wages etc,but that is yet to be seen.

Would running welfare/state wages increases behind inflation a way it will be done, stealth cuts. 

[Majorpain]

2 hours ago, leonardratso said:

uncle terry sent out his annual letter if its of interest to anyone, probably not liking the sectors he has but i find he does talk a lot of sense, he may well be in for a shock this decade but hes made me some money and ive duly accepted it and pissed it up the wall spent it wisely;

https://www.fundsmith.co.uk/docs/default-source/analysis---annual-letters/annual-letter-to-shareholders-2020.pdf?sfvrsn=4

Its always interesting to read his thoughts, i would agree that the sectors he invests in are "suspect".  Its all well and good when money keeps getting pumped into the system/consumer, but what happens to the companies protective "moat" when inflation rears it ugly head?  His thought on that was they retain the power to increase prices like oil/miners/resources etc., but its not been tested in practice as its been deflating since 1970.  I'm glad im not betting against him though!  

Quote

I will leave you with this thought: What are the similarities between a forecaster and a one-eyed javelin thrower? Answer: Neither is likely to be very accurate but they are typically good at keeping the attention of the audience.

Not sure on that one.  

[Barnsey]

5 hours ago, geordie_lurch said:

I have my eye on the 10 year fixed at Barclays at 1.99% but that's with a max LTV of 60% but that Accord 15 Year fix one (and their 10 year one) is 75% LTV and looks good at 2.59% and 2.36% respectively.

 

Could we dip into negative rates and see more competition? Of course we could, but my fear is that as soon as there's a whiff of inflation on the horizon, these 15 year deals will be pulled, along with many 10 year products. There's little downward scope for mortgage rates but a lot of upward room, just look at the rates being offered on new high LTV products, some close to 4%.

17 hours ago, RJT1979 said:

Hasn't Telford got grooming problems?

Don't think I'm their type frankly

[Talking Monkey]

1 hour ago, Barnsey said:

Could we dip into negative rates and see more competition? Of course we could, but my fear is that as soon as there's a whiff of inflation on the horizon, these 15 year deals will be pulled, along with many 10 year products. There's little downward scope for mortgage rates but a lot of upward room, just look at the rates being offered on new high LTV products, some close to 4%.

Don't think I'm their type frankly

If we go with Dave Hunters thesis ie near term uptick in inflation followed by BK, then in the BK what are thoughts on the rates on long term fixed mortgages. Would there be some top deals to be had with a hefty deposit

[dnb24]

7 minutes ago, Talking Monkey said:

If we go with Dave Hunters thesis ie near term uptick in inflation followed by BK, then in the BK what are thoughts on the rates on long term fixed mortgages. Would there be some top deals to be had with a hefty deposit

Will be interesting to find out- it’s something I keep thinking about-as we are now looking at buying in Midlands- however one thing I keep coming back to is that all assets will be hit if a BK comes along- I’d rather borrow at a higher % then if the asset I’m buying has had a decent haircut, than borrow now at a lower % but without the haircut. Especially as I aim to pay off the mortgage as soon as possible with some reflation stocks helping out. 

[Bobthebuilder]

1 hour ago, Barnsey said:

Could we dip into negative rates and see more competition? Of course we could, but my fear is that as soon as there's a whiff of inflation on the horizon, these 15 year deals will be pulled, along with many 10 year products. There's little downward scope for mortgage rates but a lot of upward room, just look at the rates being offered on new high LTV products, some close to 4%.

Those 10 and 15 year fixes are relatively new products I think. If they had been available 10 years ago I would have taken your arm off for one. As soon as a whiff like you say, they will be gone.

[wherebee]

1 hour ago, dnb24 said:

Will be interesting to find out- it’s something I keep thinking about-as we are now looking at buying in Midlands- however one thing I keep coming back to is that all assets will be hit if a BK comes along- I’d rather borrow at a higher % then if the asset I’m buying has had a decent haircut, than borrow now at a lower % but without the haircut. Especially as I aim to pay off the mortgage as soon as possible with some reflation stocks helping out. 

I bought a house whilst we were still working overseas (so not so much ability to research, look, etc) precisely because in the 2013-2017 period I expected another GFC.  I didn't want my savings in a bank where they might be bailed in/lost in a collapse.  

 

Something to think about.