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

[Chewing Grass 15,551]

7 minutes ago, janch said:

US manufacturing in recession as predicted:

https://www.zerohedge.com/economics/november-heavy-duty-truck-orders-resume-collapse-down-39-weakest-2015

Waiting for Germany to officially follow suit.

[reformed nice guy 549]

16 hours ago, DurhamBorn said:

My no1 priority isnt money.Its freedom.Freedom to do as i choose,when i choose,with who i choose.Freedom to protect my family,provide for them all,shield them as much as possible.I will never ever complain that i wish id done this,wish id done that.

I agree with you there DB. Inspired by this thread and with some long term planning, I have been preparing to wind down well before official retirement age. 

One of the things that has helped me out immensely, that you have hinted at, is that for the past 18 months or so I have been keeping a detailed note of my spending. This has allowed me to plan more accurately rather than relying on googling "how much is average monthly spend retirement uk 2019"

I have also messed around with spreadsheets doing basic drawdown scenarios such as high inflation + low returns, years of equity losses + div cuts etc. That way I have an idea of the worst case scenario.

 

6 hours ago, Gin said:

It is a balanced attitude to living that maybe we should look for. I was just looking at return flights to OZ and if you don`t mind a 30 hour journey then the cost is £520...not bad at all. So scrimping can come in the form of good choices when spending to. Thailand for £300 return, brilliant. Life is for living.

With clever financial planning then these flights become even better value. A few years ago I got cheap flights to Oz and spent 7 weeks there. I prefer to do a big, long trip like that every few years rather than a week here and there. Time spent in an airport is hell to me.

[spygirl 24,725]

8 hours ago, janch said:

US manufacturing in recession as predicted:

https://www.zerohedge.com/economics/november-heavy-duty-truck-orders-resume-collapse-down-39-weakest-2015

Thats  Boing spillover.

Non boing related companies are doing great.

 

[DurhamBorn 7,370]

10 hours ago, Talking Monkey said:

Its mad that folks just don't put anything into pensions, I know plenty of people in their 40s who have virtually nothing in their pensions despite a decent pay packet and expect to make it all up in the next 20 years. Its that assumption they will continue earning their current salary till 65 without a thought to potential downside scenarios

On the roadmaps DB in what you describe above do you map out several scenarios (Best, mid, worst) case scenarios on a piece of paper or in Excel, is that how one goes about doing it, inputting the variables. I'm trying to conceptualise how an individual builds their roadmap as I guess some of the input variables are specific to the individual based on their personal circumstances

I tend to do it on paper.I keep things rough.I know how much i need going forward.At the minute i need £850 a month to live as i want,so i base things on that as the minimum.I can make that in dividends easily.I then have SIPPs that i can go into draw down in 6.5 years.Roughly that would take me up to £1600 a month together.I then have full state pension at 67 or 68 so up to £2300 a month.That last level (and the middle one as well) are way more than i need.However i run my road maps on that i spend all income and base the figures on how much i undershoot,hit,or overshoot inflation.It also means that is i want i can increase spending now by running down ISAs slightly (say i wanted to increase income to £1000 a month) and still see a rising income at 55 and 67/68.My worst road map to run out of money at 75 needs really big falls in capital value,or a huge increase in spending.

Im very good on the frugal living side as i love cooking etc and iv got my house now very efficient and nice.One thing im going to do more of though is learn extra DIY skills.Im pretty good anyway,but would like to do bigger jobs myself.

[DurhamBorn 7,370]

17 minutes ago, spygirl said:

Thats  Boing spillover.

Non boing related companies are doing great.

 

They arent,they are in recession Spy.All my lead indicators are saying so.They pick up things well ahead.Industrial will be heading south very very soon.It would need massive printing and a quickly falling dollar to turn things.

[NogintheNog 157]

It's interesting that DB has talked about governments injecting money directly into the veins of the economy once deflation takes hold and that then creating the inflation part of the cycle after deflation. Of course we could go straight to inflation if either of the Conservatives/Labour actually spend like they say they are going to

One of the trusts I have inside my ISA is the Personal Assets Trust (LON: PNL) which is a very defensive fund run by Sebastian Lyon. Interestingly in this interview from 2015 he was asked by Moneyweek how he saw deflation turning to inflation. Have a listen from about 20:35mins....

https://youtu.be/sG4svAppYzw?t=1233

[DurhamBorn 7,370]

2 hours ago, NogintheNog said:

It's interesting that DB has talked about governments injecting money directly into the veins of the economy once deflation takes hold and that then creating the inflation part of the cycle after deflation. Of course we could go straight to inflation if either of the Conservatives/Labour actually spend like they say they are going to

One of the trusts I have inside my ISA is the Personal Assets Trust (LON: PNL) which is a very defensive fund run by Sebastian Lyon. Interestingly in this interview from 2015 he was asked by Moneyweek how he saw deflation turning to inflation. Have a listen from about 20:35mins....

https://youtu.be/sG4svAppYzw?t=1233

Iv never seen that so very interesting.Im pretty convinced this will be the route as are my friend and others he worked with at Fidelity.The bond markets simply arent prepared for it,nor are the stockmarkets.People simply havent lived through a reflation/inflation cycle who are now in charge of investing money.Its a doubled edge sword though for companies im interested in as they tend to have big debts as well so their interest costs will rise.However i expect the increase to free cash flow should be around 4x bigger than the increase in interest payments (even though they will double and more).The key is they should be able to pay off more principal as it comes due and roll less over.In the west the printing mostly went into welfare spending and most of that went into services and imports from Chinese factories.The money flowing through the financial system went into bonds and some shares and of course housing in the UK.

We are still in the deflation,the liquidity isnt growing as fast as the debt destruction and im expecting demand drag to pull down lots of areas soon.Im going to be spending a lot of time after xmas on tracking these measures and try to provide a decent road map on things.Most cycles now would be the time to buy oil if its late cycle,the problem is i think those models maybe wrong and we are in fact past late cycle entering end cycle.Iv ladders in place in most areas i want,but the energy sector needs more work,as does the insurance sector.That wont be bought until well into any big market move though,as some will likely go under.

[JMD 487]

On 05/12/2019 at 23:04, Sideysid said:

It’s entirely expected I’m afraid. The key thing about this thread which makes it what it is (after surviving from HPC) is that people from all manner of fields and walks of life, have done their own research and draw similar conclusions to where it’s all heading.

You tell the truth of it all to you’re average co-worker without sounding like a nut job... You can’t blame them either, as they’ve been bombarded from all angles by friends/families and the MSM. You talk about contrarian investing and a diversified portfolio and they’ll glaze over. 

 If there’s one true saying in life, it’s that you can lead a horse to water but you can’t make it drink. By all means give people the breadcrumbs and let them find out for themselves and be grateful. Better than preaching to them and being an overbearing ball ache (as some people can be) as people automatically shut off.

I agree Sideysid, its entirely expected that good advise usually goes unheeded. Regarding your quotation - personally I prefer the Ayn Rand one (she herself was characterised as being a rabid right-winger; I don't consider myself as right-wing, but as current events come increasingly into focus I think she makes more and more sense), she was both vilified and ridiculed starting in the 1980's (when liberal globalism really took off, so I expect no coincidence in timing), anyway she says -

'You can ignore reality, but you cant ignore the effects of reality'.

I feel it chimes very neatly with the sort of socio-political madness that's been inflicted on the West by our political 'leadership', the social and economic effects of which are slowly beginning to bite the majority of low paid workers. Who would have thought that policies such as uncontrolled-unskilled-mass immigration would backfire?!

To be clear I don't at all relish what I think's ahead, but if the economic consequences play out as most here, including myself think they will, then the type of government required to implement the radical policy solutions (post 2028) will not be acceptable ('morally'?) to large sections of the population. Tragically, I don't think the 48/52 divide is going away any time soon.        

 

Edited December 8, 2019 by JMD

[Democorruptcy 5,217]

On 07/12/2019 at 11:31, Talking Monkey said:

Its mad that folks just don't put anything into pensions, I know plenty of people in their 40s who have virtually nothing in their pensions despite a decent pay packet and expect to make it all up in the next 20 years. Its that assumption they will continue earning their current salary till 65 without a thought to potential downside scenarios

Is it really that mad... ? 

The FTSE top figure has gone nowhere for decades, while governbankment policy has pushed house prices up and increased the pension age. If they leveraged up on property, might their money have done better than in pensions?

If people are high earners with a decent employer contribution then pensions make sense. Otherwise is it worth locking money up for god's know how long, in a vehicle whose annual increment could be below the inflation rate, instead of putting it in self managed and easier accessible ISA?

[Harley 6,983]

On 06/12/2019 at 23:33, DurhamBorn said:

One of the big reasons im not getting another job after xmas is so i can spend lots of time with my 80 year old dad.

I would give a lot now just to have 5 more minutes with my parents.

On 06/12/2019 at 23:33, DurhamBorn said:

I would get zero pleasure from a new car.

I get more pleasure from maximising the return on my current cheap car.

Edited December 8, 2019 by Harley

[Harley 6,983]

On 07/12/2019 at 09:22, DurhamBorn said:

As you say,money is a tool and should be seen as such,a tool to achieve or enjoy units of time as you see fit.

100%.  My stress is I have not fully deployed my capital/used it as a tool.  Plus I'm further stressing about losing it as I know better how to mitigate the risks.  Trouble is I may have rushed ahead in the other enjoyable areas and not fully completed the supporting financial side first.  To me the clock is ticking and the sooner I complete my deployment and other plans for (semi) retirement the better.  Yes, I am being hard on myself but hopefully I can channel most of that energy into getting things done.  Plus maybe taking a bit of time has not been all bad as things do change. 

[Harley 6,983]

On 07/12/2019 at 16:11, reformed nice guy said:

One of the things that has helped me out immensely, that you have hinted at, is that for the past 18 months or so I have been keeping a detailed note of my spending. This has allowed me to plan more accurately rather than relying on googling "how much is average monthly spend retirement uk 2019"

Top job.  I did the same at the outset of my journey.  It's not just about getting better data but also about immersing yourself in the data so you can understand it, making changes and plans as necessary.  That is, appreciate the data rather than just understand it.  This has to be the place to start and build from.  Furthermore, you get to know your required rate of return so you can then choose a commensurate level of risk for your investments - neither too high nor too low - something these generic "rules of thumb" can never really do that well.    

[Harley 6,983]

22 hours ago, DurhamBorn said:

One thing im going to do more of though is learn extra DIY skills.Im pretty good anyway,but would like to do bigger jobs myself.

Thoroughly recommended.  I was coasting in a career, learning nothing new, and limited in what I could do to remediate due to the demands of work.  So living a bit of a soulless life.  I have learnt so much since changing direction.  Actually quite impressive and something to feel good about.  Real skills and knowledge covering a broad array of topics but all with the self sufficient/reliant theme.  It keeps you physically active and your mind actively learning.  You'll probably do a better job too!  Then people will ask for you to do similar so if you want.......

PS:  Hot tip, get the white van early on!

Edited December 8, 2019 by Harley

[Harley 6,983]

7 hours ago, NogintheNog said:

......One of the trusts I have inside my ISA is the Personal Assets Trust (LON: PNL) which is a very defensive fund run by Sebastian Lyon. Interestingly in this interview from 2015 he was asked by Moneyweek how he saw deflation turning to inflation. Have a listen from about 20:35mins....

Thanks for the link.  I often come back to this fund and may bite one day.  Not 100% convinced it's been that an effective hedge but I need to look closer, and see if the world around it has changed to give it its day!

PS:  Just listened.  Can't argue.  And he was saying this in 2015!

Edited December 8, 2019 by Harley

[Harley 6,983]

4 hours ago, DurhamBorn said:

We are still in the deflation,the liquidity isnt growing as fast as the debt destruction and im expecting demand drag to pull down lots of areas soon.

I sign up to the demand drag but what kind of things are you thinking of when you say (the current?) "debt destruction"?

[Bobthebuilder 1,008]

2 hours ago, Harley said:

PS:  Hot tip, get the white van early on!

Hotter tip, if you are in your 20/30s then buy the white van, claim it off tax bill, fit as many boilers as you can.

If you are in your 50s dont bother, repair as many boilers as you can (low cost of materials), dont buy a van, pay as much tax as you can and stick it in a SIPP.

Sell a service not a product.

Sell a service people need, not what people want.

Blah, blah, blah you get my point.

Maybe thats what you said.

Edited December 8, 2019 by Bobthebuilder

[Harley 6,983]

8 hours ago, Bobthebuilder said:

Hotter tip, if you are in your 20/30s then buy the white van, claim it off tax bill, fit as many boilers as you can.

If you are in your 50s dont bother, repair as many boilers as you can (low cost of materials), dont buy a van, pay as much tax as you can and stick it in a SIPP.

Sell a service not a product.

Sell a service people need, not what people want.

Blah, blah, blah you get my point.

Maybe thats what you said.

Just I effed around too long scheduling deliveries or trashing my car.  Plus I would now like to do a van conversion to leisure or mobile tech repair business.  Plus I now identify as a proud real worker of a white van man!

Yep, noticed most of the fitters are young and the older ones can't or don't need to be arsed.  Happy to sell my time as a necessary service with no attempt to employ more to a skim a take.

Busy week ahead!

PS:  Think DB already has a van but may not be up to taking a few sheets of plasterboard, if he must!

Edited December 9, 2019 by Harley

[CVG 267]

14 hours ago, Democorruptcy said:

Is it really that mad... ? 

The FTSE top figure has gone nowhere for decades, while governbankment policy has pushed house prices up and increased the pension age. If they leveraged up on property, might their money have done better than in pensions?

If people are high earners with a decent employer contribution then pensions make sense. Otherwise is it worth locking money up for god's know how long, in a vehicle whose annual increment could be below the inflation rate, instead of putting it in self managed and easier accessible ISA?

I FIRE'd due to going heavy on my pension between 30 and 50.

You need to ignore the top figure as most gains are made from the reinvested dividends which don't figure in that. And I'd recommend investing beyond just the UK FTSE.

Of course the other benefit is the tax relief going in which means that you can sustain a minimum 20% drop in FTSE (based on a single investment) without going below the net invested.  And if you are really fortunate to earn more than the 40% tax band then dump most in your pension to avoid paying it.

You're not mad if you don't do it, but there's more to it than meets the eye.

[Democorruptcy 5,217]

56 minutes ago, CVG said:

I FIRE'd due to going heavy on my pension between 30 and 50.

You need to ignore the top figure as most gains are made from the reinvested dividends which don't figure in that. And I'd recommend investing beyond just the UK FTSE.

Of course the other benefit is the tax relief going in which means that you can sustain a minimum 20% drop in FTSE (based on a single investment) without going below the net invested.  And if you are really fortunate to earn more than the 40% tax band then dump most in your pension to avoid paying it.

You're not mad if you don't do it, but there's more to it than meets the eye.

I know about re-invested dividends thanks, I was merely suggesting why other people might have turned away from financials to leverage up on housing. Obviously with hindsight you can swerve shares that have faltered, like dividends from "safe" areas such as banking pre-2007 and all the other firms that have gone bust, but it adds to their "nothing is as safe as houses" mindset. 

I also know tax relief on money going in thanks but again there's a lot of whining in the press about the "unfair tax" on pension income. 

The governbankment have made housing more attractive than pensions to a lot of people, so they haven't been mad, they have followed the money. I wasn't suggesting people should avoid pensions and invest in housing but I can see why they might have done it. A lot of people must have made a lot more money from property that what they would have done in a pension. The governbankment have now started pension auto-enrolment to try force more money back into pensions and let people access them earlier to try make them more attractive. Maybe in the future things might change and dinner party conversation might switch how big is my pension pot instead of how much is my house is worth?

 

[Democorruptcy 5,217]

An oily not doing well today, Tullow currently down 58%! 

[NogintheNog 157]

14 hours ago, Harley said:

21 hours ago, NogintheNog said:

......One of the trusts I have inside my ISA is the Personal Assets Trust (LON: PNL) which is a very defensive fund run by Sebastian Lyon. Interestingly in this interview from 2015 he was asked by Moneyweek how he saw deflation turning to inflation. Have a listen from about 20:35mins....

Thanks for the link.  I often come back to this fund and may bite one day.  Not 100% convinced it's been that an effective hedge but I need to look closer, and see if the world around it has changed to give it its day!

PS:  Just listened.  Can't argue.  And he was saying this in 2015!

I think in a deflation like most other trusts it's gonna take a hit, but this trust has some serious cash firepower having sold 'over priced' stocks over the last 5 years. In 2009 it dropped less than other trusts and recovered even stronger. The current asset allocation is here;

https://www.patplc.co.uk/portfolio-data/PDF

20% cash & UK T-Bills, 30% US TIPS, 9% Gold Bullion!

Edited December 9, 2019 by NogintheNog

[JMD 487]

14 hours ago, Harley said:

I get more pleasure from maximising the return on my current cheap car.

Same here Harley. My car failed its mot last week due to cracked windscreen and it can't be repaired due to the crack being too large - so a new windscreen is required - ouch!! If the crack could've been repaired AutoGlass were quoting nearly £200 for the job. Now I know AutoGlass are not the cheapest - but guess what - I found a local company (Smile Windscreens) to provide and fit a new windscreen for £222. Smile only do Kent btw, but i'm sure other operators provide similar service elsewhere in UK.

Anyway thought it interesting as its another example of the biggest NOT being the best. Also my local garage wouldn't recommend anyone local or cheap despite them having done this for me in the past, instead they stuck to pushing for AutoGlass. Their staff have changed over the years but I think its just another indication of how businesses (even my local grease monkeys! - no offence intended!) go for pallid/safe/low risk advice, ahead of genuine customer service.

 

[JMD 487]

5 minutes ago, Tdog said:

Most insurance companies insure windscreens these days, dont yours?

About 4 years ago i took my car to Kwikfit for one of their free break tests, was told i needed to spend hundreds on getting the breaks fixed ... took it to a local garage where i was told they were fine.. They ended up fixing them 3 years after Kwikfits scam for about £150.

I'd avoid any multinational garage as i presume they're all up to their necks in debt or im funding a few multi million pound salaries.

Tdog, I should have mentioned I still use TPFT insurance for my car (old car/low mileage these days), my broker says not many of these type of policies around these days and are being phased out and soon everything will be fully-comp. Anyway so no automatic cover for windscreen, but then again have saved over the years, plus (minus?) the excess would have absorbed most of the payout I might have got.

I should have made clear I was talking about my local small garage. I agree with you about KwikFit et al, I instead use an independent outlet tyre-fitter.

[JMD 487]

14 hours ago, Harley said:

Top job.  I did the same at the outset of my journey.  It's not just about getting better data but also about immersing yourself in the data so you can understand it, making changes and plans as necessary.  That is, appreciate the data rather than just understand it.  This has to be the place to start and build from.  Furthermore, you get to know your required rate of return so you can then choose a commensurate level of risk for your investments - neither too high nor too low - something these generic "rules of thumb" can never really do that well.    

Harley, notice you now use Gin Lane as your profile pic. - hope your not immersing yourself too literally in that there data you mention!! (...interesting how moralities change over time, were you aware that there is also a 'Beer Street' that sought to depict the opposite moral stance?)

[janch 387]

20 hours ago, DurhamBorn said:

.......... the energy sector needs more work,as does the insurance sector.That wont be bought until well into any big market move though,as some will likely go under.

I'm beginning to think the insurance sector might never be a good place to invest in future because the likely claims may rocket because of all the weather events which seem to be increasing rapidly ie flooding etc.  Do you take this into account when constructing a road map or do you think it won't be a significant factor?