Credit deflation and the reflation cycle to come (part 3)

[Yadda yadda yadda]

iShares TUR available in the USA has 52 holdings. I can't get all the details on the same screen on my phone so this is just for the percentages and you can also see that there are six pages to scroll through.

[DurhamBorn]

1 hour ago, Frog said:

Could the contrarian view be that BTL will do very well over the next decade?

 

If we think about some of the current headwinds:

 

l Rising IRs

 

l Increasing tenant rights

 

l Increasing regulation

 

l Target for increasing taxes

 

l Rising cost of tradesmen

 

l Rising cost of materials

 

On the face of it, all of these things are very bad for LLs and this is what the media and many are focusing on.

 

However there are plenty of possible tailwinds:

 

l    Increasing rents

 

l Negative real rates

 

l Capital values increasing (inflation hedge)

 

l Population growth (more than a million foreign nationals let in last year)

 

l Falling rental supply as amateur LL exit

 

l Lack of new LL entering the market

 

l Insufficient new build

 

l Institutional LLs only make up a tiny percentage of overall stock

 

So maybe BTL can work very well for someone who is not overleveraged, owns modern property and is handy?

 

I’m beginning to think BTL could thrive in the same way the tobacco companies did.  Everyone thought regulation and taxation would kill them and sold out, when in reality they became great investments.

 

 

 

Tobacco formed into 4 or 5 big companies with zero other competition,BTL has insurers and pension schemes with hundreds of billions of £ that will come into the market.BTL will work for big landlords etc,for small ones with 3 properties with 60%+ leverage they will be a disaster.Rent up 10% doesnt make up for rates up 200%.Time will tell.

27 minutes ago, desertorchid said:

Unless i am missing something the turkish stock market is up 250% in the last year ( primarily the affect of inflation) but this fund has managed to lose  10%. Doesnt instill enormous confidence. Surely you are merely punting on future value of the lira when buying into this stock

Yes a big part of it.

[DoINeedOne]

4 hours ago, Foor said:

https://english.alarabiya.net/News/world/2022/06/26/Four-G7-powers-impose-ban-on-Russian-gold-exports

Is it me or are all these sanctions aimed more at or to do with the bankcrupt West trying to maintain confidence in there toilet roll currencys? 

Four G7 powers will ban Russian gold exports in a new bid to stop oligarchs from buying the precious metal to avoid the impact of sanctions against Moscow, Britain said Sunday.

The joint action taken by Britain, Canada, Japan and the United States, “will directly hit Russian oligarchs and strike at the heart of (President Vladimir) Putin’s war machine,” said British Prime Minister 

Oh look government making everything 10x worse again 

Do they really think that it won’t just flow mostly east 

[Animal Spirits]

HTRY:LSE:GBX $11.6 million

HSBC GLOBAL INVESTMENT FUNDS - TURKEY EQUITY BDGBP - EUR 46 million

ITKY:LSE:GBX $123.7 million

Holding the HSBC GIF fund meant investors incurred a comparatively less severe drawdown over the last 10 years, HL waives the initial charge on this one as well.

Distributions on this fund are reported as only 0.76% annually whereas the HSBC MSCI is 4.1% and the IShares 3.67% semi-annually.

It's also a bit more expensive 1.28% vs 0.5% HSBC MSCI and 0.74% Ishares MSCI.

It would be interesting to get some commentary from the HSBC fund manager/team on what decisions they've been making to comparatively out peform the MSCI, weighting/holding sizes/reinvesting vs larger distributions etc.

[Funn3r]

17 hours ago, Yadda yadda yadda said:

You don't use your own postcode for anything online do you? Best to use the postcode of someone you don't much like.

Edit: not you but @Funn3r

I think I've talked on here enough about the tribulations of living in Bracknell so I am already doxed to that extent. Anyone who worries about this sort of thing needs to be more concerned about sending of camera-phone pictures to people, as these are quite likely to have your GPS exact coordinates. 

[Castlevania]

4 hours ago, DurhamBorn said:

Two things to now consider as certain now is BTL is mostly finished and will burn large percentages of those involved who dont get out.Bag holders.Some will get out with big profits,some with small profits,but anyone using leverage,even say 50% is going to be running at a loss at some point.

The second thing is the West splitting from the Emerging Markets.We predicted both on here,but now we can start to cross market those affects.

One of the reasons i like the wealth managers is the death of BTL.Lots of capital will go their way,once market falls are over.The population at large doesnt understand pensions,share ISAs etc,but that will now grow as BTL fades away to big institutions and the few pro landlords (even many of them will cash in)

The splitting provides us with huge chances to grow capital.First we need to understand why its happening,and thats so western governments can default on their debts through inflation.The savings of China,decades of working hard in factories stolen by western governments.The thing here is though is that will be a one time event.They wont be bitten again.So where will their savings go?

I think gold and Asian stocks markets will see much more demand and Russia will fill their energy needs.Eastern companies have just gained a huge advantage so their shares are likely too cheap.

The west we need to work more on.The first take is consumption will fall,but not all,some will increase.There is a chance this isnt an 8 year reflation,but a 4/5 year reflation followed by a 25 year steady inflation (3%-4%).I think that is now more likely,i cant macro that yet,but im seeing signals.

Easy first step for anyone not already is ladder into Henderson Asian Income and Blackrock Latin America.I hold them both.Im going to try to find a way to play Turkey outside of just Turkcell.In history Turkey (the area) has been a huge winner as the bridge between different blocks,likely it will be again.

Il make a contrarian call based on this roadmap scenario.Turkey is the best investment in the world right now with multi bag potential.

How do we play it?

 

As an aside, I was in Çanakkale the other day. Visited both the Gallipoli peninsula and the ruins of Troy. The history of both revolves around the Dardanelles and who has access to the straight and in turn access to the Black Sea. Turkey definitely has some leverage despite various treaties removing a large amount of their ability to control ships which enter.

[MMax]

On 24/06/2022 at 13:34, HousePriceMania said:

Does anyone sell anything on ebay here ?

I've been trying to shift a fridge, cant see to give it away.

Deflation in 2nd hand prices anyone ?

 

It may be apocryphal, but read of someone trying to get rid of a broken fridge. They left it outside with a sign saying FOR SALE enquire within.  Someone pinched it!

May still work!

 

[JMD]

4 hours ago, Frog said:

Could the contrarian view be that BTL will do very well over the next decade?

 

If we think about some of the current headwinds:

 

l Rising IRs

 

l Increasing tenant rights

 

l Increasing regulation

 

l Target for increasing taxes

 

l Rising cost of tradesmen

 

l Rising cost of materials

 

On the face of it, all of these things are very bad for LLs and this is what the media and many are focusing on.

 

However there are plenty of possible tailwinds:

 

l    Increasing rents

 

l Negative real rates

 

l Capital values increasing (inflation hedge)

 

l Population growth (more than a million foreign nationals let in last year)

 

l Falling rental supply as amateur LL exit

 

l Lack of new LL entering the market

 

l Insufficient new build

 

l Institutional LLs only make up a tiny percentage of overall stock

 

So maybe BTL can work very well for someone who is not overleveraged, owns modern property and is handy?

 

I’m beginning to think BTL could thrive in the same way the tobacco companies did.  Everyone thought regulation and taxation would kill them and sold out, when in reality they became great investments.

 

 

 

I get what your saying. But for me, even if putting aside - for sake of argument the method of financing, leveraging - vanilla BTL returns are simply too low. Especially with the extra demands of management and tennents. However I do think niche areas such as HMOs, maybe for single mothers, vulnerable groups, etc, could make sense if they produced 15%+ return, but the risk of future regulations/cost of environmental upgrades would still put me off.

[Errol]

Stupid German.

[M S E Refugee]

EU steps back into coal age – media https://www.rt.com/business/557554-europe-coal-energy-crisis/

[DurhamBorn]

55 minutes ago, JMD said:

I get what your saying. But for me, even if putting aside - for sake of argument the method of financing, leveraging - vanilla BTL returns are simply too low. Especially with the extra demands of management and tennents. However I do think niche areas such as HMOs, maybe for single mothers, vulnerable groups, etc, could make sense if they produced 15%+ return, but the risk of future regulations/cost of environmental upgrades would still put me off.

Government has shown as well they dont want 1 to 5 houses BTL.They are doing everything they can to make it a nightmare.Of course many BTL terraces etc are owned outright,or very small mortgages,but even then ,say £5k gross profits pa soon becomes not worth it with £10k to £15k upgrades,voids etc.10 years 50k rent,even with no voids,just those upgrades,no other repairs its £3.5k a year before tax.£80k house for £3k after tax pa max.You can get more than that in Equity income funds and do nothing,just collect the divs.What might be the straw is when prices start to fall,but rates increasing,so owners losing their profits,but new BTL buyers not making any extra due to higher rates.Looks like a terrible investment from here.

There is also the fact although they are putting bennies up,are they putting LHA up the same?.Single/couples rates are low anyway,its only when kids are under 18 it covers rent.Plus no mention of the benefit cap being uprated.Its £20k a year if not working,so if they dont increase it,for many the 10% bennie increase wont happen as they are or will be capped.

[Ma2]

Turkey’s investments in Algeria reach $5B
https://www.dailysabah.com/business/economy/turkeys-investments-in-algeria-reach-5b

Turkey strengthening ties to Algeria, which is energy rich…

‘Algeria has the highest Human Development Index of all non-island African countries and one of the largest economies on the continent, based largely on energy exports. Algeria has the world's sixteenth-largest oil reserves and the ninth-largest reserves of natural gas. Sonatrach, the national oil company, is the largest company in Africa, supplying large amounts of natural gas to Europe. Algeria's military is one of the largest in Africa, and has the largest defence budget on the continent’

[Yadda yadda yadda]

2 hours ago, Funn3r said:

I think I've talked on here enough about the tribulations of living in Bracknell so I am already doxed to that extent. Anyone who worries about this sort of thing needs to be more concerned about sending of camera-phone pictures to people, as these are quite likely to have your GPS exact coordinates. 

You can turn location data off. Although I've no idea if that is effective. If someone knows what they're doing they can find you.

 

42 minutes ago, DurhamBorn said:

Government has shown as well they dont want 1 to 5 houses BTL.They are doing everything they can to make it a nightmare.Of course many BTL terraces etc are owned outright,or very small mortgages,but even then ,say £5k gross profits pa soon becomes not worth it with £10k to £15k upgrades,voids etc.10 years 50k rent,even with no voids,just those upgrades,no other repairs its £3.5k a year before tax.£80k house for £3k after tax pa max.You can get more than that in Equity income funds and do nothing,just collect the divs.What might be the straw is when prices start to fall,but rates increasing,so owners losing their profits,but new BTL buyers not making any extra due to higher rates.Looks like a terrible investment from here.

There is also the fact although they are putting bennies up,are they putting LHA up the same?.Single/couples rates are low anyway,its only when kids are under 18 it covers rent.Plus no mention of the benefit cap being uprated.Its £20k a year if not working,so if they dont increase it,for many the 10% bennie increase wont happen as they are or will be capped.

Been out and about this afternoon enjoying the sunshine whilst it lasts. Was told about a plan to build flats to rent above a Waitrose store. Good location, these won't be cheap to rent. John Lewis would furnish the flats if required. Part of the deal would be access to cars to rent by the hour/day, apparently from John Lewis/Waitrose. I suppose they could instead partner with a suitably expensive car manufacturer to provide the vehicles directly. No facility to park private cars on site. This is the direction of travel.

[Democorruptcy]

Were the BIS calling for interest rate rises to curb inflation earlier on, or has it taken them by surprise like it has the Central Bankers? Oh.... they are the Central bankers....

Quote

 

Leading economies at risk of falling into high-inflation trap, BIS says

Diagnosing that many economies had already embarked on the process, the BIS recommended that central banks should not be shy of inflicting short-term pain and even recessions to prevent any move to a persistently high-inflation world.

Agustín Carstens, BIS general manager, said: “The key for central banks is to act quickly and decisively before inflation becomes entrenched.”

Central banks around the world have started to raise rates quickly in response to soaring inflation, with the US Federal Reserve leading the pack, but the action taken so far does not satisfy the BIS.

https://12ft.io/proxy?q=https%3A%2F%2Fwww.ft.com%2Fcontent%2Fb937e023-c86c-4b07-b40d-a3266d84f149

 

 

[M S E Refugee]

Gold ban will cost Russia $19bn – US https://www.rt.com/business/557869-blinken-russia-gold-ban/

 

[Frog]

4 hours ago, DurhamBorn said:

BTL has insurers and pension schemes with hundreds of billions of £ that will come into the market.BTL will work for big landlords etc,for small ones with 3 properties with 60%+ leverage they will be a disaster.Rent up 10% doesnt make up for rates up 200%.Time will tell.

 

Playing devil advocate - why would the institutions come in if interest rates are so high that resi investing no longer stacks up?  Surely they would invest elsewhere with more attractive returns?

Assuming the institutions invest their billions, I suspect it will take many decades for them to build out / acquire units to have any meaningful impact on total supply. 

The government can only squeeze LLs so hard IMO, ultimately private lets are required to accomadate the rising population.  Sure there maybe bumps, but I believe ultimately an equilibrium has to be reached where tenants have their rights, but it remains worthwhile for LLs.

Buying a highly leveraged, crap terrace fo £80k in a crap location, that needs upgrading and with the minimal opportunity for rent rises is always going to struggle.

Alternatively let's say one buys a £250k modern 2/3 bed semi, mortgage for £185k and rent it out for £950 pcm. 5 year fixes are available for circa £430 pcm. Is that really going to be a disaster?

I am of course assuming that house prices continue to rise, at least in nominal terms.  There maybe volatility, but I cannot see why they should fall in a meaningful way or for a lengthy period, when we have a rising population, lack of new supply, negative real rates, rising inflation and low unemployment.

 

 

 

 

 

[Errol]

18 minutes ago, M S E Refugee said:

Gold ban will cost Russia $19bn – US https://www.rt.com/business/557869-blinken-russia-gold-ban/

 

Wouldn't have thought it will cost them anything. Gold will go to other markets and then be sold back into G7 nations. How will anyone know where gold has come from once it has been processed by China/India, re-stamped, and then shipped out again? Gold is totally fungible.

Also, there's this:

 

[reformed nice guy]

28 minutes ago, Frog said:

Alternatively let's say one buys a £250k modern 2/3 bed semi, mortgage for £185k and rent it out for £950 pcm. 5 year fixes are available for circa £430 pcm. Is that really going to be a disaster?

That's an annual income of £6240 after mortgage cost.

Let's round it down to £6000 to cover insurance and ignore saving for future upgrades.

You can't take mortgage interest off your top line,so taxable amount would be 11,160 (240 off for insurance).

If your a higher rate tax payer you get £1000 tax free then it's 40%, so £4064 tax bill.

So roughly £2000 income on the £65k deposit, about 3%

One big repair like boiler or windows and that's cashflow gone.

To break even for capital gains, you need the nominal value to go up at least the inflation rate plus a bit more to cover capital gains tax.

[JohnnyB]

2 hours ago, Cattle Prod said:

Ummm....

Rest assured I will be showing this to my son, I hope he tells his class again.

If they try and reduce people's wanking-off-in-shower time they really will get revolution.

[M S E Refugee]

1 minute ago, JohnnyB said:

If they try and reduce people's wanking-off-in-shower time they really will get revolution.

I doubt Macron will have to tell the French to spend less time in the Shower to save energy.

[Axeman123]

37 minutes ago, Frog said:

Playing devil advocate - why would the institutions come in if interest rates are so high that resi investing no longer stacks up? 

The yield is income divided over total cost of building units. If building land is pennies then massive blocks of identical flats could be built, and still yield reasonably well even in a high interest rate environment. Every problem in property comes down to prices being too high.

[Lightly Toasted]

35 minutes ago, M S E Refugee said:

Gold ban will cost Russia $19bn – US https://www.rt.com/business/557869-blinken-russia-gold-ban/

 

The putative cost will be a Rotterdam-Effect-style mirage. This is an anti-Brexit piece but the information is relevant:

https://news.sky.com/story/revealed-how-gold-takes-the-shine-off-britains-trade-figures-11057545

...

The Sky News analysis of Britain's trade with the rest of the world underlines just how much these figures have been distorted by movements of gold - almost all of which is produced in other countries and is simply passing through London's financial markets.

In July alone, the latest month for which trade figures exist, gold accounted for more than a tenth of the value of everything exported by the UK overseas - making it Britain's top export above cars, engines and pharmaceuticals.

...

 

e.g. In 2018 the UK was the second biggest gold exporter, after Switzerland.

https://en.wikipedia.org/wiki/List_of_countries_by_gold_exports

Oddly enough, Switzerland is also the biggest gold importer, followed by India then the UK and China.

https://www.worldstopexports.com/international-markets-for-imported-gold-by-country/

It's India and China that are really providing demand for gold.

 

[M S E Refugee]

‘Shall we take our clothes off?’ UK PM asks G7 leaders (VIDEO) https://www.rt.com/news/557870-boris-johnson-clothes-off-putin/

We are screwed, our leaders are imbeciles.

[ThoughtCriminal]

"Yeah, that thing I don't control? Well I'm gonna set a price cap for it."

 

Has everyone just gone completely fucking mad? Did we all get slipped MDMA and this is just reality now?

[BWW]

On 25/06/2022 at 18:11, BWW said:

But I disagree that it's the only way and everything else is the wrong way.

 

22 hours ago, Harley said:

 

Now where did I say that? 

Lots more to discuss there, too much.

Best I stop posting if that's how people read my shite while others (it seems as the newts are on ignore) shite post.

Apologies if my post caused offence.

You are quite correct you didn.t say that explicitly but it was what i understood you to be saying with the whole long post I quoted. Since you have now said not true: my bad, sorry.