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


spunko

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2 hours ago, M S E Refugee said:

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

 

Cheers. It’s a shame I can’t read rt (because my head will explode or something) but I can see the headline, so appreciate these updates from beyond the western press  

$19 Bn, thats like a whole week or two of oil…chump change.

I guess there is a plan here to influence the gold price, undermine the Russian and Chinese gold reserves and gold advocacy generally.

I guess if we ask the US, Canada, UK and Japan why they are doing this….and then we can expect the exact opposite of what they hope to achieve, to happen.🤦🏻‍♂️ 

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1 hour ago, ThoughtCriminal said:

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

 

I'm going to set a price cap on sex.  

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Chewing Grass
1 hour ago, M S E Refugee said:

‘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.

English version for our censored audience, the background is more interesting than the foreground, any look Biden will catch the Belgian Coof.

 

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honkydonkey
36 minutes ago, Pip321 said:

Cheers. It’s a shame I can’t read rt (because my head will explode or something) but I can see the headline, so appreciate these updates from beyond the western press  

$19 Bn, thats like a whole week or two of oil…chump change.

I guess there is a plan here to influence the gold price, undermine the Russian and Chinese gold reserves and gold advocacy generally.

I guess if we ask the US, Canada, UK and Japan why they are doing this….and then we can expect the exact opposite of what they hope to achieve, to happen.🤦🏻‍♂️ 

Just put 12ft.io/ then the link. I don't know why people don't just do this so everyone can just click on the link to read. You don't need to do the proxy/q= bollox, it does all that automatically .

https://12ft.io/proxy?q=https://www.rt.com/news/557870-boris-johnson-clothes-off-putin

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3 hours 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?  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.

 

 

 

 

 

Because the life insurers wholl be doing this don't need to borrow money.

They need a rough hedge against inflation.

The idiot actuaries convinced the life ins that commercial property did that. It hasn't worked that way - returns in offices n shopping centres has been dire.

You will get one two Barbicans built in every large town io city, prob where tge shops were.

These will be let to working people.

In terms of io btl finances - you lose 30% of rent in taxes.

You model is naive as it does not allow for voids, which can be painful.

And  at some point, io btl finance will be pulled when all the initial batch if loans default on the one and only capital repayment, at the of io btl term, which us usually 15-20 years.

You see all those ' The bank wants my house va k cis I've only got an io mortgage's posts?

Well, when the bank asks for a commercial loan back they are not so nice.

 

 

 

 

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2 hours 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?  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.

 

@reformed nice guy  has put some numbers together that illustrate how the yields on houses are really poor….and I concur they are.

I have developed property and been a LL for 25 years and my wealth from houses has been almost entirely created through adding value and then sales (with a massive icing on the cake of balmy price rises).

A new boiler every 8 years, window replacements, fences, driveways, carpets, voids, roof repairs, ovens replacing, blocked drains (£3k last 24 months just on those), replacement garages, curtains, furniture removal, leaking shower, wobbly floor tile, condensation, glass hob smashed by tenant dropping a pan etc etc.

EPC is a new cost and those goalposts will keep moving  

I am not moaning about my costs but highlighting how for me the rental side was effectively for me to cover costs whilst holding. I held until I could time a sale to minimise CGT.  I did make ‘some’ cash flow profit as time went by….but I am fairly hands on and resourceful and interest rates plummeted. 

The key for me was having a connected network so I could buy at 60/70% of value…carry on working to pay for my normal frugal lifestyle…and save huge amounts of my large salary into a real pension. Many BTL’ers aren’t even close to thinking in those terms. 

Now after 25 years I am a bit like a Bitcoin holder who paid £200 a coin, or a Rio shareholder who has had 25 years of Dividends…..ie the market can pretty much do what it wants for me.

I think we will see a decline in private LLs…I hope we see price falls and this allows it to become more achievable for 25 years old to buy a half decent modest family home. Then we can rely less in private let’s and rely more on cheap owner occupied homes. 

I have lived through several crashes and it’s amazing just how people ‘forget’ what sentiment can do. In 1986 I would have paid as much as I could for my first home….in 1993 our neighbours virtually couldn’t give their property away.

Literally I have seen a pair of houses (admittedly it was a HMO) being bought at 30% of the amount paid by the previous owner in superb rental areas. When other people stop buying the really do stop. Just words…but when you see it (and are unaffected yourself) then it is actually a beauty to behold.

However I do agree nothing is 100% nailed on. I wouldn’t bet against the government coming up with more props….we have had dozens so far. I also wouldn’t bet against the crazy attitude that we have that you can’t lose on houses continuing. However the arrows and sentiment are pointing in the other direction….

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Noallegiance
1 hour ago, Funn3r said:

I'm going to set a price cap on sex.  

Upon reflection, I think I may have done that years ago without realising....

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Lightly Toasted
2 hours ago, ThoughtCriminal said:

"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?

Link copied from the Ukraine thread

https://www.theguardian.com/world/2022/jun/26/proposed-price-cap-on-russian-oil-moves-closer-at-g7-summit

... A price cap would operate by dictating to the quasi-monopoly responsible for insuring Russian oil tankers that they will be sanctioned if they allow oil to be sold above a fixed price. About 95% of the world’s tanker liability coverage is arranged through a City of London-based insurance organisation called the International Group of Protection and Indemnity Clubs, which has to heed European law...

9_9

This is like punishing the truck insurer for "allowing" the supermarket to overcharge for the produce arriving in the truck.

How is the insurer supposed to enforce this? Such an obvious question but the Guardian (unsurprisingly, since their journalists are first spoon-fed the bilge that they then spoon-feed to their readers) doesn't even acknowledge it, let alone make an effort to analyse it.

 

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Yadda yadda yadda
2 hours ago, ThoughtCriminal said:

"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?

It could be like the US debt ceiling. The maximum oil price set in stone until it is no longer enough and they invent a new maximum number.

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Surely none of this forces Russia to load the ships with oil or pump it down the pipeline? If there was an actual means to force the above, then it would also be a means to just order his forces out of Ukraine?

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Joncrete Cungle

Surely the tankers will be in the future insured elsewhere not subject to EU / USA moronic sanctions? Middle East or China etc? Removing some shipping insurance business from London in the process?

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Yadda yadda yadda
13 minutes ago, Lightly Toasted said:

Link copied from the Ukraine thread

https://www.theguardian.com/world/2022/jun/26/proposed-price-cap-on-russian-oil-moves-closer-at-g7-summit

... A price cap would operate by dictating to the quasi-monopoly responsible for insuring Russian oil tankers that they will be sanctioned if they allow oil to be sold above a fixed price. About 95% of the world’s tanker liability coverage is arranged through a City of London-based insurance organisation called the International Group of Protection and Indemnity Clubs, which has to heed European law...

9_9

This is like punishing the truck insurer for "allowing" the supermarket to overcharge for the produce arriving in the truck.

How is the insurer supposed to enforce this? Such an obvious question but the Guardian (unsurprisingly, since their journalists are first spoon-fed the bilge that they then spoon-feed to their readers) doesn't even acknowledge it, let alone make an effort to analyse it.

 

Someone else will insure the tankers. Presumably the tankers involved could no longer sail to Western nations but so what? They're throwing away business as fast as they can.

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Lightly Toasted
13 minutes ago, Yadda yadda yadda said:

Someone else will insure the tankers. Presumably the tankers involved could no longer sail to Western nations but so what? They're throwing away business as fast as they can.

Probably wouldn't be WTO-compliant anyway, if you start allowing "goods can only be delivered to the UK in ships insured by <list of countries>" then that's a real can of worms.

 

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Joncrete Cungle
2 minutes ago, Lightly Toasted said:

Probably wouldn't be WTO-compliant anyway, if you start allowing "goods can only be delivered the UK in ships insured by <list of countries>" then that's a real can of worms.

 

I am sure India and China will welcome the tankers with open arms, especially if the cargo is at a discount.

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M S E Refugee
28 minutes ago, Lightly Toasted said:

Link copied from the Ukraine thread

https://www.theguardian.com/world/2022/jun/26/proposed-price-cap-on-russian-oil-moves-closer-at-g7-summit

... A price cap would operate by dictating to the quasi-monopoly responsible for insuring Russian oil tankers that they will be sanctioned if they allow oil to be sold above a fixed price. About 95% of the world’s tanker liability coverage is arranged through a City of London-based insurance organisation called the International Group of Protection and Indemnity Clubs, which has to heed European law...

9_9

This is like punishing the truck insurer for "allowing" the supermarket to overcharge for the produce arriving in the truck.

How is the insurer supposed to enforce this? Such an obvious question but the Guardian (unsurprisingly, since their journalists are first spoon-fed the bilge that they then spoon-feed to their readers) doesn't even acknowledge it, let alone make an effort to analyse it.

 

Also in that article they talk about putting a price cap on Russian Gas as the Russians won't be able to sell it elsewhere so Putin will have to yield to these bunch of retards, good luck with that!

I'm sure the Eurotards will cave within a few days of Putin turning off the Gas.

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6 minutes ago, Lightly Toasted said:

Probably wouldn't be WTO-compliant anyway, if you start allowing "goods can only be delivered the UK in ships insured by <list of countries>" then that's a real can of worms.

I would agree, but many cans of worms have been gleefully opened over the last few years eg sanctioning Russian FX reserves.

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The Grey Man
2 minutes ago, Axeman123 said:

BJ says a pay rise wouldn't be in your best interest, as it would just fuel inflation:

https://www.dailymail.co.uk/news/article-10955201/Johnson-says-no-point-giving-workers-pay-rises-price-spiral-cancel-benefit.html

I wonder if the same logic will be applied to benefits...?

He needs to be more open.

Why dosen't he go back to the five o' clock briefings as he did in hardcore COVID times? I guess after partygate he has used that particular moral compass and a second go would fail.

Some pigs are just more equal.

 

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Yadda yadda yadda
10 minutes ago, Axeman123 said:

BJ says a pay rise wouldn't be in your best interest, as it would just fuel inflation:

https://www.dailymail.co.uk/news/article-10955201/Johnson-says-no-point-giving-workers-pay-rises-price-spiral-cancel-benefit.html

I wonder if the same logic will be applied to benefits...?

He has already explained that benefits don't factor into cost push inflation whereas my wages do. Fucking retard hasn't heard of demand pull inflation.

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Lightly Toasted
8 minutes ago, Axeman123 said:

BJ says a pay rise wouldn't be in your best interest, as it would just fuel inflation:

https://www.dailymail.co.uk/news/article-10955201/Johnson-says-no-point-giving-workers-pay-rises-price-spiral-cancel-benefit.html

I wonder if the same logic will be applied to benefits...?

iirc in the 1970s certain workers (e.g. Ford, perhaps?) were seen as a benchmark in setting pay-rise expectations, in their own sector and beyond.

I never expected to see benefits filling that role.

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Lightly Toasted
2 minutes ago, Yadda yadda yadda said:

He has already explained that benefits don't factor into cost push inflation whereas my wages do. Fucking retard hasn't heard of demand pull inflation.

There's a trivially easy answer, then!

Just give every worker enough of these non-inflationary benefits to match their desired pay-rise.

Indeed, why stop there, just shovel non-inflationary money at them until they can afford to down tools altogether :)

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sleepwello'nights
25 minutes ago, Axeman123 said:

BJ says a pay rise wouldn't be in your best interest, as it would just fuel inflation:

https://www.dailymail.co.uk/news/article-10955201/Johnson-says-no-point-giving-workers-pay-rises-price-spiral-cancel-benefit.html

I wonder if the same logic will be applied to benefits...?

Don't worry he's working on turning the UK into a High wage economy, he said so 

https://leftfootforward.org/2022/06/johnson-makes-high-wage-economy-u-turn-as-calls-for-15-minimum-wage-grow/

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5 hours ago, Yadda yadda yadda said:

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.

John Lewis are in trouble and are merely kicking the can. If they can't remedy their core business, all that service and property frippery won't save them. Ok High Street retail is a brutal business going forward, but they should have the experience and the branding to re-invent their retail model. For example, Sainsbury's have setup partnerships with Argos and Timpsons, etc. That increases footfall and lowers/shares costs, so seems a no brainier to me? ...however, I don't hold much hope - if you have actually seen the new John Lewis board, you might agree with me that they look am unimpressive bunch of woke interlopers! 

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