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

[MrXxxx]

14 hours ago, DurhamBorn said:

Id also open a SIPP and feed the divis from the ISA into you bank account then back out into your SIPP getting tax relief added on

Why?...am I missing a trick here OR is it because you are getting the tax refunded on overseas stock divis?

[moneyscam]

14 minutes ago, Funn3r said:

Nobody likes losing money but I am more paranoid than most about a BK. It's ironic that someone like me is forced into the stock market at a time like this; it's the last thing I would naturally want to do. But just can't ignore inflation any longer. Very true what DB has said many times something like "the market hurts as many participants as possible."

I understand what you are telling me though and I am not planning on piling in with fingers crossed. Going to be fairly cautious with things I hope will be somewhat BK-resistant and no expectations of sudden huge profits; just want to keep my head above water.

One option if you are nervous is to hedge your portfolio however like any insurance it comes at a cost. There are various ways you can do this : 1) buy put options on the index (FTSE, S&P 500) 2) short index on a spread bet platform like CMC or IG 3) buy short FTSE index ETF. There are advantages / disadvantages to each but the simplest would be the ETF as you avoid the hassle and cost of rolling over the hedge with the options or managing the margin with the spread bet option.

There used to be a FTSE 100 VIX (volatility index) but that has been discontinued which is a shame as that is what I would use to determine an entry point for purchasing portfolio insurance as most of my investments are in FTSE 100/250. So I have to use S&P 500 VIX as a proxy which suffices if you are concerned about a BK.

I am currently looking at this short FTSE 100 3x leverage (there is 1x and 2x as well) ETN and will be buying this once VIX trades in the 15-16 range. Putting £5K into this in my case would be the closest I can get to 1:1 delta hedging of my portfolio - it will never be a perfect hedge but close enough.

https://www.hl.co.uk/shares/shares-search-results/w/wisdomtree-ftse-100-3x-daily-short

[WICAO]

3 hours ago, DurhamBorn said:

Very good advice for people,fees are a huge thing to consider.I often hear people say HL are expensive,but like you say they arent unless you own lots of unit trusts etc.I own all direct shares and investment trusts so my SIPP costs £200 a year, miniscule on the size of the SIPP.The IFA who did a pension transfer for me charged 1.8% (including all platform fees,fund fees,ongoing advice) if id left it there (he thought i was going to hence doing the transfer).They take about a third of the return of a 60/40 fund and thats pretty much the portfolio they all build,and thats in a rising market.Someone with say £200k with them is losing £3600 a year before they start.Nuts.

Agree re HL.  There are of course other choices.  I just used HL as an example as that's who @Funn3r mentioned.

Some might find this link useful when trying to find a suitable wrapper provider https://monevator.com/compare-uk-cheapest-online-brokers/

[WICAO]

2 hours ago, moneyscam said:

I have a question. My only income streams are my dividends and some capital gains. These will never hit the £12.5K personal tax allowance limit. None of my investments are in any wrappers as I just had them transferred over from a custody account in Switzerland. Am I right in thinking there is no particular advantage in putting these into S+S ISA in my case as long as they remain below £12.5K + dividend allowance + capital gain allowance? 

I know I could look all this up for myself but I ask here also for the benefit of others that may be reading this and in the same position. Cheers for any answers 

How do you know they'll never exceed the respective allowances?  Government might change the rules on divi's / CGT or your investments might 10 bag.

What's the negative (other than some buy/sell spread and trading costs) to gradually selling them down annually at a level below the CGT allowance and popping the proceeds into an S&S ISA.  Over a number of years you might even end up with everything ISA sheltered.

Of course ISA rules can also change...

Not advice, DYOR etc.

[Bobthebuilder]

43 minutes ago, MrXxxx said:

Better to go Emerging Markets in my opinion!

The 2 model railway companies offering the most competitive prices at the moment are Peco and Dapol, both UK based manufacturers.

[sancho panza]

21 hours ago, Castlevania said:

I sold ~10% of my oil stocks today. Not that I wanted to but they were too big a proportion of my portfolio.

Redeployed 3/5 of the proceeds into accumulating more B2G, Barrick and Telefonica Brasil. Remainder in cash as tobacco stocks have run away - will wait and see if they come back into my target price range or not.

I'm consdiering some horse swapping mid race.Sale Total and ENI and redeploy profits into Tef Deutsch/AN Other comms and then redeploy original stake into RDSA/BP/Poss Repsol.

Interesting to see EQNRand CVX level pegging with their Sept 18 high in Brent around the $82 level.I've bored with the chart before but it shows the thinking or lack thereof.

BP was 580 last time Brent was $82.

[DoINeedOne]

We should probably start a ways to reduce your tax thread so many great points get buried 

[MrXxxx]

2 hours ago, CannonFodder said:

I pay a bit more in fees having 3 but I feel better in terms of counter party risk. Eg someone goes pop

Agree, I made this point the other day elsewhere...basically you are talking about another £45 pa, so on a lump sum of £85k ; the FSCS limit it would be 0.05%, and on a sum of £50k it would be 0.09%....look on it as insurance, and/or if one broker is down when the SHTF it give you flexibility/an alternative broker to sell/buy at....that 'extra' £45 could be saved in such a situation.

[moneyscam]

18 minutes ago, moneyscam said:

One option if you are nervous is to hedge your portfolio however like any insurance it comes at a cost. There are various ways you can do this : 1) buy put options on the index (FTSE, S&P 500) 2) short index on a spread bet platform like CMC or IG 3) buy short FTSE index ETF. There are advantages / disadvantages to each but the simplest would be the ETF as you avoid the hassle and cost of rolling over the hedge with the options or managing the margin with the spread bet option.

There used to be a FTSE 100 VIX (volatility index) but that has been discontinued which is a shame as that is what I would use to determine an entry point for purchasing portfolio insurance as most of my investments are in FTSE 100/250. So I have to use S&P 500 VIX as a proxy which suffices if you are concerned about a BK.

I am currently looking at this short FTSE 100 3x leverage (there is 1x and 2x as well) ETN and will be buying this once VIX trades in the 15-16 range. Putting £5K into this in my case would be the closest I can get to 1:1 delta hedging of my portfolio - it will never be a perfect hedge but close enough.

https://www.hl.co.uk/shares/shares-search-results/w/wisdomtree-ftse-100-3x-daily-short

Sorry to quote myself but thought I should flesh the above out just a little bit further.

If you do something like this then you can invest in divi payers yielding around 5% on portfolio - if market goes up your total capital goes up and you collect the divi's less the cost of the insurance - if there is a BK you still collect the divi's (assuming no divi cuts) but your capital should remain fairly static as what you will lose on the capital will be offset by the gain on the short ETF (ETN in this case). As mentioned it won't be a perfect hedge but you can back test this by constructing your proposed hypothetical portfolio over the last 5 or 10 years and measure that against the performance of the ETN to work out how much you would need to purchase of this to achieve as close as possible 1:1 delta hedging.

 

[Colliedog1]

2 hours ago, HousePriceMania said:

Out of interest, where do you get the bankrupt stock from or find out about them ?

Auctions and I have trade contacts. Remember try to buy low and sell high but sometimes you get it wrong just like shares. My OH has storage lock ups so I have free storage which helps especially when buying pallet lots.

[MrXxxx]

2 hours ago, moneyscam said:

I have a question. My only income streams are my dividends and some capital gains. These will never hit the £12.5K personal tax allowance limit. None of my investments are in any wrappers as I just had them transferred over from a custody account in Switzerland. Am I right in thinking there is no particular advantage in putting these into S+S ISA in my case as long as they remain below £12.5K + dividend allowance + capital gain allowance? 

I know I could look all this up for myself but I ask here also for the benefit of others that may be reading this and in the same position. Cheers for any answers 

 

I believe its always worth using your ISA allowance as a) it doesn't cost you anything, b) once the tax year has gone if its not used its lost, and c) you don't know financially whats around the corner...basically it gives you flexibility at no cost; if its in 'cash' rather than stocks it can sit in a brokers account without any annual fees, all you are losing is the basic interest on the capital which at the moment is nothing...if this bothers you buy low risk/low volatile investments in the S&S isa that are liquid; as long as they cover the brokers annual fee + inflation you are not at a loss.

NOTE Not financial advice, DYOR!

[sancho panza]

21 hours ago, Lightscribe said:

Emergency workers are a different kettle of fish. Yes benefits can be good (although pension isn’t really a factor anymore - state age linked) but the pay is limited and is subject to budget cuts (most have already been frozen).

Newly recruited police officers (in London) start on £19k a year which is less than a PCSO. They are now also subject to pay freezes up the yearly banded scale if they fail a performance review or are on an action plan.

In todays society and aggro that comes with it, with no pension in reachable sight, there’s literally nothing left to keep these young low banded emergency service workers when cost of living starts to skyrocket.

I know I’d rather be working in Lidl instead faced with the above.

 

 

Couldn't agree more here LS.Paramedics start on Band 5 bottom which is £25,655 plus unsocial.SOunds ok until you're dealing with people spitting at you,threatening you and pewking up all over your vehicle.Once you lifte up the band it's not bad but the stresses of modern society are wrosening not improving.Places like Birimingham have huge(and I mean HUGE) retention problems,likely same in police.

The pay to poo ratio is jsut totally out of kilter for most staff with under 5 years in.The staff with 5 years in are leaving because the stress has got worse.

And that's before the elephant in the room of price inflation kicks in.1% pay rise lags 7% inflation on a leveraged basis

                                           Pay     Inflation    Real wage by year end

year 1                                £20k     7%          £18.6k

year 2 (incl 1% pay rise)  £20.2k  7%           £17.47k

As above feel free any of the abacus users- @Castlevania @planit to adjsut my spending power estimates,but given wage rises occur after the inflation,this scenario is unfloding.

FOr frontline public sector eg police,ambulance staff,the  pay to poo ratio will get out of kilter very quickly right here.

Joe Public is in for a shock.Not just from the decline in spendo but also the fact that when they call the police,there may not be any to come when the civil strife starts.There's not enough now for heaven;s sake.

19 hours ago, Lightscribe said:

Productivity is measured by GDP/hours wokred.GDP has been gamed higher by imputed rents(12% now as aooposed to circa 2% in the 60's iirc) and also govt spending funded with borrowed money which might explain some of the degree of deviation but the point remains.

19 hours ago, Funn3r said:

OK here's where the rubber meets the road, for me at least. About three years ago I opened an HL account with 1 pound after following this thread since ToS, then totally bottled any use of it. Finally this week got sick and tired of my cash ISA getting 0.01% and arranged to have it transferred to HL as a Stocks&Shares ISA. 

I'll add in a bit more cash so let's say 50K for now. I have been saving what I thought were notable posts from this thread exactly for a time like this and got some ideas. Basically telecoms, oil companies, PMs, and maybe a little bit miners. Not expecting or accepting Advice but any general suggestions welcome on how to get started. I'm not dead yet but no spring chicken so time horizons are shall we say "limited." 

 

18 hours ago, Bobthebuilder said:

https://www.bbc.co.uk/news/business-59966752

 

 

I think a lot of people are in for a spending shock bob.Not jsut the Hornby gang..

[MrXxxx]

1 hour ago, HousePriceMania said:

Hi @Funn3r, When people were buying shares pre-2020 some people were asking why were they not waiting for the predicted falls, take the Scottish share as an example, many people will have wished they had waited.  I myself bought into the narrative and although it came good at the time due to laddering into the oil shares there was a fortune to be lost in March 2020.

So, now, ask yourself the same question....

Is now a good time to be buying into the market when the IRs/Inflation/End of QE events are still to play out and while most on here expect a BK ( which could mean 80% fall in share prices which wont recover in real terms for decades ).

If you missed the 2020 bottom and subsequent profits I'd be more inclined to wait 3-9 months before investing in anything especially if you are a buy and hold investor.

Saying that, with inflation picking up I am wondering if there will be a rush to assets with people buying any old shite for vast sums of money, look at 2nd hand cars and houses at the mo !!!

The central bankers who's aim is to control inflation and have a stable economy have created an instable economy and massive inflation....what comes next is anyone's guess.

If you look at the stock market post 2007 it was up up up...so with £1Tn pumped in maybe it will be 10 years of gains.  I just think sitting out most of 2022 is a wise move.

I do hold oil shares (UP) and some miners (DOWN) at present in a SIPP.  With gains, dividends and the tax free element even if I lose 60% in nominal terms then I'd not actually have lost out.  I have sold out some profits recently though as I think there are a lot of problems in the pipeline now.

Agree in part, but it costs very little [interest on sum] to set up whilst waiting to invest, and/or they could 'learn' with some small purchases and/or day trades...one successful day trade and that £45 annual fee is covered.

Note not financial advice DYOR.

[MrXxxx]

1 hour ago, leonardratso said:

yes, i remember thinking wheni set it up, is it this or woodford? hahaha i trusted terry more cos he looked more stoic than 'rockstar' woodford. I was still dubious even back then thinking surely this is at the top - and to be honest i filled it up then cleared it back a bit then began trickling in on a lesser note. Even during the march 2020 rout it didnt lose as much as other stuff did and was still well up on my starting point.
So yes, im amazed at how wrong i was even back then, i continue to be wrong thats for sure.

Rather than the continued success of the fund manager, I was thinking more the continued [above normal] rise of the tech stocks.

[sancho panza]

1 hour ago, moneyscam said:

I've also only got 14 years of NI contributions and recently found out because I worked in Switzerland for 9 years I can purchase additional years for £165 each rather than £800 so that is another no brainer thing I need to sort out soon.

£800 seems rather steep especailly for a promise to pay from the govt.£165 is definteily worth a nudge.

[CannonFodder]

I could see this hobby stuff trains etc being sold off very quickly with contents of attic once money is tight and food and fuel is needed. 

Reading that in weimar, pianos being exchanged for potatoes. Doubt it will get that bad but a lot of unused or barely used stuff will be sold.

Lets face it, a lot of this stuff is bought by recently retired whoose incomes wont hold up.

Friend of mine went to look at buying brewery equipment, vendor said he would buy back at half price at any time. Seems he made a living of selling stuff to middle aged men with a dream and buying it back when they jacked it in.

[Agent ZigZag]

1 hour ago, moneyscam said:

I've also only got 14 years of NI contributions and recently found out because I worked in Switzerland for 9 years I can purchase additional years for £165 each rather than £800 so that is another no brainer thing I need to sort out soon.

The bit in bold I would be interested to know how are you going about this. I am 6 years short of the current NI contributions needed although I intend to extend this to 40, as I have a sneaky feeling they will extend it. My understanding was Under Class 2 you could, as an example, declare a few items sold on ebay on a tax return for I think about £140odd pounds fee (need to check) and HMRC will allocate your NI for that year. I could be wrong and member opinions on this would be helpful.

[sancho panza]

WOlf as ever,does a great job here of laying bare the CPI lie ref rents ,hoemowner equivalance measures and the actual cost of a house.

If they measured the cost of a primary residence then the destruction of spending power would be significantly higher.

A weak dollar phase does look liekly from these charts,so could see commods spike even higher....

https://wolfstreet.com/2022/01/12/purchasing-power-of-dollar-inflation-whoosh/

But so far, the Fed has refused to deal with this inflation. It is still repressing short-term interest rates to near 0%, and it’s still printing money in large amounts, though less than it did two months ago.

The effective federal funds rate (EFFR), which the Fed targets with its interest rate policy, is now at 0.08%. With CPI-U inflation at 7.04%, the inflation-adjusted or “real” EFFR is a negative 6.96%, the most negative “real” EFFR in the data going back to 1954, the hallmark of the most reckless Fed ever.

Rent Factors, nearly one-third of CPI, started to jump.

The CPI contains two measures of rent that account for 32% of the CPI. These rent factors are the biggie. They dropped sharply in 2020 and early 2021, then U-turned in June and have been rising every month since, gradually picking up the increases in market rents. Because both measures are still below CPI, they’re still holding down CPI, but less than before.

“Rent of primary residence” (makes up 7.6% of overall CPI), rose by 3.3% year-over-year but remains below where it had been before the pandemic, as it is gradually pushed higher by the surge in market rents (red in the chart below).

“Owner’s equivalent rent of residences” (makes up 23.5% of overall CPI), the stand-in for the costs of homeownership, is based on surveys that ask homeowners to estimate what their home might rent for. It rose 3.8% year-over-year (green line).

[moneyscam]

2 minutes ago, Agent ZigZag said:

The bit in bold I would be interested to know how are you going about this. I am 6 years short of the current NI contributions needed although I intend to extend this to 40, as I have a sneaky feeling they will extend it. My understanding was Under Class 2 you could, as an example, declare a few items sold on ebay on a tax return for I think about £140odd pounds fee (need to check) and HMRC will allocate your NI for that year. I could be wrong and member opinions on this would be helpful.

I rang up the pensions service and explained I wanted to purchase some additional NI class 2 years. When she checked my record she asked why I had such a large gap. I explained I had worked abroad in Switzerland. She then said I might be able to purchase class 3 @ £165 each but I would have to ring HMRC on 03002003500 and discuss this with them. I did ask how much additional pension I would get for each year and it works out to £5.50 per week or £286 per year so it would be silly to pass on the £165 one off cost notwithstanding how much you doubt the gov will make good on keeping its promise! @sancho panza

I haven't done this yet but will be doing before end of this tax year. I will let you know I get on once I've done that.

I can't speak to the other method mentioned but I have heard of something similar. Hopefully someone else that has direct experience of this will chime in. 

[CannonFodder]

I.ve noticed supermarkets are holding certain things steady - pint of beer . Milk bread. Bottle of wine as people watch these.

Larger items going up about 20 percent it seems the 3-4 pound things extra pound on the honey or coffee.

Smaller items appearing to doubling, the sub pound. My coleslaw tub for example. Its a double but most look at another 40p if they notice price at all. 

Perhaps my perception but interesting to see the tactics at play.

 

[DurhamBorn]

2 hours ago, MrXxxx said:

Why?...am I missing a trick here OR is it because you are getting the tax refunded on overseas stock divis?

Just the normal tax relief you get on pension contributions.My partner got £4k of divs last year in her ISA.She pulled them out and put them in her SIPP and got £1k added from the government.She is going to jack in at 56 so has 11 or 12 years where she can pull £16700 a year tax free from her pension.She will empty it over those years and allow the ISA to build then and at 68 then kick her employer pension in and her state pension and her ISA divis.

[DurhamBorn]

45 minutes ago, Agent ZigZag said:

The bit in bold I would be interested to know how are you going about this. I am 6 years short of the current NI contributions needed although I intend to extend this to 40, as I have a sneaky feeling they will extend it. My understanding was Under Class 2 you could, as an example, declare a few items sold on ebay on a tax return for I think about £140odd pounds fee (need to check) and HMRC will allocate your NI for that year. I could be wrong and member opinions on this would be helpful.

I used to do it every year and get a years stamp for £140 just tell them you sold a few items on Ebay.Now i claim specified adult childcare credits for free,look after grandkids.Im on 34 years now,but il keep claiming them because like you i think they might mess around with those years and 40 might get you the pension early or something.

[stoobs]

1 hour ago, MrXxxx said:

I believe its always worth using your ISA allowance as a) it doesn't cost you anything, b) once the tax year has gone if its not used its lost, and c) you don't know financially whats around the corner...basically it gives you flexibility at no cost; if its in 'cash' rather than stocks it can sit in a brokers account without any annual fees, all you are losing is the basic interest on the capital which at the moment is nothing...if this bothers you buy low risk/low volatile investments in the S&S isa that are liquid; as long as they cover the brokers annual fee + inflation you are not at a loss.

NOTE Not financial advice, DYOR!

Also remember you can transfer between ISA types.

So if you would prefer it in the bank, chuck it in a cash ISA to grab your allowance.

Then a few years down the line if you decide to invest it, you can transfer some or all of that cash ISA to a shares ISA without affecting the tax wrapper (or the current year's ISA allowance).

[HousePriceMania]

 

Money became worth more in 2007....cant be having that now can we.

What a bunch of criminals **** run the world.

[Democorruptcy]

2 hours ago, moneyscam said:

Sorry to quote myself but thought I should flesh the above out just a little bit further.

If you do something like this then you can invest in divi payers yielding around 5% on portfolio - if market goes up your total capital goes up and you collect the divi's less the cost of the insurance - if there is a BK you still collect the divi's (assuming no divi cuts) but your capital should remain fairly static as what you will lose on the capital will be offset by the gain on the short ETF (ETN in this case). As mentioned it won't be a perfect hedge but you can back test this by constructing your proposed hypothetical portfolio over the last 5 or 10 years and measure that against the performance of the ETN to work out how much you would need to purchase of this to achieve as close as possible 1:1 delta hedging.

 

I suppose you are using a 3x to reduce the stake in it? Just had a look at March 2020. The ETN went from £10 to near £28 almost tripling your money, while the FTSE dipped from about 7.5k to 5k losing a third.