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


spunko

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2 hours ago, The Bear of Doom said:

CPI 5.4% and RPI 7.5% :o

BT and VOD set the price increases for some tariffs using the inflation figures released this month.

For BT it is CPI + 3.9% so it will be 9.3% from March

For VOD it is CPI + 3.9% for customers who took on a home broadband plan from 02/02/2021, otherwise it is the RPI figure from March. In both cases the increase is applied in April.  For Mobile customers, the March RPI figure is used for customers who took out a plan before 09/12/2020, for plans taken out after that date, an increase of CPI + 3.9% is applied.

Yeah I expect they’ll be a public campaign to remove these ‘unfair’ terms. All I wanted was the latest iPhone etc now I’m paying xyz a month.  The only thing that might work is highlighting the absolute £amount of the increase.
 

Although it is not immediately clear to me why the contracts are rising over and above ‘inflation’. I assume it’s to do with the building of the actual networks?

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HousePriceMania
48 minutes ago, sancho panza said:

We're reaching the end game here AWW.I was talking to a lady at a kids playgroup tuesday(I have the littlest one all day that day) and she was saying the middle class are starting to get really squeezed finanacially to the extent some increasingly arne't middle class any more.

Very much reflecting @DurhamBorn thesis that the amount of people living off the workers is becoming unsustainable.

Something's happening at my work with people suddenly just handing their notice in and leaving-Ambulance service.It's not vaxx related but jsut a lot of people unhappy with their pay/poo ratio I guess.Trainee Para starts on £20k plus unsocial.For that they're working weekends/nights and dealing increasingly with people who have completely lost their moral compass through either drink/drugs or isolation from society.Paras first two years start at £25k plus unsocial and for that they're dealing with all the same things as the trainee para except the legal responsibility is with them if someone dies/sues and they also have to oversee the trainee.

I've said for sometime that the ramifications of lockdown would be felt long after it stops and that the law of unintended consequences would apply.One likely result will be more and more middle class taxpayers opting out of paying.

Hearing anecdotally as well that lots of GP's are going part time too.Boris has really f***ed this up.He thought he was Churchill fighting a war on covid and yet actually he was Neville Chamberlain starting one with his own taxpayers.Words genuienly fail me with regard to this govt.

 

PS Admire your stance on raising kids.

The bit in bold times ten.Your average basement dweller knows whats coming but per centage wise very few others,not least our sleeping political class.

Must say,I'm starting to consider going firm on timings myself for the BK.

Oil price moving up-tick,it's called every one of the last four recessions to some degree.All of a sudden I'm getting people who were laughing at me buying oilies last year as we were going green,texting me for my take on which to buy.A sign in itself.

Im not in agreement on the subdued inflation print in the US.I think they're inflation data will push the dollar down one last time and then we'll get the crack up boom in oil,then BK,deflationary wave,banks down(again) and then the decade long fiscal reflation trade.

Need to update my BK checklist if I get time this week and do some work on it.

Good post SP.

Why work when your house earns double what you do ?  Might as well give up and MEW every 12 months!!!!

We sat and watched several share prices post 2020 go to crazy levels, I suspect this is about to happen to oil shares as people worry about inflation and flee other falling share prices, so much so I've bought back in over the last 3 weeks and currently very glad I did, up 15-20% in that time span.  Why work when you can make £10K on shares in 3 weeks ?  I think people are going to be taught a very harsh lesson soon.

Now look at the thin read line on these charts wrt to the Exxon one, if BP/RDSB/REPSOL follow this we are looking at, from here:

RDSB:Another 18%

BP: Another 15%+

REPSOL: Another 15%+

and that's just to get back to 2019 levels, you could see another 30% all round before a big pull back IMHO 

The green is my sell price target, hopefully it'll get there before the BKK.

It's worth noting that I am always wrong.

image.png.e3221581c52b69519679d872e183fc01.png
 

 

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59 minutes ago, Cattle Prod said:

Good reminder, spy. This ensures a future generation of crushed productivity. Students will be incentivised to work in another country or work part time to stay below threshold. It goes without saying that 10.3% interest without repaying principal compounds rather badly:

image.png.b542ce87e9125e7920986d002c075212.png

If inflation stays around here for the next 7 years averaged, a student running up say 75k in student debt will double it within 7 years of leaving university, not enough time to get up the pole far enough to pay it off in almost all professions. Why bother? Imagine having £150k around your neck at 28 years of age? Sod that, off to Australia.

The other likely outcome of course is "Sod University" which would be  good thing. Let it go back to 10/15% of school leavers and let of the polys and paper mills die off.

Of course that curve explains it neatly: it's exponential. Exponential curves are unstable, something has to break.

Its actually sadly worse than you think unless things changed since I looked at it.

There is another threshold of RPI plus 3 which is for 'no earnings data', eg you are abroad so they dont have your tax records. If they cant figure out your earnings, you go in top rate of interest 

Plus you not paying it off while abroad so principle compounds, leaving the country becomes a one way bet, very hard to come back and then pay it off.

Really one needs to pay student loan off asap before interest compounds it.

This is a graduate tax for most that will never be paid off.

Someone with kids will pay 40 income 3.25 NI 9 student loan geaduate tax and 18 lost child benefit for a total tax rate of 70.25 percent on self assessment if my maths right.

So keeping less than 30 pounds out of 100 between 50 and 60k

 

Edit - keeping is perhaps the wrong word as Vat and council tax and road tax etc then need to be paid on consumption

 

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On 18/01/2022 at 09:30, Cattle Prod said:

This could well be the signal for the insto money @sancho panza is smelling. Larry Fink was never going to ignore the cashflows, and the others follow him like sheep. Phoenixes, what a wanker xD

As I've said before,this recent run up feels like that's the case.BP rarely leads the oil price higher which makes sense really.I think this is where the Heiken Ashi TM @Harleyreally shows th trend beautifully.

This is the first rally that caught me off guard since mid 20 as I've not got any calls on BP/XOM/RDSB.I had my target sights set on 320/60/1550 for re entry but jsut missed the boat completely.Normally,I have some deep out of teh moeny FOMO calls to catch a big move but I'm not complaining.I'm jsut sat here watching the stregnth of this recent raly and staying well out of the way.

The price action versus the un derlying jsut feels and looks like insto moeny as there's no dips and they jsut keep buying

image.thumb.png.a66cb847408acd955a180ba610a46057.png

Diference between this recent rally and even the sept one is the abscence of any red at all on the daily Heiken Ashi.That's different buyers mix to before,either heavily committed retail buying or heavily committed insto.Retial can't shift companies £80bn market cap companies.jsut my views dyor natch

image.thumb.png.7d4f803d69145202d8517d9e1cce5b8d.png

Only other rally we've really seen like this was 14/9/21 to 18/10/21

image.thumb.png.015cc68203b82232dd72d3fe83f4f1b0.png

On 18/01/2022 at 10:09, DurhamBorn said:

.Ive ended it with women in the past who were stunners because they wanted 3 holidays a year etc.Iv been brutal in my focus.My worry is the young seem to be full of excuses now though why they cant save,and they are walking into a government set trap.

I saved around half my salary when working,but iv multi bagged those savings over and over and over again.This last year iv done 10x my working average earnings for instance.Snowball affect.

That's when I knew I loved Mrs P.Took her on a first date,she asked for a cocktail and I didn't even blink as Iifted a £20 from my pocket with the words 'Do you want two?'

 

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HousePriceMania
8 minutes ago, CannonFodder said:

Its actually sadly worse than you think unless things changed since I looked at it.

There is another threshold of RPI plus 3 which is for 'no earnings data', eg you are abroad so they dont have your tax records. If they cant figure out your earnings, you go in top rate of interest 

Plus you not paying it off while abroad so principle compounds, leaving the country becomes a one way bet, very hard to come back and then pay it off.

Really one needs to pay student loan off asap before interest compounds it.

This is a graduate tax for most that will never be paid off.

Someone with kids will pay 40 income 3.25 NI 9 student loan geaduate tax and 18 lost child benefit for a total tax rate of 70.25 percent on self assessment if my maths right.

So keeping less than 30 pounds out of 100 between 50 and 60k

 

Edit - keeping is perhaps the wrong word as Vat and council tax and road tax etc then need to be paid on consumption

 

It's another tool to keep the poor poor.

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Remember on the stocks we have moving higher its not just new buyers,its the fact everyone who was going to sell and thought they were finished have sold.There are trillions in dis-inflation assets to be inflated away or moved.Value is just starting,il only start looking at big sales when the 10 year goes over 2.8%

None of my kids have student loans,i made sure of that.

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HousePriceMania
1 minute ago, DurhamBorn said:

Remember on the stocks we have moving higher its not just new buyers,its the fact everyone who was going to sell and thought they were finished have sold.There are trillions in dis-inflation assets to be inflated away or moved.Value is just starting,il only start looking at big sales when the 10 year goes over 2.8%

This is well worth remembering...

In Germany when the inflation was starting, lots of people sold out and took their profit thinking they had mad a fortune, only to find it became worthless.

The real winners were the companies/people with debt who were able to clear it.

Well worth remembering.

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1 hour ago, DurhamBorn said:

So at best they work hard to stand still.Most are trading at 2x or even 4x their turnover market cap.I wouldnt buy anything in Fundsmith' top companies at these prices.

 

Fundsmith own Microsoft and yesterday Microsoft announced they’d agreed to buy Activision Blizzard for US$ 70 billion in cash. The Microsoft CEO seemed to be justifying the purchase based on how it strengthens their offering in the meta verse. All very odd and it does strike me as a top of the market transaction. 

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24 minutes ago, CannonFodder said:

Its actually sadly worse than you think unless things changed since I looked at it.

There is another threshold of RPI plus 3 which is for 'no earnings data', eg you are abroad so they dont have your tax records. If they cant figure out your earnings, you go in top rate of interest 

Plus you not paying it off while abroad so principle compounds, leaving the country becomes a one way bet, very hard to come back and then pay it off.

Really one needs to pay student loan off asap before interest compounds it.

This is a graduate tax for most that will never be paid off.

Someone with kids will pay 40 income 3.25 NI 9 student loan geaduate tax and 18 lost child benefit for a total tax rate of 70.25 percent on self assessment if my maths right.

So keeping less than 30 pounds out of 100 between 50 and 60k

 

Edit - keeping is perhaps the wrong word as Vat and council tax and road tax etc then need to be paid on consumption

 

It gets even worse if you time your pay rises badly.It's quite possible to pay back £175k and not even touch the lump sum if the interest has compiunded with the outsenading loan not tocuhed after ten years.at7% which is 4% RPI plus 3%,the average £50k debt has become £100k by age 30 and from then on it's £7k interest per annum.

Junior Panza at the tender age of 15 can already explin back to me how govts soft defaults via inflation and also how the compund interest on student loans can undo the financial benefits of a degree quite quickly.

Terrible what we've alloed to happen to our young people.

15 minutes ago, DurhamBorn said:

Remember on the stocks we have moving higher its not just new buyers,its the fact everyone who was going to sell and thought they were finished have sold.There are trillions in dis-inflation assets to be inflated away or moved.Value is just starting,il only start looking at big sales when the 10 year goes over 2.8%

None of my kids have student loans,i made sure of that.

Presume NEST will start buying back the BP they sold at£2.20 when it hits £6,jsut in time for teh BK to wipe them out yet again.

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2 hours ago, Hancock said:

@HousePriceMania This is from "Hancock" in todays Telegraph, just when you thought it wasn't possible to despise this lying, cheating, crooked, weird communist little cunt any more he states 

https://www.telegraph.co.uk/news/2022/01/19/raising-interest-rates-beset-danger/

As all the focus in Westminster is on the latest revelations, the story that most affects people’s lives is the recovery from the pandemic.

Last week we learnt that the UK economy has recovered to its pre-pandemic size. As the Chancellor put it, this is down to the grit and determination of the British people. But it’s also down to the rapidity of the vaccine rollout, the massive uptake among the public, and the unprecedented level of economic support over the past two years.

Even with any short-term bump from omicron over Christmas, the immediate prospects look good and the UK is emerging sooner and stronger than most other nations. It’s like the pandemic is a bed of hot coals we have collectively had to walk across. Britain looks about to reach the other side, with sore feet but soon to step onto the soothing wet green grass beyond.

Because in the UK we invested in vaccines early, and because uptake has been so high, we are likely to be one of the first major nations in which Covid moves from pandemic to endemic and life can get back to normal.

This is a huge personal achievement for Boris Johnson. Yet this good news hides some rocks below the surface.

Top among them is the challenge of the cost of living, made worse by the global rise in energy prices. Policy can only alleviate this real pressure on households to a degree. There isn’t a quick fix, and any temporary support must be well targeted. But we can and should act in the medium term, with policies that cut both costs and emissions, like insulating homes.

But I fear that the political debate about the recovery is only skin deep. The UK’s economic performance since the 2008 crash has relied on ultra-loose monetary policy and near- or even below-zero interest rates. This can’t last forever. Yet unwinding a decades-long stimulus is beset with danger.

First, the huge injection of taxpayers’ money was vital to keep the economy afloat. This was an active policy choice. The economic disruption was due to decisions necessary to save lives; the economic support was there to help businesses through and – as yesterday’s employment figures prove – keep people in work, so we could rebound as well as possible when it was all over.

Yet this has come at a price. No event since the Second World War has had such a big economic impact. Last year the Government borrowed twice as much as at the height of the financial crisis. Fully a fifth of all the gilts ever issued have been issued in the past two years. Debts have to be paid.

Second, inflation is on the rise. Last week we saw US inflation rise to 7 per cent. In Britain, inflation has been at a 10-year high, and is expected to rise to its highest rate in almost 30 years. Once the inflation genie gets out of the bottle it is very hard to put it back in – so it is vital to bring it back to low and stable levels. But stopping inflation involves tough medicine too.

That brings us to interest rates. The Bank of England has already signalled that rates are expected to rise further. This raises profound questions that are not being debated in Westminster. How much will a rise in interest rates impact the housing market? When rates fell to near-zero levels over a decade ago, many people with mortgages kept some headroom in their budgets in case they rose again. But how many still have? How many families could cope with a rise to more normal levels of interest? Instead of keeping a cushion, many have used low rates to borrow yet more, and chased house prices up. It will take great skill to let the air out of this bubble safely.

How will the Bank start to unwind the massive amounts of quantitative easing? What will happen when the Government tries to borrow in the open markets, without the Bank snapping up all the new bonds? For almost two years the Bank rightly printed all the money the Government needed to finance the pandemic. What will happen when that, rightly, stops? What will happen to companies and pensions savings when interest rates rise and the bond market correspondingly falls? It was James Carville, Bill Clinton’s legendary strategist, who said that when he was reincarnated he wanted to come back as the bond market, because then you can intimidate everyone.

When I worked at the Bank, we put huge efforts into calibrating the impact of a rise in interest rates on how people behaved. It was difficult back then. But now, interest rates have been so low for so long it is hard to predict how people will respond. The risks are perilous. We must ensure banks and pension funds are well capitalised to be prepared for the risks to come. We must support entrepreneurs and job creators much more and we must never take for granted the economic recovery generated by business.

So, as we leave the hot coals behind us as we get over the tumult of the pandemic, recovery is going well. We must not squander it on the rocks ahead.

 

Edit - The fact he says that Westminster never debates the housing bubble, shows they clearly do.

Edit - His last comment about supporting job creators shows that cunts like him think they can control markets, if cunts like him would fuck off job creators and society would be far better off.

 

Reading way too much into this.

Hes trying to establish himself and get back into the cabinet.

Its all wibble - apple pie, motherhood that sort of crap.

 

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1 minute ago, spygirl said:

Reading way too much into this.

Hes trying to establish himself and get back into the cabinet.

Its all wibble - apple pie, motherhood that sort of crap.

 

I agree - it reads as very Prime Ministerial to me.

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Just now, sancho panza said:

It gets even worse if you time your pay rises badly.It's quite possible to pay back £175k and not even touch the lump sum if the interest has compiunded with the outsenading loan not tocuhed after ten years.at7% which is 4% RPI plus 3%,the average £50k debt has become £100k by age 30 and from then on it's £7k interest per annum.

Junior Panza at the tender age of 15 can already explin back to me how govts soft defaults via inflation and also how the compund interest on student loans can undo the financial benefits of a degree quite quickly.

Terrible what we've alloed to happen to our young people.

Presume NEST will start buying back the BP they sold at£2.20 when it hits £6,jsut in time for teh BK to wipe them out yet again.

The way out for the UKs young is simple - 

- Remove migrants access to benefits and free public services. Bill them.

- Deflated public sector pension promises.

- Gut UC.

Looking at the demographics, the UK will be over the bump of baby boomers in ~10-15 years.

Wont be able to give (some) houses away by then.

 

 

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Yes student loan tax is very unfair as rich pay fees upfront so only middle and poor get stuck in web.

Didnt buy more poly in end, silly me , was hoping that tensions increased.

Looks like Blinken blinked, his latest speeches about finding a diplomatic solution rather than standing firm with ukraine. Few comments about ecomonic sanctions, which is akin to saying we wont help in battle, we.ll sanction them after 

Germany says it wont support sanctions, guess they rather continue to buy gas to stay warm.

With canada and uk sending material, US now needs to spend troops or equipment too to look like that they as comitted as uk and allies. If they do that will increase the tension, if they dont then theycome across as all talk no trousers

Its all fun and games poking the Russian until the tanks start amassing on the border 

Time to sh8t or get off the pot for the US methinks

I thought US have a bit more in them but look like folding their hand. The high oil prices created by this tension cant be helping US recovery. An extra 10 dollars a barrel on Russians 10 mbpd is 100 million dollars a day for Mr Putin to buy himself something nice. I.ld be happy to park my tanks on border for as long as needed for 100 million a day, got to be parked somewhere. Could even buy some new tanks from that. Some more gold reserves. Buy an election or two 

I feel oil could pull back quickly if ukraine resolved. Strangely more drone attacks on ME oil yesterday .

Almost see oil and russian shares as a counter play

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Any thought on foreign banks ?

One of my emerging market funds has about 35% invested in these..  eg, Saudi National bank, Bank Rakyat (indonesia), Saudi British bank,  OTP bank (Hungary).

I'm trying to figure out whether I should be reducing my exposure or not really.

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4 minutes ago, Libspero said:

Any thought on foreign banks ?

One of my emerging market funds has about 35% invested in these..  eg, Saudi National bank, Bank Rakyat (indonesia), Saudi British bank,  OTP bank (Hungary).

I'm trying to figure out whether I shouldbe reducing my exposure or not really.

Just did the Dowd Buckner ratio for OTP and it's leveraged about 50/1.Total assets/MC.

WIthout a reserve currency bank behind it.I wouldn't touch it.dyor natch

 

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On 17/01/2022 at 12:17, AWW said:

The government wants both parents working, as that then creates another job (and source of taxation) in the form of childminders.  I'm the sole earner in my household.  We don't get child benefit, we don't get tax relief on nursery fees, I don't even get a personal allowance FFS. It's our choice, as we want our kids to be brought up by their parents, not childminders.

The amount of tax that is taken off me is, frankly, sickening. Obviously, we're pretty comfortable, but we're not rich by any means, and while the loss of child benefit is obviously unwelcome, I can understand it. The loss of personal allowance, however, just boils my piss, and it happens right around the salary range to properly fuck over those who are doing alright.

I am going to be contrary here and state that I think the UK tax system is pretty benign and, frankly, generous - IF you can structure your affairs appropriately.

I accept that anyone on six figures and PAYE is going to squeal.

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Does anyone know who is involved in the LNG pipelines etc in the US?.I think most growth in LNG will come from the US to Europe,but trying to figure out who leverages it.Repsol is an easy one,maybe smaller companies who own LNG plants terminals?

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33 minutes ago, sancho panza said:

I think this is where the Heiken Ashi TM @Harleyreally shows th trend beautifully.

Yep the weekly in particular is textbook.  BP is doing me head in.  Sanity says it's getting toppy for now so could pull back.  It's hitting it's Feb20 dead cat bounce zone, daily MACD started to weaken this week, the weekly is still on the up but has filled the Mar20 gap (down), and monthly momentum is weakening (but the MACD still rising but usually follows momentum).  Yield is now only 2.89%.  IMO (DYOR)a tight trade at best from here.  But this is clown world! 

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Wolf goes some way to show how people in the US are following on from lockdown with some lifestyle changes.Obviously,here in the UK,we'll likely see more people go onto benefits/part time and why not?

Govt obviously wants people back on their corporate tax paying treadmills.

https://wolfstreet.com/2022/01/16/one-factor-in-the-bizarre-great-resignation-labor-shortage-the-huge-surge-of-americans-starting-businesses/

us-business-applications-2022-01-16-tota

Striking out on their own was still hot but lost some steam. This comes as entire industries are going through wild gyrations to hire people amid the labor shortages, and companies are using aggressive offers to fill vacant jobs.

But these millions of entrepreneurs now have a business that they need to get off the ground, and they’re passionate about it, and they will be difficult to pull back into the corporate rat-race unless the business doesn’t get properly off the ground – and there will be some of those too.

But this historic surge in new businesses – nearly 10 million in two years – and the millions of entrepreneurs involved explain in part the huge number of “quits” and the labor shortages.

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4 minutes ago, DurhamBorn said:

Does anyone know who is involved in the LNG pipelines etc in the US?.I think most growth in LNG will come from the US to Europe,but trying to figure out who leverages it.Repsol is an easy one,maybe smaller companies who own LNG plants terminals?

Apart from the LPs (avoid?) MDU?

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1 minute ago, Don Coglione said:

I am going to be contrary here and state that I think the UK tax system is pretty benign and, frankly, generous - IF you can structure your affairs appropriately.

I accept that anyone on six figures and PAYE is going to squeal.

I agree,the coalition government did wonders.2 x £12.5k allowances.You can have £500 a week tax free a couple and bang the rest in SIPPs.I built my ISA (was a PEP) and added the divs sometimes tax free to my tax allowance to live on.Pension access was also fantastic.I know it might not be popular,but i thought Osborne was a great chancellor,he would of reformed welfare and nearly did if the party hadnt lost its nerve,he still forced through the two child limit though,a crucial policy.

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1 minute ago, Harley said:

 Yield is now only 2.89%.  IMO (DYOR)a tight trade at best from here.  But this is clown world! 

Agreed,I'm not throwing any new money at it.Bretn from sept 2018 $82 should see £5.50 achicevable before we're even breaking any new ground.

had a nice steday time trading the pullbacks on these until there weren't any.I fear some much deeper pockets are at the table and it's time for little old me to move to anotehr game.

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I view the tax system as very unfair.

Anyone with knowledge of it doesnt have to pay tax if they use isa sipp and vct appropiately.

Any normal working people get absolutely exploited.

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