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

[Harley]

18 minutes ago, Chewing Grass said:

^^^ that is as good financial advice as you'd get off most financial advisor’s.

Even if correct though (and I do worry), it can be a lot more complex.  How far they go (or rather the data they use goes) I don't know.  But the compounding principles are useful, as Einstein suggested!

[HousePriceMania]

20 minutes ago, DurhamBorn said:

Exactly this.Nobody dare sell as nothing to buy,unless you buy a new build of course.Around me now no family 3 beds come up,or odd ones and all the decent ex council ex and terraces bought by BTL and shipping in loads of southern bennie types.Big house builders should be laughing in this sort of market.

I genuinely would go and buy a house right now with a big mortgage ( as I fully expect massive inflation ) but there is nothing worth buying at any price in the area I need to live in, anything half decent is selling for silly money to silly people.

This fact has stopped me buying into it.

But when you sit down and think about it, the market has the look of a non-functioning market about it and as such buying into it is probably a bad idea, so maybe the silly people are doing me a favour right now.

If transactions fall off a cliff and given the silly prices and the lack of stock I have no reason to believe that they wont, then the banks are in trouble because their business model dries up, the estate agents are in trouble because there's no commission, rightmove will be in trouble because there will be few agents listening there.   The only solution to this it to collapse prices, mass repos, get the market moving again.

Interesting times for sure.

 

It's a bit like the supply chain issues.  They need to get the market moving and pushing up prices will make this worse, not better.

[HousePriceMania]

 

[Starsend]

1 minute ago, HousePriceMania said:

 

Classic bubble stuff

[HousePriceMania]

UK10 year gilt

 

[HousePriceMania]

50 minutes ago, Starsend said:

Classic bubble stuff

FOMO/Greedy/Irresponsible

The time to get into crypto was when 1 BTC was when it was 10p not when it was £50,000.

 

[Majorpain]

2 hours ago, sancho panza said:

Well worth 29 minutes of anyone's time.George Gammon goes through why there are supply chain problems and why they're not going to get resolved anytime soon.Goes on the assess the probabailityof an economic crisis(high),lays outs a few templates and then concludes that the lockdown template witll be used for climate change purposes in the future when we'll be stopped from travelling to 'save grandma the planet'

Lot of this stuff is already discussed herein,but this is a really decent synopsis and as ever,Geroge puts a lot of the detail within an easy to grasp structure.

One of our suppliers went under a few weeks ago, European tungsten shortage means tooling has become harder to get hold of than Gold/Silver (not joking!).  No tooling = No Turnover = No company which was unfortunate for 16 people.

[HousePriceMania]

42 minutes ago, Majorpain said:

One of our suppliers went under a few weeks ago, European tungsten shortage means tooling has become harder to get hold of than Gold/Silver (not joking!).  No tooling = No Turnover = No company which was unfortunate for 16 people.

That'll happen with the housing market soon enough

[kibuc]

47 minutes ago, HousePriceMania said:

FOMO/Greedy/Irresponsible

The time to get into crypto was when 1 BTC was when it was 10p not when it was £50,000.

 

Every time I start getting FOMO, I ask myself what is more likely (or what should happen sooner): BTC going to 200k or Abraplata going to $2cad. Even if BTC rips, I feel that a well-built miners portfolio has a good chance of keeping up with much less drama*.

*Make no mistake, it's still not for the faint-hearted! But significantly less so than crypto.

[Hancock]

1 hour ago, Starsend said:

Classic bubble stuff

More tulip mania stuff.

[MvR]

2 hours ago, DurhamBorn said:

If the BOE increase rates and if they drop QE to £40 billion a year i think sterling / dollar goes to $1.78,thats my target .Now, going through my portfolio most of my assets gain from falling sterling,not rising.Tricky.

I try to mitigate this by either making sterling denominated bets on dollar denominated instruments in my spread betting account for short/medium term trades. ( eg. SLV, GLD ), or for longer term stock positions, hold a negative dollar balance in my IB account if I think the dollar will fall.. basically buying US instruments with borrowed dollars.

I realise you're thinking about UK stocks here so I guess your targets are based on your cross-market work so I'm not sure how it would work for you, particularly in ISAs where you can't hold a negative cash balance or multiple currencies. 

There's also the added complication of digital currencies, which to me appear to be their proposed solution to replaced debt based QE.  How does it work if the UK reduces QE, but at the same time, increase digital currency issuance to pay benefits / UBI, which can only be spent on essentials, and not pumped directly into assets?

 

[nirvana]

2 hours ago, DurhamBorn said:

i think sterling / dollar goes to $1.78,thats my target

holy guacamole Batman! For real? How about GBP/JPY? I fancy a flight to Japan and visit some car auctions, try and drive it back....actually I best have a smoke to calm down....

1.78...bloody ell......hmmmm, cable longs lol

[CVG]

39 minutes ago, nirvana said:

holy guacamole Batman! For real? How about GBP/JPY? I fancy a flight to Japan and visit some car auctions, try and drive it back....actually I best have a smoke to calm down....

1.78...bloody ell......hmmmm, cable longs lol

It was 2 not so long ago. At that rate I might start looking to see if there are any dollar assets I fancy purchasing.

[Axeman123]

 

 

I am starting to worry about Dave...

[Axeman123]

3 hours ago, DurhamBorn said:

If the BOE increase rates and if they drop QE to £40 billion a year i think sterling / dollar goes to $1.78,thats my target .Now, going through my portfolio most of my assets gain from falling sterling,not rising.Tricky.

Firstly, thanks for starting this thread which I have really found usefull. A lot of talk here has focused on Euro appreciation to drive DXY down, due to it's 57.6% weighting in the index, which of late seems rather unlikely. How would 1 GBP = 1.78 USD move the DXY if everything else remains fairly constant? I make that a 29% appreciation from here, which at 11.9% weighting in the index, would only take DXY to around 90 if all else remains constant.

Fascinating stuff, please forgive my limited knowledge.

[DurhamBorn]

7 minutes ago, nirvana said:

holy guacamole Batman! For real? How about GBP/JPY? I fancy a flight to Japan and visit some car auctions, try and drive it back....actually I best have a smoke to calm down....

1.78...bloody ell......hmmmm, cable longs lol

Mid cycle target,not a trading target.I havent done currency for ages,but i took a guess on UK QE and rates and likely US policy and thats the number im getting.For me its a problem given some of my big holdings earn most in dollars.Its dollar weakness so commods look likely to leverage fall.Always BK risk closer in of course hits sterling.

 

[DurhamBorn]

9 minutes ago, Axeman123 said:

Firstly, thanks for starting this thread which I have really found usefull. A lot of talk here has focused on Euro appreciation to drive DXY down, due to it's 57.6% weighting in the index, which of late seems rather unlikely. How would 1 GBP = 1.78 USD move the DXY if everything else remains fairly constant? I make that a 29% appreciation from here, which at 11.9% weighting in the index, would only take DXY to around 90 if all else remains constant.

Fascinating stuff, please forgive my limited knowledge.

Im seeing 86 still on the dollar ,really fuzzy though.

[DurhamBorn]

6 minutes ago, Cattle Prod said:

Thanks DB. If that happens, and a few other CBs follow suit, won't that mean the dollar index drops, meaning commodities will gain more than they lose in the ~30% forex hit you see? Sterling alone would hit the DXY for 3.3%..

Yes,commods should leverage it for us enough to make more on those holdings,but it would hit the likes of BAT etc and some telco divs.Im going to look again after the November BOE meeting.That was max number as well,but interesting that its showing a mid term strength in sterling.

[Harley]

54 minutes ago, Cattle Prod said:

Thats brilliant Harley, thank you! I've been trying to do something similar in much more amateur way. Where do you adjust your investment return into the formula? Just change the inflation rate of 5% to 3%?

 

Ta, yes, just use the net rate as both streams (inflation and returns) share the same time profile.

[Loki]

Sorry, bit tradey for this thread but still - big earnings week next week

https://www.ii.co.uk/investing-with-ii/international-investing/us-earnings-season

[Harley]

@DurhamBorn a rather stretched question I admit but I'm looking to use my earlier stuff to update my financial plan for the next 20 years:  What inflation rates would you use for planning purposes over the next 20 years (or up to whatever you have)!  I'm wondering if I can get better than assuming one rate for the period and instead use a series of rates, e.g. 8% from 2023 to 2025, 5% from 2026 to 2030, etc.  Appreciate it's a stretch question but the better the assumptions....

[sancho panza]

On 20/10/2021 at 18:49, DurhamBorn said:

There is huge systemic risk now.Its between the mass scroungers ,welfare and state worker and private sector workers.Im watching like a one eyed Kestrel on if the BOE raise rates but still QE.My dial is homing in on when QE goes so low government cant fund on the bond market.Its close.I think the structural deficit is over £120 billion.

I jsut had to google structural deficit ,The more I sit and watch ,the more totally unsustainable it looks.Not just the welfare and NHS spending but also the govts ability to fund the fiscal deficit with QE.There was a chart posted earlier with a sharp rise in the ten year yield.I'm jsut amazed it's taken so long.

Last tax year Govt borrowed something like £270bn and the BoE printed £250bn of it...................

[sancho panza]

2 hours ago, Cattle Prod said:

5 and 10 year breakevens are breaking out. 5 year at 15 year highs, 10 year almost there.

I just noticed that gold is up on a day when the USD and the 10 year Treasury yield are both also up. Make of that what you will, but I see it as different behaviour. Could be a flight to safety because of Evergrande or something but ...TLT is flat.

Some PM miners are super cheap on a cashflow basis anyway,you're getting the yellow stuff in for free so to speak.We've been long most of these from lower down but even so......some of these could double and still be godvalue on  a relative basis

Last figure on the chart is the p/e ratio.

[JREWING]

It's what I love about this thread. Big up and thank you to Born up there in Durham for initiating the thought for forum.

I think. We are all going to get our pants pulled down, ass spanked in some way. If you have something well someone else wants it. Reminds me of being a kid with more marbles than the kid with huge fists. You squeezed his balls but he still took yours.

They're coming. Best thing is we'll all lose something but by discussions and understanding well don't make it right but makes one less bitter.

I'm not one to blame. Cattle prod made a good point in his post. Blame is for me pointless and cowardly. Stand up own your shit. Ask yourself could you survive as Papillion. I could easily, but I'm physically and mentally fit. 

Bricks and Mortar, share certificates. Wealth no. Health is. You're health and your loved one's. Easy really. Just never end up needing one of their electric scooter things. Rant over. Blame no one accept responsibilities and be your own man/woman. Blame is bollocks.

PS. Hope the market crashes for Hancock. Get him a cheap pad and portfolio. 

[23rdian]

5 hours ago, Loki said:

Sorry, bit tradey for this thread but still - big earnings week next week

https://www.ii.co.uk/investing-with-ii/international-investing/us-earnings-season

In case anyone missed this...

For one week only (25 to 29 October 2021), we’re removing trading fees on buys and sells of US shares. FX charges and terms apply.

I went on a bit of a binge last time they did this with generally positive results apart from buying T.

FML