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

[AWW]

7 hours ago, Noallegiance said:

Interesting point. Makes me think of a conversation I've had with someone who was happy to see some of his tax given to the 'benefit class' no-hopers so they don't come round and nick his shit.

He has a point.

That's effectively why benefits are paid at the level where the workshy can have Sky, a TV with its own gravitational field, forty fags a day and as many cans of Stella as they can drink. It's protection money.

[AWW]

When are people on this thread planning to retire?

I'm 40 with two very young kids and want to be done by 50.  Well, actually, I want to be done yesterday, but we currently spend about £4k a month (don't judge me, I'm not Viv Nicholson - we live in London, it's dear).  The pensions part, I'm pretty well sorted, not least because I have been reading this thread for a few years, consolidated a load of crappy work pensions into a SIPP, went shopping in March last year and suddenly have what I need (as long as I can match inflation).  I can't thank the regular contributors enough, particularly that man up in Durham. But...

For those of you planning to retire before pension age, or those of you already retired before pension age, how are you going to bridge the gap to when you hit 57? (or whatever your pension age is).  Same sort of strategy you have in the SIPP, i.e. divis and drawdown?  From what?  S+S ISAs?

[Harley]

3 hours ago, Yadda yadda yadda said:

Only 3% of the population have a stocks and shares ISA.

WTF!

[DurhamBorn]

2 hours ago, AWW said:

When are people on this thread planning to retire?

I'm 40 with two very young kids and want to be done by 50.  Well, actually, I want to be done yesterday, but we currently spend about £4k a month (don't judge me, I'm not Viv Nicholson - we live in London, it's dear).  The pensions part, I'm pretty well sorted, not least because I have been reading this thread for a few years, consolidated a load of crappy work pensions into a SIPP, went shopping in March last year and suddenly have what I need (as long as I can match inflation).  I can't thank the regular contributors enough, particularly that man up in Durham. But...

For those of you planning to retire before pension age, or those of you already retired before pension age, how are you going to bridge the gap to when you hit 57? (or whatever your pension age is).  Same sort of strategy you have in the SIPP, i.e. divis and drawdown?  From what?  S+S ISAs?

Iv retired at 49,and had about 14 years off between 16 and now.Iv 5 years to bridge before SIPP.I use divs from my ISA,i think its about 1/3 of my assets outside of my house and PMs.2/3s are in SIPP.The income from the ISA is a bit tight on what i need/prefer,little wriggle room,but iv also got the next five years direct debits,energy,council tax,water,phone,internet,insurance etc in my accounts in cash.That means i dont have to make hasty choices if divs cut etc.I would prefer if my ISA income and capital were the same in 5 years as id like the tax free income on top of the SIPP income so i dont have to go into tax in the SIPP,but if its lower,even by a lot its not a disaster.

I havent ruled out going back to work sometime for a few months at some points.Iv found that has really worked for me over the years and not paying tax on the wages is always nice.

My partner is still working,and will be for 5 years.However she works 3 x 12r shifts so it works really well now im not working,i cook all meals etc,so when she is on shift she gets meals cooked,everything else done.I could make the 5 years up for her,but she wants to do them,she gets final salary pension,so now she is saving 100% of her income over the tax allowance in her SIPP so no tax and will withdraw the lot between 55 and 67.She also has another final salary she needs to transfer,but at the moment not do-able as nobody is taking insistent client transfers anymore.At 55 though her final salary now pension should cover her income needs on its own with state pension,so more likely she can get an IFA to say yes on the other one then.She also has an ISA with a good amount in ,at the moment divs are being re-invested,but she isnt saving into it as shes full force into the SIPP now.ISA would cover her to 55 if she needed it to,but again the aim of that is to be tax free income on top of SIPP tax allowance and tax free element.

[JREWING]

15 minutes ago, DurhamBorn said:

Iv retired at 49,and had about 14 years off between 16 and now.Iv 5 years to bridge before SIPP.I use divs from my ISA,i think its about 1/3 of my assets outside of my house and PMs.2/3s are in SIPP.The income from the ISA is a bit tight on what i need/prefer,little wriggle room,but iv also got the next five years direct debits,energy,council tax,water,phone,internet,insurance etc in my accounts in cash.That means i dont have to make hasty choices if divs cut etc.I would prefer if my ISA income and capital were the same in 5 years as id like the tax free income on top of the SIPP income so i dont have to go into tax in the SIPP,but if its lower,even by a lot its not a disaster.

I havent ruled out going back to work sometime for a few months at some points.Iv found that has really worked for me over the years and not paying tax on the wages is always nice.

My partner is still working,and will be for 5 years.However she works 3 x 12r shifts so it works really well now im not working,i cook all meals etc,so when she is on shift she gets meals cooked,everything else done.I could make the 5 years up for her,but she wants to do them,she gets final salary pension,so now she is saving 100% of her income over the tax allowance in her SIPP so no tax and will withdraw the lot between 55 and 67.She also has another final salary she needs to transfer,but at the moment not do-able as nobody is taking insistent client transfers anymore.At 55 though her final salary now pension should cover her income needs on its own with state pension,so more likely she can get an IFA to say yes on the other one then.She also has an ISA with a good amount in ,at the moment divs are being re-invested,but she isnt saving into it as shes full force into the SIPP now.ISA would cover her to 55 if she needed it to,but again the aim of that is to be tax free income on top of SIPP tax allowance and tax free element.

Nice post.

[wherebee]

5 hours ago, Yadda yadda yadda said:

Most people leave their pensions in the default settings. These will be increasingly heavy on the ESG (sounds like a food additive that I wouldn't want in my pizza). They don't have to make people invest where they want them to. For most it will just happen and they won't know about it. People, generally, are more scared of stocks and shares than I am of the Government.

Only 3% of the population have a stocks and shares ISA. 33% apparently own shares but I wonder how many of those only have shares in their employer?

https://www.finder.com/uk/investment-statistics

Plus, in many work-related pensions, even when you have a 'choice' the level is not granular enough to avoid the turkeys.  In a rising market, that doesn't matter.  But if, for example, in one pension scheme you want to avoid China entirely on risk and human rights grounds, you cannot.  'FOREIGN' is the bucket, and you cannot know what is in it.

[wherebee]

The canary is looking decidedly off-peak:
A notable drop on Friday (3%).

for those wondering why I track this share, when I have nothing invested - if my theory that this winter will show massive failure of the vaccines across the UK, USA, and Europe in preventing death, and maybe even that they have hastened death in a number of people, this stock will collapse.

Insiders in the company would know this was coming.

So if we see a suddenly drop, or a long grind down, at a time when the 'news' tells us it's booster shots for ever....

And a BK would, I suspect, be triggered by a realisation the west has fucked the pig and spent billions on vaccines which at best do something minor good for six months but overall are a negative.

[AlfredTheLittle]

56 minutes ago, wherebee said:

The canary is looking decidedly off-peak:
A notable drop on Friday (3%).

for those wondering why I track this share, when I have nothing invested - if my theory that this winter will show massive failure of the vaccines across the UK, USA, and Europe in preventing death, and maybe even that they have hastened death in a number of people, this stock will collapse.

Insiders in the company would know this was coming.

So if we see a suddenly drop, or a long grind down, at a time when the 'news' tells us it's booster shots for ever....

And a BK would, I suspect, be triggered by a realisation the west has fucked the pig and spent billions on vaccines which at best do something minor good for six months but overall are a negative.

I don't disagree that the vaccines maybe don't do much, but as far as I can tell covid never turned out to be as bad as first feared, and the vaccines allow the powers that be to backtrack on their initial massive panicked overreaction. 

So the vaccines failing doesn't mean much because there's not a lot they need to do anyway. The money spent on vaccines is neither here nor there, just part of the hundreds of billions (or trillions worldwide) printed then wasted. 

The BK will come with the realisation that printing has to end, assuming it does. Until then the party carries on, covid or no covid.

[Noallegiance]

9 hours ago, AWW said:

That's effectively why benefits are paid at the level where the workshy can have Sky, a TV with its own gravitational field, forty fags a day and as many cans of Stella as they can drink. It's protection money.

I'd never thought of it like that until this fella mentioned it. I can certainly see his point.

For me, the holes in his theory are that he started out by saying that, as a civilised society, we should look after those less able rather than look down their nose at them. I agreed, but the small number of people genuinely unable to work and do necessary things for themselves shouldn't run into the £10s of billions.

Of course, looking after people doesn't mean handing them money and keeping them at arms length. The guy putting this forward is a business owner. He doesn't want to employ these people cos they'd be shit for his business. He'd rather pay them to stay away. But then he stated he believes in education in order to get on in life.

Pretty NIMBY. He's not prepared to educate people by taking them into his business. The university racket is the answer, apparently.

For me, giving people money and ending up in a family of generational benefits does them and society no favours. It keeps them down, removes motivation and they gradually get more expensive for the rest of us to look after.

As always, for me, allow house prices to fall and the need for finance to take over everyone's lives is negated. More time for philanthropy if people choose to do so. More time for people to be with people rather than chuck money at them.

Money doesn't fix these ills.

[Seacrest]

We are at a real cross roads I believe,  in 40 years of manufacturing/procurement I have never experienced the like.

Lean manufacturing and just in time supply chains are decimated, its now buy at any cost to keep going, that is not sustainable.

Energy costs have more than doubled since summer, that is consumed costs only the industry levvies have increased as well, that adds 35% to the bill,  CO2 is up 500% and restricted supplies Argon has a 28% premium currently, cobalt up £17k per ton, steel costs ... the list goes on and on and on  these are not phased they are immediate.

The lag to the consumer is shorter, industry has absorbed all it can in margin reductions. I think that is why consumers have reduced spending most people know someone in manufacturing and bad news travels further than good.   

   

[Harley]

11 hours ago, AWW said:

When are people on this thread planning to retire?

I'm 40 with two very young kids and want to be done by 50.  Well, actually, I want to be done yesterday, but we currently spend about £4k a month (don't judge me, I'm not Viv Nicholson - we live in London, it's dear).  The pensions part, I'm pretty well sorted, not least because I have been reading this thread for a few years, consolidated a load of crappy work pensions into a SIPP, went shopping in March last year and suddenly have what I need (as long as I can match inflation).  I can't thank the regular contributors enough, particularly that man up in Durham. But...

For those of you planning to retire before pension age, or those of you already retired before pension age, how are you going to bridge the gap to when you hit 57? (or whatever your pension age is).  Same sort of strategy you have in the SIPP, i.e. divis and drawdown?  From what?  S+S ISAs?

Looking back, I guess I retired early 50's, that being when I became my own boss (clients apart).  Was still saving since then (I always have) and living frugally (I always have!), apart from investing in kit.  I mostly do what I want, when I want, and how I want. That's as close to retirement as I want, body willing.

[reformed nice guy]

6 hours ago, AlfredTheLittle said:

I don't disagree that the vaccines maybe don't do much, but as far as I can tell covid never turned out to be as bad as first feared, and the vaccines allow the powers that be to backtrack on their initial massive panicked overreaction. 

So the vaccines failing doesn't mean much because there's not a lot they need to do anyway. The money spent on vaccines is neither here nor there, just part of the hundreds of billions (or trillions worldwide) printed then wasted. 

The BK will come with the realisation that printing has to end, assuming it does. Until then the party carries on, covid or no covid.

Even though we know that its funny money, it still has a coupon to pay.

Printing to build infrastructure could grow the economy which *should* offset the rate of interest of printed money - ie print $100B, improve power transmission lines on the grid, saves 2% of electric generated, that pays for the coupon. Something like that.

Like DB has often said, printing to give Chantelle a new trampoline for little Tyrone & Chardonney to play on means that the single male Amazon wage slave next door is the one paying the bill.

The printing will come to an end but the poorer the return on the printing then the sooner that day comes

[Seacrest]

Dominoes toppling will be the first sign domestic construction has stopped - every "builder" I know who is  sat on accepted consumer quotes for future work,  knows  full well they now cannot do the work  at the previously quoted,  but need to reprice and the consumer says not for me thanks,  why has it gone up 30% ?  all of sudden 2 years work that they currently believe they have and the laughable rates they are charging, -  and people are paying,  (demand pull inflation drops away and a big hole appears in order books)-   is no work. 

There is no way input inflation is not at least and I genuinely mean at least 20%  i hope someone on here can prove me wrong that's the reason I post it.

 

[Bobthebuilder]

6 minutes ago, Seacrest said:

Dominoes toppling will be the first sign domestic construction has stopped - every "builder" I know who is  sat on accepted consumer quotes for future work,  knows  full well they now cannot do the work  at the previously quoted,  but need to reprice and the consumer says not for me thanks,  why has it gone up 30% ?  all of sudden 2 years work that they currently believe they have and the laughable rates they are charging, -  and people are paying, -   is no work. 

There is no way input inflation is not at least and I genuinely mean at least 20%  i hope someone on here can prove me wrong that's the reason I post it.

 

I posted a few pages back, that domestic builders I know are stopping doing quotes for extensions etc. People will more likely move than extend, is what I hear from the experienced builders.

One builder I know is just finishing off a loft conversion, £120,000 even the builder thinks its stupid money now.

 

9 minutes ago, Seacrest said:

Dominoes toppling

Read that first bit and thought you were talking about pizza.

[DurhamBorn]

3 hours ago, Seacrest said:

We are at a real cross roads I believe,  in 40 years of manufacturing/procurement I have never experienced the like.

Lean manufacturing and just in time supply chains are decimated, its now buy at any cost to keep going, that is not sustainable.

Energy costs have more than doubled since summer, that is consumed costs only the industry levvies have increased as well, that adds 35% to the bill,  CO2 is up 500% and restricted supplies Argon has a 28% premium currently, cobalt up £17k per ton, steel costs ... the list goes on and on and on  these are not phased they are immediate.

The lag to the consumer is shorter, industry has absorbed all it can in margin reductions. I think that is why consumers have reduced spending most people know someone in manufacturing and bad news travels further than good.   

   

We have made some mistakes along the way,but this thread i think has proved closer to whats happened than anything iv seen.We said how long supply chains would have to return closer to home etc.Next comes the companies that collapse,but the price increases dont go away,its just the fewer companies find it easier to pass on those increases,inflation feedback loops are kicking in now.

Its ironic,but if a few of my old employers had employed me to provide this roadmap to them id of saved them multi millions.Of course they would of laughed at me,well they arent laughing now.

 

[Don Coglione]

7 minutes ago, Cattle Prod said:

This is how houses hedge inflation. Every brick and pipe inflates with the replacement cost. If the 120k loft conversion sounds like stupid money, well it's just been added onto the price of houses that already have them. I get @DurhamBorns view that housing will take a big hit, but I think it's more specific than that. I think poor quality new builds, and the overpriced land a house is sitting on (the SE) will take a hit, but solid houses that are valued at building cost plus a reasonable amount for the site will continue to hedge inflation.

I realise this is an unpopular view around here, but I've seen it that way for a long time. Once I'd convinced myself that my house wasn't overpriced (by taking a pre 2000 sale price and inflating it by RPI) buying it three years ago on a 10yr fix was a no brainer. I'm in the SE, but just far enough away from London to get away with it I think.

That said, as mortgage service costs haven't increased in decades it's clear that almost all the house price 'bubble' has been driven by interest rates coming down. So prices will have to come down as rates go back up. But if it's a quality house, I think it'll probably stay flat in real terms. If you're on variable, and wages increase with inflation, service costs as a % of income will keep pace.

This has long been my view also.

[DurhamBorn]

I think on houses BTL and slave box new builds will take most of the hit.Those new build estates are horrible places after just a few yearss.BTL will take a massive hit going forward,not just servicing the mortgage,but repairs,regs,tax etc.

I think more families will share space etc.Not large at first,but growing.Its the best way to avoid the massive inflation in bills,including council tax.

I think BTL ,tax credits and housing benefit have been a disaster for this country.Pendulums swing hard the other way at cycle changes though,and usually overshoot the other way.

[Bobthebuilder]

10 minutes ago, Cattle Prod said:

I realise this is an unpopular view around here, but I've seen it that way for a long time. Once I'd convinced myself that my house wasn't overpriced (by taking a pre 2000 sale price and inflating it by RPI) buying it three years ago on a 10yr fix was a no brainer. I'm in the SE, but just far enough away from London to get away with it I think.

I used house prices adjusted for inflation when I bought mine in the SE in 2012. Its pretty much tripled since then and recently has probably fallen by a large percentage during the last 2 years.

I see the SW as being in a larger bubble now than London, many other places too.

I must add that I saw owning a house debt free and in good condition to last me the next say, 20 years as an important part of my life / retirement plans. I don't think I would be able to achieve the same result buying in the SW today on local wages.

[Shamone]

7 minutes ago, DurhamBorn said:

slave box new builds

I’ve tried, and you cannot get an estate agent or the developer to give you an answer as to the ongoing management charges or if they are capped. I believe it will be the next big scandal.

[AWW]

41 minutes ago, Cattle Prod said:

This is how houses hedge inflation. Every brick and pipe inflates with the replacement cost. If the 120k loft conversion sounds like stupid money, well it's just been added onto the price of houses that already have them.

Or taken off the value of those that don't...

[Noallegiance]

11 minutes ago, AWW said:

Or taken off the value of those that don't...

I look at places for sale in my area.

Many of them have had lots of modernisation.

So nice of them to splash the cash on updating them for me so I don't have to!

[JMD]

16 hours ago, AWW said:

That's effectively why benefits are paid at the level where the workshy can have Sky, a TV with its own gravitational field, forty fags a day and as many cans of Stella as they can drink. It's protection money.

In the 90's I heard it referred to as being 'hush' money. The name is inconsequential of course, but my point is that the concept has been well known for long time. 

[Majorpain]

10 hours ago, wherebee said:

The canary is looking decidedly off-peak:
A notable drop on Friday (3%).

for those wondering why I track this share, when I have nothing invested - if my theory that this winter will show massive failure of the vaccines across the UK, USA, and Europe in preventing death, and maybe even that they have hastened death in a number of people, this stock will collapse.

Insiders in the company would know this was coming.

So if we see a suddenly drop, or a long grind down, at a time when the 'news' tells us it's booster shots for ever....

And a BK would, I suspect, be triggered by a realisation the west has fucked the pig and spent billions on vaccines which at best do something minor good for six months but overall are a negative.

Media is already starting to push for lockdown before the flu season really kicks off, but with inflation starting to surge and the lights looking like they are going off at some point this winter, there may be more important things than a virus to worry about!

Furlough at the minimum looks completely off the table, I very much doubt people are going to willingly sit in the dark with no income for weeks on end this time around!

[Talking Monkey]

2 hours ago, Bobthebuilder said:

I posted a few pages back, that domestic builders I know are stopping doing quotes for extensions etc. People will more likely move than extend, is what I hear from the experienced builders.

One builder I know is just finishing off a loft conversion, £120,000 even the builder thinks its stupid money now.

 

Read that first bit and thought you were talking about pizza.

So did I, it took me a while to get the gist, pizzas I'm always thinking about pizzas

[Loki]

4 minutes ago, Talking Monkey said:

So did I, it took me a while to get the gist, pizzas I'm always thinking about pizzas

I blame Durumborn