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

[Majorpain]

2 hours ago, Junction25 said:

Quick question has everyone sold their £10 shell shares ? looks to Me like Shell may have peaked ? or what do you think the price will peak at ?

I'm treating Shell/BP as Dividend machines, my nice low purchase price got me some good quarterly income that effectively pays for my petrol, Divi's are more likely to increase in value than decrease so good future prospects as well IMO.

Just need some Telco's with their RPI +3% increases to pay for my phone bill and that's another monthly outgoing ticked off.

[geordie_lurch]

12 minutes ago, Loki said:

Anyone know what time it is, or what time the minutes get released?

From a Zerohedge article I've just read @Loki "Traders will be on the lookout for any surprise announcement out of the White House after 1:15pm when Joe Biden holds an Oval Office meeting with Fed Chair Jerome Powell and Janet Yellen."

[ThoughtCriminal]

Nah, it'll be fine 🤡🤡🤡

[Noallegiance]

UK Credit Card Borrowing Soars Most Since 2005

Credit card borrowing jumped in April at the fastest annual rate in over 16 years, today’s data shows.

The Bank of England reports that credit card borrowing was 11.6% higher than in April 2021, marking the biggest increase since November 2005.

That will ring alarm bells at the Bank of England, says Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco:

 

It shows the economic storm clouds are getting darker by the day. People can take out credit and loans if they are confident, but in this case it’s almost certainly because they are seeking extra cash to cover their bills and put food on their tables.

The drop-off in mortgage approvals is surprising as April and May have been exceptionally busy, although we do expect the combination of weaker borrower sentiment and lenders tightening their affordability to feed through in the months ahead.

[Loki]

1 minute ago, geordie_lurch said:

From a Zerohedge article I've just read @Loki "Traders will be on the lookout for any surprise announcement out of the White House after 1:15pm when Joe Biden holds an Oval Office meeting with Fed Chair Jerome Powell and Janet Yellen."

Thanks Geordie, time to dust off my YOLOing shoes. Watch and learn

[sancho panza]

4 hours ago, WICAO said:

It's almost as though they want to ensure boom and bust.

Absolutely amazing that they were lending at those levels. Especially with no recession in 30 years lulling people into thinking oz isn't subject to normal economic cycles.

4 hours ago, feed said:

Print and they will come.  So long as the banks are prepared to lend and people are prepared to take on the debt.  

Transition as WFH shifts money from the SE to the rest of the country and more hollowing out of the middle ground.
Shit holes where no one will lend or borrow move to the professional rental services and nice middle class areas with retirees prices increase but value is eaten away by inflation.  Stealing from old people slowly.  

London property, well that just becomes more an asset class for the global wealthy.  
 

https://www.mansionglobal.com/articles/foreign-ownership-has-grown-in-london-despite-travel-restrictions-01646850620

London’s foreign-buyer contingent owned £59.3 billion (US$78.1 billion) worth of property in the capital during 2021, an uptick from 2020 despite widespread travel restrictions, which only began to lift at the tail end of the year, according to a report Wednesday from London-based lettings and estate agent Benham and Reeves.

The total value of homes owned by overseas residents in the city last year was £6 billion more than 2020, and equated to 85,451 properties in foreign hands, 4% more than the 81,872 the year before

 

A lot of the people buying in londinium will be those leaving stalag left new zealand or the melbourne re education camps.as well as people getting cash out of china/russia

[sancho panza]

4 hours ago, Democorruptcy said:

B&M are having a bad day so far. They are the cheaper end of the market and like for like sales are well down. No wonder the governbankment wants to up bennies.

 

Awful numbers @Ash4781b knows ac thing or two about retail iirc.he comes down here once in a while.wonder if this is company centric or across the board?

Thei r bottom line is going to get smashed further out in a year or two. 

3 hours ago, Castlevania said:

Gold Fields have announced a merger with Yamana at 0.6 Gold Fields shares for every one in Yamana.

Damn, AUY is widely held amongst the goldies buyers down here. FCF machine going forward. 

We sold GFI in Sept 20 and i don't want it back unless it's cheaper than $5.....

Can see more of this M&A in the goldies.NGD looks a sitting duck at these prices sadly.

 

3 hours ago, geordie_lurch said:

I do a lot of work with online retailers large and small and nearly all of them have seen sales down at least 30% for several weeks now which just further reinforced my view that we are already deep in a recession but the 'official' numbers just haven't confirmed it yet.

The headline retail figures will mask it as people spend more on food, fuel and clothes it'll hide the drop in discretionary spend.

 

Can you name the companies?no worries if not

[geordie_lurch]

17 minutes ago, sancho panza said:

Can you name the companies?no worries if not

I can't but you can see from this previous report from the industry discussing figures from April that "Shoppers did more of their spending online in April than in March – but spent almost 11% less than a year ago"

Karen Johnson, head of retail and wholesale at Barclays Corporate Banking, says: “April was a month of two halves. Travel, holidays and family gatherings around Easter helped drive spend over a key weekend in the month, but the post-Easter reality of rising energy costs and inflation heavily impacted spending later in April.

“Customers are increasingly conscious of the cost of their baskets, and are actively seeking out own brands or deals to reduce costs, which is helping to maintain sales volumes in supermarkets and other essential retailers. Non-essential retail has seen the biggest fall in volumes within the sector, as many consumers simply don’t have the disposable cash to spend on these type of purchases.

You could also look into other companies that are at the coalface of eCommerce ad spending such as this post by a company that manage large Google Ads budgets: The Pandemic-Ecommerce Bubble Has Burst but note again this was using data from March not May 2022

"Drop in Demand

With the rising cost of living, we are now seeing a drop in demand especially within Fast Moving Consumers Goods. As consumers continue to tighten their belts ahead of uncertain times, consumer buying will be prioritised by ‘needs’ rather than ‘wants’. This issue is further compounded by the increased competition and advertising costs.

This is having a sharp impact on Return On Advertising Spend, (ROAS) in Google Shopping campaigns already. ROAS has now dropped to levels not seen since February 2019 again further highlighting a return to normal whilst spend this month is set to be on par with November 2020.

Many Google Shopping advertisers are seeing a stark drop in both revenue and spend due to their campaigns still containing higher ROAS Targets."

From what I have seen personally, I think May's sales will be even worse than the -11% from a year ago - I'd say -30% for non-essential retail at least unless the figures are majorly fudged and with everything going on I think it's only going to get worse

 

[sancho panza]

3 hours ago, M S E Refugee said:

A few of the NPC's at work aren't as cocky as they used to be, it is okay to virtue signal if it doesn't affect you.

What's an NPC?

3 hours ago, Junction25 said:

Quick question has everyone sold their £10 shell shares ? looks to Me like Shell may have peaked ? or what do you think the price will peak at ?

No.

No idea.weak dollar phase may launch oil on an exponential move north, maybe not

1 hour ago, ThoughtCriminal said:

Agree entirely.

 

From the number on benefits, healthcare, power generation, immigration, the whole country reeks of incompetence. It's just teetering.

 

Western Civilisation as a whole has been getting by for decades on the third world accepting our toilet paper money for their cheap goods. That's ending.

 

I've said it before but we're seeing a paradigm shift. Reality is going to be one hell of a shock for 99% of the population.

good post TC.

as has been said,  no coincidence that we began heading towards GD2 in 1998 with the repeal of glass steagall heralding a banking arms race to 08.it happened at a aftet all the people who'd suffered through GD1 left office.

the policy errors since are no more than you'd expect from a political elite with little real world experience outside of a few niche professions.

 

 

 

[Animal Spirits]

1 minute ago, sancho panza said:

What's an NPC?

They look like this:

https://en.wikipedia.org/wiki/NPC_(meme)

[sancho panza]

1 hour ago, kibuc said:

Gold Fields is buying Yamana. Big boys are getting bigger.

You got a view on the price K? As I've said, I'm sad to see it leave my portfolio at that price

[Castlevania]

@sancho panzaNon Player Character. 

[JMD]

6 hours ago, Alifelessbinary said:

This is where Home England and GLA are already stepping in to plug the gap. I’ve heard of schemes in London where the grant has been over £40k per flat (infrastructure, affordable housing grant ect…) While I completely disagree with the constant meddling in the market no government can allow the housing industry to shutdown, as they need a constant stream of projects to retain the skill base. Considering how important home owners are to the Conservatives voting base they are doing a terrible job of maintains housing construction.

Rapid labour and material inflation is already causing havoc for contractors throughout the U.K. I’m not sure what props the government has for housing, especially when affordable housing and sustainable requirements are making developers land bank sites or look for alternative uses. We’ll certainly see a few house builders struggle especially those who have forgotten their financial history.

Where conventional house building fails I wouldn’t be surprised to see a bigger push towards Private Rented Sector (PRS). Companies like Grainger are already seeing good returns in this area and might be able to arbitrage long term returns to snap up distressed assets. Minimum lot size is 100 units, but the sweet spot is 200-400 to ensure efficient management services. 

They’ll still be money to made in residential property, however developers will be careful to shield themselves from price fluctuations. I can already see a shift from unconditional deals to promotion agreement, or subject to planning arrangements. 

It’s an interesting situation where we have huge demand for housing, with limited supplies, however prices mean that most of the demand can’t afford to buy. In the short term I can see all of the COVID price rises being reversed, we’ll then need to watch government action to assess if things will become worst. Most people don’t understand the difference between nominal and real price changes, so the government will try to keep nominal prices flat where possible to avoid a panic in the electorate.
 

 

 

 

Interesting. But what are the alternative uses for their land that house developer companies investigating/doing?

[reformed nice guy]

1 hour ago, Pip321 said:

Am I allowed to say Martin Lewis was wrong? Is that sexist or racist or something nowadays….I know he is untouchable following his heroics getting us all £400 fuel allowance free from the government (well, free but paid for by ourselves) .😆

 

[DurhamBorn]

2 hours ago, Starsend said:

Do you think it's possible for them to stop printing? Are the scale of the required cuts in public spending simply too great for them to do? Be interested in your thoughts as to what you think they'll do.

They can see what's coming down the road which is why they're trying so hard to pump up immigration again. They can't see any other way out other then massive growth which I just can't see happening as it requires a cohesive Government plan - not just flooding the country with more cheap labour.

I think printing is over,or even if they start it wouldnt be large.They might get lucky though with a big sterling rally yet.Im seeing signs in the data i use for currency there might be 12% up in sterling next.Im the other side of the Bank of America trade .Economy is sending loads of price signals,but polos are trying to hold back the Amazon with a turf dam.

[Lightscribe]

8 minutes ago, Castlevania said:

@sancho panzaNon Player Character. 

[feed]

I think we need to be careful with the YOY on sales figures, with the lockdowns effects from early 2021.

Pubs for instance.

When did pubs reopen inside 2021?
Pubs and restaurants in England will be able to reopen on 17 May, Prime Minister confirms. Boris Johnson has confirmed that indoor hospitality settings will be able to unlock next Monday (17 May)

That's just the equivalent of 2 weeks ago.. 

 

 

[Alifelessbinary]

1 minute ago, JMD said:

Interesting. But what are the alternative uses for their land that house developer companies investigating/doing?

That very much depends on the type of developer and their strategic land strategy. For green field sites options are more restricted, however these are rarely sold unconditionally. Urban plots have more flexibility but management costs can still cause paid, especially for over leveraged firms.

Larger developers will be looking to renegotiate promotion agreements with land owners to a level that will allow them to still achieve an acceptable level of returns. Success on this pin to will depend on planning progress and whether the land owner is prepared to wait another development cycle. The developers will also be using the current news to reduce S.106, CIL and affordable home requirements. Many will also be changing the scheme mix to optimise returns.

I’ve seen many sites with residential allocation shifting to either industrial or commercial uses recently. There’s obviously only so much capacity for these types of schemes, so developers need to commit to the strategy early. 

Like many area at the moment there is a skill shortage, so the job market is strong. I’m monitoring a few firms to see if they start to let people go, as if this happens you’ll know that they are becoming lean to weather the storm ahead. Most professionals at the moment seem relaxed, inflation is causing people to act cautiously, although most firms are happy to store profits in good quality assets. 

 

[janch]

UK is considering re-opening the Rough storage facility to store gas just in case gas supply is threatened for next winter plus extending the use of Hinkley B and coal-fired power plants:

https://www.bbc.co.uk/news/business-61633993

They seem to have found their reverse gear all of a sudden. 

[Option5]

4 minutes ago, janch said:

UK is considering re-opening the Rough storage facility to store gas just in case gas supply is threatened for next winter plus extending the use of Hinkley B and coal-fired power plants:

https://www.bbc.co.uk/news/business-61633993

They seem to have found their reverse gear all of a sudden. 

Rough storage was always a net user as it leaks at the old depleted production wells due to them not being sealed off for the higher pressure that pumping gas in causes.

[Barnsey]

4 hours ago, DurhamBorn said:

Yes,thats 25% though inflation adjusted.Thats middle though of course,could be 15%,front loaded etc.My roadmaps tend to work very well at showing where we are going,how we get there cant really be tracked.30 months time might look like a sweet spot to buy.Lets see how it develops.

Be fascinating to see how things unfold in the States, house prices up a whopping 35% in Tampa past year alone 

[kibuc]

1 hour ago, sancho panza said:

You got a view on the price K? As I've said, I'm sad to see it leave my portfolio at that price

Too big to fail be of interest to me, but in general I'd hate my miners to be taken out at the current depressed prices (unless it's for a 400% premium).

[Heart's Ease]

I am still learning about reverse repo. 

 

[Boon]

44 minutes ago, Alifelessbinary said:

That very much depends on the type of developer and their strategic land strategy. For green field sites options are more restricted, however these are rarely sold unconditionally. Urban plots have more flexibility but management costs can still cause paid, especially for over leveraged firms.

Larger developers will be looking to renegotiate promotion agreements with land owners to a level that will allow them to still achieve an acceptable level of returns. Success on this pin to will depend on planning progress and whether the land owner is prepared to wait another development cycle. The developers will also be using the current news to reduce S.106, CIL and affordable home requirements. Many will also be changing the scheme mix to optimise returns.

I’ve seen many sites with residential allocation shifting to either industrial or commercial uses recently. There’s obviously only so much capacity for these types of schemes, so developers need to commit to the strategy early. 

Like many area at the moment there is a skill shortage, so the job market is strong. I’m monitoring a few firms to see if they start to let people go, as if this happens you’ll know that they are becoming lean to weather the storm ahead. Most professionals at the moment seem relaxed, inflation is causing people to act cautiously, although most firms are happy to store profits in good quality assets. 

 

What strikes me is that there is a scissor effect for the builders, on one hand their input costs go up, on the other the potential sale prices of their houses have big pressure on them with no HTB and higher interest rates reducing affordability.

At even 20% net margins this isn't much room and it could well be that some of the current developments would be unprofitable if they started from scratch today.

Given this I do wonder if a housebuilder could simply acquire a residential services company and become BTR themselves? The other choices to them don't really seem that palatable, either build at a loss, or sit on your hands and don't earn anything.

One thing that we might see is that even if house prices fall due to forced sales, rents will be slower to go down as interest rates affect landlords.

[JMD]

7 hours ago, Democorruptcy said:

The BoE are supposed to have been scratching their heads for years about why productivity is low. My Imputed Labour has nailed it for them hasn't it? People like @DurhamBornare a classic example. He could be working full time and more productive but instead he's claiming bennies and not working, those on tax credits might just have reduced hours. The missing part of the puzzle though is that he's stealing the productivity of others, by having more time to do labour without paying someone else to do it. He's done his own fence, cut his own tree etc. if someone is working full time they might have got a man in, their productivity would be in the system and added to GDP.

 

I don't think economists are baffled by the 'low productivity problem'. In fact I would guess they are perfectly happy to ignore what's staring them rudely in the face! After all measuring human productivity points to the real crises in the economy (and who wants to tackle real problems?)... in that human-productivity vs tech-productivity very much highlights how humans are becoming more and more irrelevant in regards wealth generation. I don't mean in absolute terms, but crucially they are within our current economic system, and moreover this will be the first time in history that this has occurred.                                                                                                                          Peter Thiel has been discussed recently on the thread and Eric Weinstein (he of the dark web; and also brother of Brett/Evergreen University debacle) is MD of Thiel Capitol. Below is an article, not a brilliant one and is also a few years old, but does touch on the productivity question. Anyway I bet his boss (Thiel) plus the other powerful tech/social media billionaires all very much buy into this type of thinking and so these ideas might become the entrenched direction over next 20 years, at least it provides a different model to the Klaus Schwab one!!                                                                                                 https://www.vox.com/policy-and-politics/2017/7/25/15998002/eric-weinstein-capitalism-socialism-revolution