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


spunko

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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

Agreed. Would rather not have this deal. Perhaps another bidder will come in for it.

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Inflation in Poland in May: 13.9% YoY. Rates at 5.25% with a 7.75% target.
 

That dip in Feb reflects special measures taken, including cutting VAT on a range of goods and services from 23% to either 8%, 5% or 0%.

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geordie_lurch
1 hour ago, feed said:

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

Yep I totally agree you have to be careful with YOY comparisons @feed but online sales are very different to standard bricks and mortar retail (or pubs which you mentioned) as per the links and anecdotes I posted about. The data for this specific part of the economy was screaming that non essential spending was dropping rapidly in April and my educated guess is that it's only going to get increasingly harder for both retailers and consumers in 2022 due to inflation both stealing discretionary spending money from customers and all input costs increasing for retailers :Beer:

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51 minutes ago, Barnsey said:

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

Where I live (south coast) I would say house prices have gone up around 30% in the last two years, so if there is only going to be a 10% decrease over the next 2 years it will be a blip and have no significant impact on affordability, especially if interest rates are rising.

 

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Lightscribe

I think any house price correlation has to be taken with a pinch of salt. Monetary stimulus and central banks is one thing, but anything in regards to humans and emotion is another.

Remember that house prices and ‘bricks and mortar’ attitude has been well entwined into the British economic psyche for decades.

Previous cycles were long forgotten by those just staying put for years, the only ones burnt were the unlucky ones who’s hand was forced (three D’s and buying at the top of the cycle). Then the last decade went way off kilter with stratospheric deviation to wage/price ratio, gentrification and sentiment to match.

The moment of realisation that trees don’t grow to reach the sky, inflation is here to stay and BTL is a loss making investment will be devastating. The supply/demand narrative will be turned on its head with those cashing in their chips trying to catch the top of the cycle. That coupled with a very small number who can actually buy, with free cash funds (once everything is selling off) and banks willing to lend.

This will vary massively on area, and the south will be decimated. I can easily envisage 50% nominal falls (far less than that up north). 

Properties like this in Tooting (used to be a shithole) below were £200k 20 years ago and £300k 10 years ago. It’s not difficult to imagine that decade of cheap credit could reverse astronomically to 2012 prices.

5150FA2C-3911-432E-88AD-F8FFA50AC345.thumb.jpeg.bdad91fc9f70f8c9cae4dd957222c8bf.jpeg

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4 hours ago, leonardratso said:

hey, saint martin of the morons if you please.

I was shocked to learn he was married. Mind you might be to a bloke, i dont know, i couldnt be arsed to do any further research on the one who saved us 20pence this decade but cost us £80K.

I think he looks rather shocked these days on tv, as if some form of reality had caught up with him and kicked him squaw in the nutz.

He's married to a former weather presenter, the BBC Click presenter... not a bloke, she's definitely female!!

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Joncrete Cungle
43 minutes ago, kibuc said:

Inflation in Poland in May: 13.9% YoY. Rates at 5.25% with a 7.75% target.
 

That dip in Feb reflects special measures taken, including cutting VAT on a range of goods and services from 23% to either 8%, 5% or 0%.

One of the Polish lads at work has just been back for two weeks holiday. He said he was shocked how much prices have gone up and how quickly. A loaf of bread is now over £2, even in the poorer rural areas.

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15 minutes ago, Joncrete Cungle said:

One of the Polish lads at work has just been back for two weeks holiday. He said he was shocked how much prices have gone up and how quickly. A loaf of bread is now over £2, even in the poorer rural areas.

2 quid for a loaf in Poland, that cant be true, surely about 50 p?

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21 minutes ago, Joncrete Cungle said:

One of the Polish lads at work has just been back for two weeks holiday. He said he was shocked how much prices have gone up and how quickly. A loaf of bread is now over £2, even in the poorer rural areas.

Arguably, a load of bread in Poland has a decent chance of being actual bread, unlike the shite you'll find around here. But prices have gone up massively nevertheless, I've come back yesterday and if I weren't on UK wages I'd be feeling the sting for sure. House prices in particular went through the roof although sales seems to be drying up now as the rates are going up and the borrowing criteria also get tightened.

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22 minutes ago, Lightscribe said:

I think any house price correlation has to be taken with a pinch of salt. Monetary stimulus and central banks is one thing, but anything in regards to humans and emotion is another.

Remember that house prices and ‘bricks and mortar’ attitude has been well entwined into the British economic psyche for decades.

Previous cycles were long forgotten by those just staying put for years, the only ones burnt were the unlucky ones who’s hand was forced (three D’s and buying at the top of the cycle). Then the last decade went way off kilter with stratospheric deviation to wage/price ratio, gentrification and sentiment to match.

The moment of realisation that trees don’t grow to reach the sky, inflation is here to stay and BTL is a loss making investment will be devastating. The supply/demand narrative will be turned on its head with those cashing in their chips trying to catch the top of the cycle. That coupled with a very small number who can actually buy, with free cash funds (once everything is selling off) and banks willing to lend.

This will vary massively on area, and the south will be decimated. I can easily envisage 50% nominal falls (far less than that up north). 

Properties like this in Tooting (used to be a shithole) below were £200k 20 years ago and £300k 10 years ago. It’s not difficult to imagine that decade of cheap credit could reverse astronomically to 2012 prices.

5150FA2C-3911-432E-88AD-F8FFA50AC345.thumb.jpeg.bdad91fc9f70f8c9cae4dd957222c8bf.jpeg

Agree and nice example. In your example they paid only £102k for that house in 1998. And today they want £695k. 

Prime, prime areas are even more exaggerated too. I mentioned before (many moons ago) of a Nottinghill flat increasing maybe x10 verses houses near me (nice high demand town) going up x3 

The rises we have seen haven’t been evenly distributed across the UK and in some cases for good reason. However the falls I believe will be equally as disproportionate.

Think I said it before but there are still terraces in Teeside etc for £25k that haven’t gone up hardly at all in 20 years….now, I wouldn’t recommend buying one😆….but all I mean is I doubt they will fall like some of the property that has seen massive rises.

Non the less….still stormy waters ahead for property values. 

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Noallegiance
1 hour ago, kibuc said:

Inflation in Poland in May: 13.9% YoY. Rates at 5.25% with a 7.75% target.
 

That dip in Feb reflects special measures taken, including cutting VAT on a range of goods and services from 23% to either 8%, 5% or 0%.

So a live example of tax cuts doing fuck all after a short-term blip.

There may be trouble ahead.

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1 hour ago, geordie_lurch said:

Yep I totally agree you have to be careful with YOY comparisons @feed but online sales are very different to standard bricks and mortar retail (or pubs which you mentioned) as per the links and anecdotes I posted about. The data for this specific part of the economy was screaming that non essential spending was dropping rapidly in April and my educated guess is that it's only going to get increasingly harder for both retailers and consumers in 2022 due to inflation both stealing discretionary spending money from customers and all input costs increasing for retailers :Beer:

but the question is compared to when. 

Online for discretionary spend has had a significant advantage for the last two years.  It would surprise me if discretionary online hadn't fallen.  I would expect a move from online to off, from the corporate to SME's.   

This is interesting for consumer behavior post covid.  What's going back to pre covid and what isn't..  

https://www.ons.gov.uk/economy/economicoutputandproductivity/output/bulletins/economicactivityandsocialchangeintheukrealtimeindicators/7april2022#consumer-behaviour

What's interesting with seated diner, is it's not only showing a 125pp increase on last year, (no surprise as we'd have been at the heart of the lockdowns) But also 24pp increase compared with the pre covid baseline.  And that spend has to come from somewhere.  

 

image.png.beb8ae689297d398c3699952143678dd.png

 

 



 

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3 hours ago, sancho panza said:

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

I fear not all those leaving NZ are running away from gulags... I note our newly installed Information Commissioner (Commissar?!) is from New Zealand and his CV is depressingly globalist... But what immediately irks me is that his £200k a year salary isn't going to home grown talent, but instead we literally hire from opposite side of the world, as I said all very globalist.         (I mean first we had Carney from Canada, theres a theme happening here?!)

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DurhamBorn
2 hours 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. 

Government destroyed some of my capital in The Scottish share so fat Sharon could get her nails done by saving £10 a month on her gas bill.Three years later that mistake sees fat Sharons bill treble.Saving the tenner didnt work out so well.Never mind,they can take the profits from the people producing the energy still so fat Shaz can keep the Turkish Uber Eats driver in a job so he can bring his family here.And get her nails done.

UK energy policy.

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sancho panza
8 minutes ago, DurhamBorn said:

Government destroyed some of my capital in The Scottish share so fat Sharon could get her nails done by saving £10 a month on her gas bill.Three years later that mistake sees fat Sharons bill treble.Saving the tenner didnt work out so well.Never mind,they can take the profits from the people producing the energy still so fat Shaz can keep the Turkish Uber Eats driver in a job so he can bring his family here.And get her nails done.

UK energy policy.

Difficult to know which emoji to click for that post.....can't do them all or I would.

So true,so ironic.this country's really on the slope into shit creek

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24 minutes ago, Pip321 said:

Agree and nice example. In your example they paid only £102k for that house in 1998. And today they want £695k. 

Prime, prime areas are even more exaggerated too. I mentioned before (many moons ago) of a Nottinghill flat increasing maybe x10 verses houses near me (nice high demand town) going up x3 

The rises we have seen haven’t been evenly distributed across the UK and in some cases for good reason. However the falls I believe will be equally as disproportionate.

Think I said it before but there are still terraces in Teeside etc for £25k that haven’t gone up hardly at all in 20 years….now, I wouldn’t recommend buying one😆….but all I mean is I doubt they will fall like some of the property that has seen massive rises.

Non the less….still stormy waters ahead for property values. 

using the BoE inflation calculator (CPI), the 102k is the equivalent of just shy of 160k in 2021, just shows how distorted house prices are in some parts of the uk,

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Yadda yadda yadda
1 hour ago, kibuc said:

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).

Gold fields share price very unimpressed by the deal.

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3 hours ago, sancho panza said:

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

 

'Niche professions' you say, i'll have you know that lawyer's (especially human rights and immigration ones) are the modern equivalent of the mediaeval priesthood, ie creepy,  elitist, closeted, zealots!

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https://www.telegraph.co.uk/business/2022/05/31/bank-england-take-collapsed-cryptocurrencies/

This makes no sense, the price of a stablecoin is dictated by the market as its only worth is what people are willing to pay for it.  If that is 2p to £1 because the underlying asset is junk that is the price.

BOE is the clown spinning plates at a party, and in addition to House prices and real economy that are now wobbling, they are adding another one in cryptocurrency just to spice things up.

portrait-of-clown-spinning-plates-front-view-picture-id124240973

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3 minutes ago, Majorpain said:

https://www.telegraph.co.uk/business/2022/05/31/bank-england-take-collapsed-cryptocurrencies/

This makes no sense, the price of a stablecoin is dictated by the market as its only worth is what people are willing to pay for it.  If that is 2p to £1 because the underlying asset is junk that is the price.

BOE is the clown spinning plates at a party, and in addition to House prices and real economy that are now wobbling, they are adding another one in cryptocurrency just to spice things up.

portrait-of-clown-spinning-plates-front-view-picture-id124240973

If this is BoE, is it "debt monetisation" by the back door?

The pic is appropriate xD honk honk

 

 

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1 hour ago, Boon said:

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.

Margins for big builders are normally circa 30%.

If house prices fall, their margins fall, and, more importantly, in the long term the value of their land banks fall.

As they put up their assets as collateral for their loans any fall in land bank values is a bigger problem.

One is a cash flow issue, the other is a solvency issue.

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35 minutes ago, Majorpain said:

https://www.telegraph.co.uk/business/2022/05/31/bank-england-take-collapsed-cryptocurrencies/

This makes no sense, the price of a stablecoin is dictated by the market as its only worth is what people are willing to pay for it.  If that is 2p to £1 because the underlying asset is junk that is the price.

BOE is the clown spinning plates at a party, and in addition to House prices and real economy that are now wobbling, they are adding another one in cryptocurrency just to spice things up.

portrait-of-clown-spinning-plates-front-view-picture-id124240973

FFS - WTF this cuntry is fuct

https://bombthrower.com/no-one-is-coming-to-save-you-or-crypto/

 

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2 minutes ago, Majorpain said:

"The consultation proposed that the Bank would have the power to direct administrators for systemic “digital settlement asset” firms under the Financial Market Infrastructure Special Administration Regime.

This is more strict than the regime for payments companies, and requires administrators to pursue continued operations “ahead of the interests of its creditors” while giving the Bank of England “powers of direction and oversight over the administrator”."

Ultimately so vague as to be meaningless, however my best guess:

It seems like they just want the power to install administrators, and puppet them, presumably at the first sign of a wobble. The bit about continued operations ahead of creditor interests probably means redeeming retail "deposits" ahead of paying large loans to other crypto entities.

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6 minutes ago, Loki said:

If this is BoE, is it "debt monetisation" by the back door?

The pic is appropriate xD honk honk

I don't think so, it appears they are trying to introduce regulation to an area which purely exists off there being a greater fool in 99% of cases.  South park explained it best....

 

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Bobthebuilder
58 minutes ago, kibuc said:

Arguably, a load of bread in Poland has a decent chance of being actual bread, unlike the shite you'll find around here.

I would say most Polish bread is like the sourdough loaves you get in the UK for £4+. Still, all my Polish mates say you cant beat English shitty bread with a fry up if you've got a hangover.

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