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

[Pip321]

48 minutes ago, Barnsey said:

Tenants face 'worrying picture' of further rent hikes, as number of rental homes has almost HALVED since 2019 amid landlord sell-off

https://www.thisismoney.co.uk/money/buytolet/article-10889583/Number-rental-homes-HALVED-2019.html

Agents reported that buy-to-let investors were increasingly abandoning London, with more than half estate agents saying they had seen a decrease in landlords in the capital.

Propertymark has previously said that small-time landlords are increasingly giving way to portfolio investors and large corporate landlords. 

Rents in London have hit a new record of £2,193 per month, rising by 14.3 per cent in the last year from £1,919 - the largest annual jump of any region, according to recent research by Rightmove.

Average asking rents outside of London have risen by 10.8 per cent or £106, to £1,088 per month, in what is being described as the most competitive market ever recorded.

Propertymark’s chief executive, Nathan Emerson, said this was a worrying picture for private renters.

'A lack of property is the root cause for rent increases and rising figures on social housing lists', he said.

'We know from our qualitative research that the most common reasons for landlords to choose to sell their properties and no longer provide homes are around risk, finances and viability.

'Landlords and letting agents have been the subject of extreme legislation changes as the UK Government tries to improve the sector. 

'However, without a middle ground, these changes are actually proving detrimental to those they are supposed to protect.

'Sadly we do not see this improving as the sector braces itself for more changes within the anticipated Renters' Reform Bill and upcoming energy efficiency targets.'

Interesting find. I have just posted a reply in another thread about something like this….it’s interesting and sounds like another ‘we need more help from the government’ type thing.

Lack of property is always a problem….it’s all about prices, if a house cost £20k to buy or £2k a month to rent then rental demand would plummet.

Over the past 20 years we have seen 2/3 million BTL landlords buy houses and remove millions of them from the owner occupier supply side. This has contributed to buying prices rising making them unaffordable and created a higher rental demand. Interest rates and lots of government props also at play of course. No new physical properties were created in this process rather the demand was shifted to rentals.

The above report simply suggests that this is being reversed…so let’s just remove the dozens of ‘government housing props’ and let prices settle to a true supply/demand position.

Was mentioned on this thread old landlords form the 70/80’s were ex civil servants but my experience is the opposite. Back then they were limited in number, full time LLs  and were miserable, penny pinching, wealthy old misers who cut corners, moaned about tenants and didn’t have friends (other than other landlords)…..but they knew what they were. Didn’t pretend anything else, honestly dishonest. 

Nowadays BTL landlords feel the government owe them the world for being ‘housing providers’ when they are no more than middle men creaming off the top (myself included). They seem to think they are Joseph Rowntree and some sort of benevolent provider to the poor.

The legislation is a pain in the arse and I will sell up as my places become empty…..but I won’t moan about it and expect something to happen. It is what it is. 

If the government want me to spend excessive amounts of money on energy efficiency and it’s not worthwhile I will serve notice….and sell at the market value, and a house is released back into owner occupation.

The house sold from rental doesn’t disappear from ‘supply’ but it changes to whom it is supplied. 

In the short term though it will cause price issues with rents. Eggs/omelette. 😉

[Yadda yadda yadda]

2 hours ago, Barnsey said:

Tenants face 'worrying picture' of further rent hikes, as number of rental homes has almost HALVED since 2019 amid landlord sell-off

https://www.thisismoney.co.uk/money/buytolet/article-10889583/Number-rental-homes-HALVED-2019.html

Agents reported that buy-to-let investors were increasingly abandoning London, with more than half estate agents saying they had seen a decrease in landlords in the capital.

Propertymark has previously said that small-time landlords are increasingly giving way to portfolio investors and large corporate landlords. 

Rents in London have hit a new record of £2,193 per month, rising by 14.3 per cent in the last year from £1,919 - the largest annual jump of any region, according to recent research by Rightmove.

Average asking rents outside of London have risen by 10.8 per cent or £106, to £1,088 per month, in what is being described as the most competitive market ever recorded.

Propertymark’s chief executive, Nathan Emerson, said this was a worrying picture for private renters.

'A lack of property is the root cause for rent increases and rising figures on social housing lists', he said.

'We know from our qualitative research that the most common reasons for landlords to choose to sell their properties and no longer provide homes are around risk, finances and viability.

'Landlords and letting agents have been the subject of extreme legislation changes as the UK Government tries to improve the sector. 

'However, without a middle ground, these changes are actually proving detrimental to those they are supposed to protect.

'Sadly we do not see this improving as the sector braces itself for more changes within the anticipated Renters' Reform Bill and upcoming energy efficiency targets.'

I've seen the future in the past.

They chose their backing singer very well, didn't they?

[WICAO]

20 hours ago, Virgil Caine said:

Income tax is only about a third of U.K. government tax at about 198 billion. Payroll taxes including NIC come in just under 50% of total tax yield. The rest comes from indirect taxes that most consumers don’t even realise they are paying. Over the decades indirect taxes have become much more important to the U.K. government which is perhaps why they run scared at the prospect of a recession as a drop in consumption will impact their own funding. It is one of the the reasons why politicians use benefits to fund consumption and why the Chancellor is particularly happy if those in receipt of such money spunk it on fags and booze etc.  Inflation puts up costs but it also boosts the government’s tax take. The total percentage of tax as a portion of GDP is now over 30% which is where it was in the mid 1970s I believe. What has changed in the interim is the distribution of those taxes

https://www.gov.uk/government/statistics/hmrc-tax-and-nics-receipts-for-the-uk/hmrc-tax-receipts-and-national-insurance-contributions-for-the-uk-new-annual-bulletin

https://ifs.org.uk/taxlab/key-questions/how-have-government-revenues-changed-over-time

My bold.

It's another reason why it's so important for us all to spend as little as possible for our desired best life.  Don't feed the beast...

[HousePriceMania]

11 minutes ago, WICAO said:

My bold.

It's another reason why it's so important for us all to spend as little as possible for our desired best life.  Don't feed the beast...

Sadly, there's 99% of the country feeding it

[sancho panza]

9 hours ago, JMD said:

Yes I've been looking to buy more divi-paying Total. SP, have you any views on why Occidental (7x) and Conoco (4x) have done so well since the Oct 2020 lows? Not asking in terms of trading advice, but to learn from my mistake (of not buying more of them!). Both share prices had been falling quiet steeply and for some time prior to the 2020 lows so perhaps they are now just rebounding back to 'true value'? Or perhaps their large shale oil drilling is flattering their production figures? Tbh i don't know their production details, but it was the relatively large exposure to shale that stopped me buying more as I deemed it a risk.                                                                                                                                                                        SP, I know you spray and pray but if you or @Cattle Prodcan add anything to my above rambling question I'd be grateful. Again I'm not asking for trading advise - The real kicker for me is that those two oilies are my smallest holdings, but are my best performers!! Anyway in the short term I think I'll sell whilst at their highs and put all proceeds into Total, but if we do get a BK I might be tempted to buy back in (after all I note that Buffet is still buying Occidental, owns 15%). 

As @Castlevania explained,OXY did a bad deal on Anadarko at the wrost time.We bought a load of small US stocks eg Devon,Occi etc but bailed out of them in Feb 20 as Covid loomed.Sadly,hung onto the largest one-Occi and then got a few ladders in but I'd say our average price was circa $30.Was glad to see them go tbh.

On reflection,failing to buy them back at the bottom was a mistake in some ways but then you live and learn.Instead I opted to invest in some XOM/BP/Shell calls instead and did so a few times up until the beginnign of 22 with some BP 380's and Shell 1800/2000.Leaving them now.

Generally,I run 'spray n pray' like an inverted pyramid.Top line is biggest,so XOM/CVX/BP/RDSB/Total,second line was the likes of EQNR/Rep/ENI and then thrid and foruth line ie smallest hodligns are our leveraged plays as it were.Fifth line would be things like rockhopper

Having said that,once Occi had reached $40 on the bounce I'd have converted it into a strong divi payer for reasonable money eg one of my top line plays which were still super good value in Jan.

With those bottom line holdings you have to be really careful to spread your risk.WHat I got wrong with Occi was seeing that Buffet was investing and thinking I was piggy backing him when in reality he was piggy backing retail traders like me.Live and learn.He obviously cut himself a super deal when they were int rouble.

[Starsend]

20 hours ago, RickyBacker said:

Quite possibly one of the best videos I've seen about the current state of the world with a focus on global energy and supply chains. It's a monster presentation... I'm 1h 40 mins in and it is truly captivating. 
Grab a beer and enjoy / worry about the state of the world based on data and facts.

 

I watched it all last night, pretty interesting, worth the time. I think he may have gone a bit too far with some of his predictions, particularly his claims that Russia won't stop until they've taken back half of Poland, half of Romania, Lithuania etc, just don't see how they're going to do that. As he correctly points out NATO would obliterate them in conventional warfare.

His predictions that we're going to lose 4 / 5 million bpd over the coming months are really interesting and highly relevant to this thread. @Cattle ProdI'd be really interested on your take on this, you only need to watch up to the first 20 mins or so. If he's correct them oil is going through the roof pretty soon (which I've suspected anyway) and I want to get positioned now.

He also predicts a billion odd people won't be with us in a year or two due to incoming famine - price of wheat will double and then double again. Hmm, maybe, but seems a bit far out on the scale of possibilities. I think real food shortages are coming in some areas but not convinced on a famine of that scale.

[WICAO]

18 minutes ago, HousePriceMania said:

Sadly, there's 99% of the country feeding it

Every little helps...

[sancho panza]

2 hours ago, Pip321 said:

Interesting find. I have just posted a reply in another thread about something like this….it’s interesting and sounds like another ‘we need more help from the government’ type thing.

Lack of property is always a problem….it’s all about prices, if a house cost £20k to buy or £2k a month to rent then rental demand would plummet.

Over the past 20 years we have seen 2/3 million BTL landlords buy houses and remove millions of them from the owner occupier supply side. This has contributed to buying prices rising making them unaffordable and created a higher rental demand. Interest rates and lots of government props also at play of course. No new physical properties were created in this process rather the demand was shifted to rentals.

The above report simply suggests that this is being reversed…so let’s just remove the dozens of ‘government housing props’ and let prices settle to a true supply/demand position.

Was mentioned on this thread old landlords form the 70/80’s were ex civil servants but my experience is the opposite. Back then they were limited in number, full time LLs  and were miserable, penny pinching, wealthy old misers who cut corners, moaned about tenants and didn’t have friends (other than other landlords)…..but they knew what they were. Didn’t pretend anything else, honestly dishonest. 

Nowadays BTL landlords feel the government owe them the world for being ‘housing providers’ when they are no more than middle men creaming off the top (myself included). They seem to think they are Joseph Rowntree and some sort of benevolent provider to the poor.

The legislation is a pain in the arse and I will sell up as my places become empty…..but I won’t moan about it and expect something to happen. It is what it is. 

If the government want me to spend excessive amounts of money on energy efficiency and it’s not worthwhile I will serve notice….and sell at the market value, and a house is released back into owner occupation.

The house sold from rental doesn’t disappear from ‘supply’ but it changes to whom it is supplied. 

In the short term though it will cause price issues with rents. Eggs/omelette. 😉

Pip,I'd be interested on your take on this parliamentary paper on BTL landlords.

Interesting stats pulled out below.It appears from this relatively out of date data that between 2010 and 2018,BTL LL's increased both the size of their portfolio's and the size of their detbs.Many likely not realsing that the equity in their own home is at the end of the default chain(my expereince admittedly small sample).

It seems to me that there's a decent size structural issue that could affect liquidity in this market ie most are all the same age and ageing ,msot are carrying similar levels of leverage(cash owned is cash owned) and there's the distinct possiblity that a lot try and exit the market at the same time?Or do you think they operate generally independently from the broader sector very much focsuing on their own finacnes>?

Do you think that msot LL's are in touch with others and that when one starts selling it could lead to a more general move for the exit? Clearly this has huge implications for some UK banks.

Decl:Reason I'm interested as looking to short to the right financial isntituions at the right time

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/775002/EPLS_main_report.pdf

There are approximately 3.4 million live deposits registered with one of the
three government-backed Tenancy Deposit Protection (TDP) schemes that
operate in England. These correspond to an estimated 1.5 million landlords,
only some of whom (about 360,000) had registered the deposits themselves.

 94% of landlords rent property as an individual, 4% as part of a company and 2%
as part of some other organisation.
While almost half of landlords own just one property, half of private rented
sector tenancies are let by the 17% of landlords with five or more properties.
 45% of landlords have just one rental property. This represents 21% of the
private rented sector9. A further 38% own between two and four properties
(representing 31% of the sector). The remaining 17% of landlords own five or
more properties, representing 48% of the private rented sector.
 Ignoring the methodological differences, since 2010, the proportion of landlords
with just one property has declined from 78% to 45% or from 40% to 21% of the
sector. Meanwhile, the proportion of landlords with five or more properties
increased from 5% to 17% or from 39% to 48% of the sector.
Landlords are, on average, older and less ethnically diverse than the general
population10. Most have been landlords for some time.
 Over half (59%) of landlords are aged 55 years or older. Not surprisingly, given
the older age profile, a third (33%) of landlords are retired. The majority (89%) of
landlords are White.

[harp]

Guinness Global Energy Fund. It’s an animal! Thanks CP for that one. £200k in that is now nearly £380k. 

[reformed nice guy]

52 minutes ago, sancho panza said:

 45% of landlords have just one rental property.

 

 Over half (59%) of landlords are aged 55 years or older. Not surprisingly, given
the older age profile, a third (33%) of landlords are retired.

On the above point, something that I have heard a few times recently is that people that normally rent out a property have been giving them to their children instead. A relative did this because their daughter + husband couldnt afford a house. A friend said he knows a few people that have done this.

 

[belfastchild]

1 hour ago, Starsend said:

I watched it all last night, pretty interesting, worth the time. I think he may have gone a bit too far with some of his predictions, particularly his claims that Russia won't stop until they've taken back half of Poland, half of Romania, Lithuania etc, just don't see how they're going to do that. As he correctly points out NATO would obliterate them in conventional warfare.

Might not need war.
Couple of months of no power/heat and some places may vote to join Russia.

[Lightly Toasted]

4 hours ago, wherebee said:

really good video, worth a watch.

However, he clearly has swallowed the official line on i) ukraine and ii) covid/vaccines.  So... what else is he wrong about?
 

Didn't he say the Treaty of Westphalia was in 1066?

I think there was another date he got wrong too. Wish I'd noted the timestamps now, as interesting as much of it was, I'm not going to sit through it again 

Overall he seems overly confident about the USA to me. He dismissed the woke (snowflake, specifically) problem as something that is over now and was never that significant anyway. The immigration problem will be solved by demographics in the people-exporting countries. US workforce is high-quality, hard-working, better than China. Either ignores or disbelieves the fraud/corruption in their political and judicial systems.

I dunno, it all seems a bit Panglossian to me.

 

[Loki]

1 minute ago, Lightly Toasted said:

Didn't he say the Treaty of Westphalia was in 1066?

I think there was another date he got wrong too. Wish I'd noted the timestamps now, as interesting as much of it was, I'm not going to sit through it again 

Overall he seems overly confident about the USA to me. He dismissed the woke (snowflake, specifically) problem as something that is over now and was never that significant anyway. The immigration problem will be solved by demographics in the people-exporting countries. US workforce is high-quality, hard-working, better than China. Either ignores or disbelieves the fraud/corruption in their political and judicial systems.

I dunno, it all seems a bit Panglossian to me.

 

He thinks Russia decided to "starve a billion people" just cos

[JMD]

1 hour ago, sancho panza said:

As @Castlevania explained,OXY did a bad deal on Anadarko at the wrost time.We bought a load of small US stocks eg Devon,Occi etc but bailed out of them in Feb 20 as Covid loomed.Sadly,hung onto the largest one-Occi and then got a few ladders in but I'd say our average price was circa $30.Was glad to see them go tbh.

On reflection,failing to buy them back at the bottom was a mistake in some ways but then you live and learn.Instead I opted to invest in some XOM/BP/Shell calls instead and did so a few times up until the beginnign of 22 with some BP 380's and Shell 1800/2000.Leaving them now.

Generally,I run 'spray n pray' like an inverted pyramid.Top line is biggest,so XOM/CVX/BP/RDSB/Total,second line was the likes of EQNR/Rep/ENI and then thrid and foruth line ie smallest hodligns are our leveraged plays as it were.Fifth line would be things like rockhopper

Having said that,once Occi had reached $40 on the bounce I'd have converted it into a strong divi payer for reasonable money eg one of my top line plays which were still super good value in Jan.

With those bottom line holdings you have to be really careful to spread your risk.WHat I got wrong with Occi was seeing that Buffet was investing and thinking I was piggy backing him when in reality he was piggy backing retail traders like me.Live and learn.He obviously cut himself a super deal when they were int rouble.

Thanks SP. Interesting to read about your prices and timings as this provides the proper background buying decision context. Devon was another I grabbed back in 2020 and has 6x for me, it's also a shale extraction one, hence my earlier query about these company types with shale exposure/production doing well.                                                                                                                                                                               I think discussing some stock specifics, fundamentals, prices, etc is useful, even here on this macro thread. I think it helps crystalise what type of (next cycle) stocks too look for. Up until a year or two ago, whilst the thread was still 'accumulating', it was a regular discussion point, but crucially it never dominated or turned the thread into a trading platform. Anyway just my thoughts.                                                                            I too use the inverted pyramid, but am moving to a 3(safe)-5(broad market)-2(risk) formation, because I wanted a method to 'force myself' into simplifying my portfolio. 

[feed]

Along the path of EV’s are a change in the business model not a change in tech.  

Plans within the large autos are now being implemented to move from the Franchise model that has existed for decades to tighter OEM control.  It’ll take 5 years to get there and franchise will likely retain servicing and used for the foreseeable, but I would expect that will move pretty quickly after the new car sales are done. 

I don’t expect anyone here would be directly invested in the franchises, but EV passenger vehicles as a service with pricing tightly controlled by the majors isn’t that far away.   
 

[Axeman123]

5 minutes ago, feed said:

...EV passenger vehicles as a service with pricing tightly controlled by the majors isn’t that far away.

I expect the resulting death of older used cars as a transport option would be their holy grail. 3 year lease when new, followed by maybe 5 years lease as a manufacturer approved used vehicle, and then recycle. No more privately owned vehicles means they can enforce end of life to ensure strong demand for new ones. Private transport could be about to become out of reach for a lot of people.

[M S E Refugee]

Ukraine to halt coal and gas exports https://www.rt.com/business/556801-ukraine-halts-coal-gas-exports/

Zelenski putting sanctions on the West.

[feed]

8 minutes ago, Axeman123 said:

I expect the resulting death of older used cars as a transport option would be their holy grail. 3 year lease when new, followed by maybe 5 years lease as a manufacturer approved used vehicle, and then recycle. No more privately owned vehicles means they can enforce end of life to ensure strong demand for new ones. Private transport could be about to become out of reach for a lot of people.

Pretty much. Longevity of recent ICE and secondary market outside of the manufactures control creates competition, they just don't want.  And the franchise model has been hated for as long as i've been in the industry, 25 years plus. Seems they've found a way to dismantle it.  

So if you want to own an ICE for long term, buy one now. 5 years and franchise dealerships are done and so will be options to buy one, unless you're wealthy.   

EU that is, there are competition laws in the US that give the franchise owners more power.   
 

[Bobthebuilder]

4 hours ago, Pip321 said:

The legislation is a pain in the arse and I will sell up as my places become empty…..but I won’t moan about it and expect something to happen. It is what it is. 

Interesting, I thought a while ago that the new EPC regs were going to push LL into a "I've had a good run, time to get out" mindset.

I do a lot of LL gas safety certificates, the bigger companies are business as usual, and they are still buying properties and renovating them. I am hearing less and less from the "I've got one or two" brigade, its quite noticeable here in London, I have never been so quiet in years. 

[Loki]

8 minutes ago, M S E Refugee said:

Ukraine to halt coal and gas exports https://www.rt.com/business/556801-ukraine-halts-coal-gas-exports/

Zelenski putting sanctions on the West.

WTF??!

[M S E Refugee]

3 minutes ago, Loki said:

WTF??!

He says the Ukrainians need the Energy for next Winter but it looks like a way of sticking it to the West.

[Loki]

6 minutes ago, M S E Refugee said:

He says the Ukrainians need the Energy for next Winter but it looks like a way of sticking it to the West.

This is clearly Putin's fault

[AlfredTheLittle]

17 minutes ago, Loki said:

This is clearly Putin's fault

It says they're a net importer anyway, it's not really news.

[janch]

GB News were pushing hard yesterday (presenters and guests) for Boris to move swiftly to the right if he wants to hang on as PM.  They were tallking about reversing net zero, reversing green levies on fuel bills, lowering taxes etc.  The line was that now all the parties are more or less the same then there is a space to move into ie moving to the right.  All were warning if he doesn't then he will lose the red wallers and will be toast.  At last some sane MSM to counteract all the other woke stuff.  It'll be interesting to see if he takes any notice and he hasn't got long to act.

Meanwhile in the real world we have a rail strike to look forward to so it seems the 70s playbook may be starting up again with strikes and a wage price spiral.  I can see a winter ahead with various shortages and maybe demand destruction of energy by rolling blackouts.

[janch]

Another interesting piece fro Shaun Richards today.  India is raising interest rates to 4.9% and also benefitting from Russian oil and gas:

https://notayesmanseconomics.wordpress.com/

In May alone, India imported over 24 million barrels of Russian crude, compared to 7.2 million barrels in April, which was the previous record high, according to data from Refinitiv Eikon cited by Reuters last week.

Indian imports of Russian crude are set to further jump in June, to around 28 million barrels, per Refinitiv Eikon oil flows data.

They are banning wheat exports too and are suffering food and fuel inflation.  CPI in March was 7.0% and rose to 7.8% in April.  Wholesale onion prices have increased by 35% in the past three weeks.