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

[ThoughtCriminal]

9 minutes ago, BurntBread said:

Although it's quite mesmerising, these sorts of videos seem to consist of putting in a lot of effort to avoid just using a log scale on the vertical axis.

Why would you need a non linear scale? Do you mean to adjust for inflation?

[BurntBread]

2 minutes ago, ThoughtCriminal said:

Why would you need a non linear scale? Do you mean to adjust for inflation?

I have seen various graphs where house prices are being shown to be out of kilter with (for example) wages, or rents, of GDP or whatever. One issue is that all the lines are increasing slowly, but broadly exponentially, so the left hand part tends to be near zero and hard to read. People try to get around this issue by re-basing to 100 at some point, and only plotting a limited time-span. However, what they are really trying to show is that the ratio between the two things has got to extraordinary levels. That's quite hard to judge at a glance on a linear scale, but dead easy on a log scale: choose the right tool for the job. The issue with compressed scales at early times also goes away with a log scale. I think the problem is people are not used to logarithms, so find it difficult to interpret these kinds of graphs.

[moneyscam]

Euro suffering as market prices in severe recession / depression. Euro has comfortably breached parity vs CHF now. I remain bearish on overall market and don't believe FED will hit their desired terminal rate because by then the inflationary shock and tightening in financial conditions will have done a lot of the work for them. FED will eventually have to pivot but I'm not convinced that automatically leads to a melt up scenario.

edit: I'm in a piss taking mood this morning so added another .gif

[HousePriceMania]

Taken the advice of this thread from yesterday and moved £50K in CHF.

I'd rather take my chance with them than the £ or $

[Plan-b]

7 minutes ago, HousePriceMania said:

Taken the advice of this thread from yesterday and moved £50K in CHF.

I'd rather take my chance with them than the £ or $

Do you know where the Swiss get the bulk of their energy from?

I know thats a bit of a silly question but the answer would surely be fundamentally important.

[HousePriceMania]

3 minutes ago, Plan-b said:

Do you know where the Swiss get the bulk of their energy from?

I know thats a bit of a silly question but the answer would surely be fundamentally important.

The Swiss are the masters of the universe.  I doubt it matters.

[moneyscam]

4 minutes ago, HousePriceMania said:

Taken the advice of this thread from yesterday and moved £50K in CHF.

I'd rather take my chance with them than the £ or $

It was me that stated I have 50% of wealth in CHF. Part of that is because I lived and worked there and kept my account there after coming back to the UK. The other part is that it's the obvious best fiat hedge against $, £, euro etc.

I used to have my money there in the national post office (fully govt backed) but had to close that when I left. Now it sits at UBS which I am not fully comfortable with but is somewhat mitigated by it being far too big to fail for Switzerland to allow it.

Good that you have taken some action to mitigate risk on sterling position, I don't think you can go far wrong with CHF, it is a very well managed country and has the highest current account surplus as % of GDP, CPI of 2.9% as of May and the SNB has started to raise rates and has a much smaller gap to close to return rates to real positive rates versus the G7. All these factors will support the currency vs £, $ and euro.

 

[moneyscam]

10 minutes ago, Plan-b said:

Do you know where the Swiss get the bulk of their energy from?

I know thats a bit of a silly question but the answer would surely be fundamentally important.

Switzerland is not as exposed to oil / gas as EU due to large proportion coming from renewables with hydro being the primary renewable resource as well as nuclear. As I said, it is a very well managed country, they do really think ahead.

[Democorruptcy]

14 minutes ago, Boon said:

TBH it makes a lot of sense to me.

The pre-GFC era had a lot of irresponsible lending like self-cert and 110% mortgages, flushed out by the GFC.

The next leg up was caused by HTB and shared ownership as well as falling interest rates. The bulk of this pump was over by 2016/2017.

The next leg up was caused by rate cuts, the pandemic inducing FOMO and free money to people for not working.

Without another 'something' to change the game the chart only can go down.

You are missing increased lending from the switch to full household income mortgages.

1998 when Bliar's Bank Act made the BoE "Independent" average main income was 18k average 2nd income 6k, mortgage lending was 3x Main plus 1x Second income. Lo and behold the average house was 60k (3 x 18 plus 1 x 6) it's the lending innit. Since 2013 the BoE want "no more than 15% of mortgages to be greater than 4.5x household income". Say 35k and 25k now, 4.5 x 60 = 270k. Apply the old mortgage lending instead and that's 3 x 35 plus 1 x 25 = 130. That's doubled prices but the 15% over 4.5x is the key, those that borrow that much, then mean others borrow more to compete on prices.

The trend will be more mortgages grouping just under 4.5x household income from the average of 3.1x household income when the rule came in 2013. Yesterday the governbankment were banging on about more free childcare. They want more women working, to keep banks in clover.

 

[Chewing Grass]

3 minutes ago, Democorruptcy said:

Yesterday the governbankment were banging on about more free childcare. They want more women working, to keep banks in clover.

and keep tax & NI rolling in, you are here to serve the government and their banksters.

[Democorruptcy]

10 minutes ago, moneyscam said:

It was me that stated I have 50% of wealth in CHF. Part of that is because I lived and worked there and kept my account there after coming back to the UK. The other part is that it's the obvious best fiat hedge against $, £, euro etc.

I used to have my money there in the national post office (fully govt backed) but had to close that when I left. Now it sits at UBS which I am not fully comfortable with but is somewhat mitigated by it being far too big to fail for Switzerland to allow it.

Good that you have taken some action to mitigate risk on sterling position, I don't think you can go far wrong with CHF, it is a very well managed country and has the highest current account surplus as % of GDP, CPI of 2.9% as of May and the SNB has started to raise rates and has a much smaller gap to close to return rates to real positive rates versus the G7. All these factors will support the currency vs £, $ and euro.

 

Isn't your CHF a chargeable asset because it's not for your own use outside the UK, so any gain is liable to CGT?

[M S E Refugee]

Bring back coal to fight Russia – Poland https://www.rt.com/news/558391-poland-coal-fight-russia/

I think eventually this Net Zero nonsense will be put to bed and Coal will make a comeback to save the Politicians from being strung up.

[moneyscam]

5 minutes ago, Democorruptcy said:

Isn't your CHF a chargeable asset because it's not for your own use outside the UK, so any gain is liable to CGT?

Not quite sure what you are asking here. As far as I know, I should and do declare any interest (fuck all at the moment) and dividend income (don't have any stocks there anymore) to HMRC. If I do import some of that money then I have to declare that as income. However I don't intend to repatriate any of that anytime soon and don't need it as I have sufficient £ liquidity here to keep me going for a long time.

[HousePriceMania]

25 minutes ago, moneyscam said:

It was me that stated I have 50% of wealth in CHF. Part of that is because I lived and worked there and kept my account there after coming back to the UK. The other part is that it's the obvious best fiat hedge against $, £, euro etc.

I used to have my money there in the national post office (fully govt backed) but had to close that when I left. Now it sits at UBS which I am not fully comfortable with but is somewhat mitigated by it being far too big to fail for Switzerland to allow it.

Good that you have taken some action to mitigate risk on sterling position, I don't think you can go far wrong with CHF, it is a very well managed country and has the highest current account surplus as % of GDP, CPI of 2.9% as of May and the SNB has started to raise rates and has a much smaller gap to close to return rates to real positive rates versus the G7. All these factors will support the currency vs £, $ and euro.

 

IIRC the £ has fallen about to 1/4 of what it was worth in CHF in 2007. And people think buying a house makes them rich !!!!

[Democorruptcy]

3 minutes ago, moneyscam said:

Not quite sure what you are asking here. As far as I know, I should and do declare any interest (fuck all at the moment) and dividend income (don't have any stocks there anymore) to HMRC. If I do import some of that money then I have to declare that as income. However I don't intend to repatriate any of that anytime soon and don't need it as I have sufficient £ liquidity here to keep me going for a long time.

I just thought that any foreign currency that's not for personal use, is liable for CGT for a UK tax resident. If you have £100k worth of any currency and then because GBP drops it becomes worth £150k, then the £50k is liable for CGT.

[Yadda yadda yadda]

Just finished catching up after some time away. On the theory that the public sector will gobble up all money til it is all worthless. At some point they will have to make choices about who needs the public sector money first. The public sector lefties will put themselves well ahead of the dole class at that point. Some people are more equal than others, after all. Will all have gone to shit by then, of course.

 

Ps lots of good stuff to read, as always

[Axeman123]

55 minutes ago, moneyscam said:

 

Savagely accurate. 

[JMD]

1 hour ago, BurntBread said:

Although it's quite mesmerising, these sorts of videos seem to consist of putting in a lot of effort to avoid just using a log scale on the vertical axis.

Hmm, not what you meant I know but I'm reminded of...  Lies, damned lies and STATISTICIANS!!!

[BadAlchemy]

10 minutes ago, HousePriceMania said:

IIRC the £ has fallen about to 1/4 of what it was worth in CHF in 2007. And people think buying a house makes them rich !!!!

Depressing to hear that. I had 10K or so CHF in a Citibank multi-currency account (no annual charges) between about 2008 and 2015. They then told me to eff off as I wasnt a 'high value' customer for them and they closed my account down. Couldn't find an alternative, cost effective platform.

It's a big club and I'm not in it!

[Axeman123]

44 minutes ago, moneyscam said:

I am seeing roughly 150 out of 300 TWh total coming from oil/coal/gas for 2020, with 100 of the 300 being just oil. Cleanest dirty shirt in the laundry basket perhaps, but not exactly lacking exposure. It certainly is enlightening to evaluate currencies based on energy security though.

In terms of the CHF, I personally can't help thinking as a contrarian...

[moneyscam]

5 minutes ago, Democorruptcy said:

I just thought that any foreign currency that's not for personal use, is liable for CGT for a UK tax resident. If you have £100k worth of any currency and then because GBP drops it becomes worth £150k, then the £50k is liable for CGT.

This applies only when the currency is not for personal use (I go to Europe / Switzerland often for holidays and use the money I have there for that purpose) and only becomes chargeable upon disposal. As I said, the bulk of that money is not intended to be converted or repatriated to the UK. I can however import some of that as income under the tax free allowance (including FX gain). My only income now is dividend income and I am well below the combined income/ CGT / dividend tax allowances so have room to spare to import some that cash tax free if I want to.

[Axeman123]

27 minutes ago, HousePriceMania said:

IIRC the £ has fallen about to 1/4 of what it was worth in CHF in 2007. And people think buying a house makes them rich !!!!

I remember when banks were convincing people buying holiday homes to get mortgages in CHF, allegedly to take advantage of it falling but really to give the bank a counterparty so they could take the other side of that trade.

[JMD]

9 hours ago, wherebee said:

As a family we've spent about 200k in the past 18 months on our main house to make it multigenerational and as energy efficient as possible.  That includes a new roof and guttering - rain and water is a major source of problems here in Oz.

A key reason for that is cash in the bank was going to be losing value at 10%+ a year AND the risk of bail in.

And as we laid in materials almost a year ahead for most of the work (used a mates big wool shed to store it), we saved a shedload (hah!) already as everything has gone up in price.  My sparkie mate told me that his basic copper wiring has gone up 50% in a year.

As you mention rain and water problems down in Oz, i wondered what your view is on Sydney and its floods currently happening there? Its being reported here as climate change related, and apparently rainfall has increased in recent years (is that true I wonder?) - but wondering if anything to do with other factors such as poor planning/drainage? 

[Axeman123]

14 minutes ago, Cattle Prod said:

I first read that as the bull collapsed in a heap before reaching the flag, but maybe it's still moving. Either works really 😁

There is also a cliff and a matadors' sword, 3 ways to get fucked.

[DurhamBorn]

1 hour ago, Boon said:

Something seems to have spooked the market quickly right now... miners seem to have taken the brunt of it.

Market will be seeing demand falling,but inflation not,so CBs boxed in.They should be starting to loosen policy now,but again they cant.China will loosen i expect.Im hoping the market stays horrible for as long as possible,most of our sectors are doing ok,the ones im buying are falling,i like that.

Telcos have done very very well since these falls started and they were my biggest holdings,them and baccy.Oil is down to third now from taking profits higher up and 15% falls in the rest.

Im 7% off all time highs across everything,happy with that.

Governments are in a right mess though,all the bombs they planted doing the long dis-inflation are starting to go off all at once,from energy to no work incentive.

Macro take is easy ,elevated inflation for longer of the 5% kind once things settle,unless governments do fund bennies and pensions by 10%,if they do,inflation will embed more and my average of 6.6% over the cycle will move to around 7.5%.

I think soon we will see a move from bonds into value equity starting in Asia.I expected we would see selling across most equity areas first,but under owning what we do will cost dear when things move.

Bonds and currency are taking most of the pain.Inflation at 8% rates at 3.5% wont hurt the telcos,but it will wipe out a lot of BTL.