Credit deflation and the reflation cycle to come (part 6)

[leonardratso]

9 hours ago, Funn3r said:

Buggering fuck this is hard

Which of this lot have you got? What does it mean?

Fundsmith Equity (Class I) Accumulation Fund Price & Information

Fundsmith Equity (Class I) Income Fund Price & Information

Fundsmith Sustainable Equity (Class I) Accumulation Fund Price & Information

Fundsmith Sustainable Equity (Class I) Income Fund Price & Information

Fundsmith Equity (Class R) Accumulation Fund Price & Information

Fundsmith Equity (Class R) Income Fund Price & Information

Fundsmith Equity Fund T Class Acc

http://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F00000LK2L

thats the url i use to scrape the price into my spreadsheet

its the basic fund, facebook/microsoft etc - all the much hated ones here, but apparently still not dead.

 

Edited July 5, 2023 by leonardratso

[Foor]

11 hours ago, King Penda said:

Indeed I’ve made a fuck up to some extent with my life but it’s been great fun .if I died tonight I’m only worth 130k .but it’s 130 more than many people I know and some have posh cars go abroad 3/4 times a year but rent and lived on credit .

Same here bud. Fucked right up but had some scrapes and fun. Just hope at 55 whenever I go it's a heart attack fatal and fast.

[Pip321]

38 minutes ago, Democorruptcy said:

Re holding short term, I read that big hitters with cash outside ISAs and SIPPs were piling into gilts, those not long from expiry and selling below par because the yield was poor. The profit being in the uplift from the below par price to £100 on maturity because it's CGT free on gilts.

That’s exactly what I saw happening. Gilts are CGT free but the coupon is subject to income tax.

The IFA yesterday shared with me a portfolio for a wealthy client (not the client details…just the gilt bits) made up of short term gilts with really low coupons, but low values for the customer who was a Top Rate Tax payer. 

So they were buy one at £94 that has a maturity value of £100 and you get the capital uplift tax free…..land something like that pays a crap coupon ie £0.25, but that would be subject to income tax anyway.

With most of my money in ISA or SIPP then I will be looking at all options and due to the tax shield it may not need to include gilts, rather it’s just an option to compete with current fixed rate offers for a portion of my cash. 

I see today the Coventry are offering an ISA at 5.4% which 12 months ago would have been unheard of.

The contra to all this isn’t that gilts are the answer….just that they are an interesting consideration as a short term add. And as DB has warned only for those who know they will absolutely not need that proportion of their money before maturity even if the BK hits.   

If the BK hits however this becomes a totally different ball game. I would then want to own ‘shares’ in real things ie commods, EMs, PMs, energy and numerous businesses mentioned on this thread etc because if you get the right areas they will hopefully grow in real terms. 

[geordie_lurch]

43 minutes ago, King Penda said:

True but if you online bank all pounds are digital 

These CDBC digital £s are nothing like what we have now so I'd strongly recommend people look into the potential implications if you don't know the differences

[Calcutta]

Living in a shared house isn't so bad, bit cramped when the kids are round, and I have to be pretty meticulous when it comes to storage space.

You never know who you'll end up living with, most of the time it's EEs who work weird shifts and I hardly ever see. There's a black guy downstairs who has his room just so he's got somewhere to hide from his girlfriend and an old guy whose grandkids live round the corner that gets drunk and falls down the stairs from time to time.

It's not ideal, but a damn sight better than living with a bird hassling me or making a mess I have to clean up.

If I was skint, or lonely, then I suppose it would be pretty grim. But tbph if I was skint or lonely I'd fuck off back to India and live on a train station platform till I'd figured out another plan. Or find some fat Shaz and ponce off her Tony Tokens for a bit.

I tell any young lad who'll listen, nothing keeps you warm at night like a pile of cash. Everything else is easy fixed.

 

[Democorruptcy]

30 minutes ago, Pip321 said:

That’s exactly what I saw happening. Gilts are CGT free but the coupon is subject to income tax.

The IFA yesterday shared with me a portfolio for a wealthy client (not the client details…just the gilt bits) made up of short term gilts with really low coupons, but low values for the customer who was a Top Rate Tax payer. 

So they were buy one at £94 that has a maturity value of £100 and you get the capital uplift tax free…..land something like that pays a crap coupon ie £0.25, but that would be subject to income tax anyway.

With most of my money in ISA or SIPP then I will be looking at all options and due to the tax shield it may not need to include gilts, rather it’s just an option to compete with current fixed rate offers for a portion of my cash. 

I see today the Coventry are offering an ISA at 5.4% which 12 months ago would have been unheard of.

The contra to all this isn’t that gilts are the answer….just that they are an interesting consideration as a short term add. And as DB has warned only for those who know they will absolutely not need that proportion of their money before maturity even if the BK hits.   

If the BK hits however this becomes a totally different ball game. I would then want to own ‘shares’ in real things ie commods, EMs, PMs, energy and numerous businesses mentioned on this thread etc because if you get the right areas they will hopefully grow in real terms. 

Hang on I'll give him a shout............. @sancho panza !!!

[DurhamBorn]

25 minutes ago, Pip321 said:

That’s exactly what I saw happening. Gilts are CGT free but the coupon is subject to income tax.

The IFA yesterday shared with me a portfolio for a wealthy client (not the client details…just the gilt bits) made up of short term gilts with really low coupons, but low values for the customer who was a Top Rate Tax payer. 

So they were buy one at £94 that has a maturity value of £100 and you get the capital uplift tax free…..land something like that pays a crap coupon ie £0.25, but that would be subject to income tax anyway.

With most of my money in ISA or SIPP then I will be looking at all options and due to the tax shield it may not need to include gilts, rather it’s just an option to compete with current fixed rate offers for a portion of my cash. 

I see today the Coventry are offering an ISA at 5.4% which 12 months ago would have been unheard of.

The contra to all this isn’t that gilts are the answer….just that they are an interesting consideration as a short term add. And as DB has warned only for those who know they will absolutely not need that proportion of their money before maturity even if the BK hits.   

If the BK hits however this becomes a totally different ball game. I would then want to own ‘shares’ in real things ie commods, EMs, PMs, energy and numerous businesses mentioned on this thread etc because if you get the right areas they will hopefully grow in real terms. 

I remember back in the day a guy i knew who grew a good portfolio for then for a factory worker (£270k 25 years ago) and retired at 50.He used to buy individual company bonds through Hargreaves,all through the post then.He used to show me the offers as i remember him getting a BT one at 7.99% and a Glaxo one at 8.1%.He had a £100 a week index linked pension and the state pension coming later and he was not bothered about his capital slowly losing value as like he said if it drifted down as his years left did so what.

I think the difference for us now is that there is much higher risk of an inflation "event" ie something gives and it blasts through 50% or something.Its an outlier,but one that would destroy every single retirement that has a lot of bonds in the mix.Thats my worry on the.In the above equities would of course suffer as a whole,but many would be able to at least capture the inflation.

There is a key difference with equities in an inflation period.They might pay a 6% div like a bond, BUT if they capture the inflation of say 12%,they should keep the holder ahead of inflation.

This thread was really about two things.First about getting the mind ready for what was coming,and it did,nobody on here was shocked at the covid falls,i was jumping for joy and prepared,but it was also really to try to do one thing.Keep everyone saved labour on here,or reading ahead of inflation.£10k or a mill it doesnt matter,so far so good as a whole.Gilts and bonds on the surface will likely match inflation over 5 years,so are probably good buys,but i wont touch them for the simple reason there is far too much risk of something systemic happening.

[DurhamBorn]

15 minutes ago, Calcutta said:

Living in a shared house isn't so bad, bit cramped when the kids are round, and I have to be pretty meticulous when it comes to storage space.

You never know who you'll end up living with, most of the time it's EEs who work weird shifts and I hardly ever see. There's a black guy downstairs who has his room just so he's got somewhere to hide from his girlfriend and an old guy whose grandkids live round the corner that gets drunk and falls down the stairs from time to time.

It's not ideal, but a damn sight better than living with a bird hassling me or making a mess I have to clean up.

If I was skint, or lonely, then I suppose it would be pretty grim. But tbph if I was skint or lonely I'd fuck off back to India and live on a train station platform till I'd figured out another plan. Or find some fat Shaz and ponce off her Tony Tokens for a bit.

I tell any young lad who'll listen, nothing keeps you warm at night like a pile of cash. Everything else is easy fixed.

 

Exactly how iv lived my life and very glad i did.Everything else like you say is fixed as long as you have the dosh.That and a Smedley Bobby jumper.

My partner rents out two rooms in her house (she lives with me but down as at hers) and gets a lot of men 40+ who are skint,but working,nearly always after a split.Most do pick things up after a while,tends to be moving in with someone else.If i was in that situation i would be renting a room and saving like crazy then buying a small terrace house up here,you can still get them for £70k

[King Penda]

3 minutes ago, DurhamBorn said:

Exactly how iv lived my life and very glad i did.Everything else like you say is fixed as long as you have the dosh.That and a Smedley Bobby jumper.

My partner rents out two rooms in her house (she lives with me but down as at hers) and gets a lot of men 40+ who are skint,but working,nearly always after a split.Most do pick things up after a while,tends to be moving in with someone else.If i was in that situation i would be renting a room and saving like crazy then buying a small terrace house up here,you can still get them for £70k

It’s what I did

[feed]

1 hour ago, geordie_lurch said:

The digital £ keeps creeping on... https://finbold.com/uk-finance-wants-banks-to-limit-digital-pound-holdings-to-5000/ emphasis mine

On July 4, UK Finance, an organization that represents UK-based banks and financial firms, weighed in on this matter. 

Namely, the group said the individual holdings of the proposed digital pound should be limited to £3,000-£5,000 in a bid to avoid panic and the risk of bank runs.

UK Finance’s suggestions come after initial recommendations from the British government and central bank to impose a temporary cap of £10,000-£20,000 to help banks evade deposit flights. 

The finance membership organization said the limit should be significantly lower, citing risks of the digital pound potentially exacerbating deposit runs in times of financial turmoil. 

In addition, the group argued that the UK authorities are yet to lay out “clearly what objectives and needs the digital pound is expected to meet and why it is best suited to meet those needs. It is not clear from the consultation what place in the market digital central bank money is expected to take.”

The UK Treasury and the central bank are still exploring potential use cases of a CBDC, with the final decision being expected by 2025. 

Yeah I'm sure it's not a done deal and they don't know exactly how they will enslave millions more with their CDBC

Imagine what an unlimited BOE CBDC would look like during credit deflation or a liquidity event.   Imagine what would have happened with the recent US banking issues, if the FED had offered an unlimited CBDC.  

The bigger problem the BOE face, is how to prevent money flowing into a ECB CBDC or FED, Swiss or any other state.

[Axeman123]

Great news everybody:

Bailey under fresh pressure to raise rates as pay surges - latest updates

https://uk.finance.yahoo.com/news/bank-england-considers-clampdown-foreign-063037943.html

(weird URL for the above headine?)

Quote

Andrew Bailey is under renewed pressure to tame inflation as figures showed pay is continuing to soar across the services industry - in a further sign that price rises are becoming embedded in the UK economy.

It looks like 50bps is on the table for the next FOMC, which is maybe what Halifax were pricing into their mortgage rates last night (of course they will get advance sight of figures like this IMO). Doesn't bode well for other lenders not following suit, or rates coming back down soon.

I think panic is coming for a lot of people.

[Gordie Lastchance]

15 hours ago, Wight Flight said:

Are you designed for port or starboard tack?

As if the whole finance world wasn't bumfuzzling* enough, you then drop this on the poor guy!

 

* If he doesn't already know this word, get Wighty jun to slide it into conversation and show how he's at one with the kulcha over the pond.  

[sancho panza]

17 hours ago, sleepwello'nights said:

That was a bad time for me. It was a time when I looked back and focussed on the decisions I'd made that didn't work out as I'd wanted. Mid life crisis maybe or perhaps hormonal imbalances, who knows.

What worked for me was reading "be kind to yourself". I also started physical exercise, much like Gerald Ratner did after his infamous prawn sandwich joke Once I started forgiving myself I realised it was a matter of perception. I had a tendency to look at those who I thought had made a better life for themselves than I had made of mine instead of counting my blessings. 

It was a phase that thankfully I passed through. Like Pilgrims Progress I had traversed the slough of despond.

 

 

Some wise words there SW,particualrly second bit in bold

We've got a clsoe family friend who's 70 and about to lsoe everything incl family home of 40 years due to BTL souring.Much as I warned them back in 06/07 to be careful and as much as you really do reap what you sow,this coming recession is going to brutalize a lot of British people's expectations for their retirement years.They're looking at a council flat if they can get one.

A key thing that's happened to me was being humbled by unemployment and a lack of decent earnings in my 20's.Never forgotten how it felt being shat on by egits and working temp jobs where the agency would let you come in the following day to tell you you were not needed.Hated it.But it humbled me.I'd have been an arrogant little so and so otherwise.

Ever since I've jsut been grateful for food on the table and a roof over my head.I say as much to the Mrs most days.I know there's people sturggling to feed kids and it's going to get worse not better.

 

[leonardratso]

tis but a scratch sir; (FORD MONEY cant make up their minds);

Dear Mr Anal itch, We have some good news for you. In line with Our Best Rate Guarantee we’re increasing the interest rate on our Flexible Saver effective 5th July 2023 as follows:

Current rate New higher rate 3.98% Gross 4.17% Gross

Edited July 5, 2023 by leonardratso

[leonardratso]

Product Name

Min. Opening Balance

Interest Rate AER*

Gross*

Product Type

Withdrawals

Apply

Fixed Cash ISA 1 Year

£500

4.75% Fixed/Tax-Free*

4.75% annually 4.65% monthly

Fixed Term, ISA

Permitted¹

Apply Online

Fixed Cash ISA 2 Year

£500

4.85% Fixed/Tax-Free*

4.85% annually 4.75% monthly

Fixed Term, ISA

Permitted¹

Apply Online

Fixed Cash ISA 3 Year

£500

4.85% Fixed/Tax-Free*

4.85% annually 4.75% monthly

Fixed Term, ISA

Permitted¹

Apply Online

5.3% for 1+2 years fixed

 

[leonardratso]

safer in the lake mate, in that £200 boat you bought with a big hole in the hull;

 

https://www.bbc.co.uk/news/business-66094057

[Wight Flight]

29 minutes ago, Gordie Lastchance said:

As if the whole finance world wasn't bumfuzzling* enough, you then drop this on the poor guy!

 

* If he doesn't already know this word, get Wighty jun to slide it into conversation and show how he's at one with the kulcha over the pond.  

It's the senior but he is in the Mid West.

Whilst googling that I came across snollygoster which is equally good.

We might need an interesting words thread.

[Castlevania]

2 hours ago, Democorruptcy said:

Re holding short term, I read that big hitters with cash outside ISAs and SIPPs were piling into gilts, those not long from expiry and selling below par because the yield was poor. The profit being in the uplift from the below par price to £100 on maturity because it's CGT free on gilts.

This is what I suggested the other week

[wherebee]

15 minutes ago, leonardratso said:

safer in the lake mate, in that £200 boat you bought with a big hole in the hull;

 

https://www.bbc.co.uk/news/business-66094057

what i find interesting about that is that there were only around 200 customers, which means on average each had close to a mill in silver or gold.

Not bad, eh.

[King Penda]

47 minutes ago, Axeman123 said:

Great news everybody:

Bailey under fresh pressure to raise rates as pay surges - latest updates

https://uk.finance.yahoo.com/news/bank-england-considers-clampdown-foreign-063037943.html

(weird URL for the above headine?)

It looks like 50bps is on the table for the next FOMC, which is maybe what Halifax were pricing into their mortgage rates last night (of course they will get advance sight of figures like this IMO). Doesn't bode well for other lenders not following suit, or rates coming back down soon.

I think panic is coming for a lot of people.

Fuck it’s baby lotion time now where did I put my wet wipes …. It’s going to get messy

[DurhamBorn]

37 minutes ago, Axeman123 said:

Great news everybody:

Bailey under fresh pressure to raise rates as pay surges - latest updates

https://uk.finance.yahoo.com/news/bank-england-considers-clampdown-foreign-063037943.html

(weird URL for the above headine?)

It looks like 50bps is on the table for the next FOMC, which is maybe what Halifax were pricing into their mortgage rates last night (of course they will get advance sight of figures like this IMO). Doesn't bode well for other lenders not following suit, or rates coming back down soon.

I think panic is coming for a lot of people.

And its bennies causing it.I did a quick look at how rate increases will work compared to bennies and government spending.3% increase in rates removes £45 billion from spending.Government inflation linking across all spending increases £110 billion.I think terminal rates are 6.3% to cancel out government inflation creation.Thats not counting the private sector.The private sector needs around 2.8% at the moment on my model,but falling at the moment due to energy pull backs (could be short lived),so BOE rate now to force out inflation should be 9.1% on my model.Everything below that level is "distribution" so at the moment we are consuming around 4% of saved wealth,thats cash,pensions (the gilt bit) and soon housing equity.Until those numbers reverse houses are no go investments.

[King Penda]

Will any of the bookies take bets on the next rates rise my mate in Telford will love it 

[sancho panza]

16 hours ago, Festival said:

Anyone got a view on either Close Brothers or Investec in terms of their financial stability going forward? Close Brothers is rated Aa3 from Moodys and Investec is Moodys A1.

Both are near the top of the best buy fixed bonds tables (paying nearly 6% for 1 and 2 year bonds). Is this another Icelandic Banks from 2008 or am I seeing spooks. Any views appreciated.

as @Transistor Man said if you're under the £85k then likely no worries  but I dont know how that system will work and how long it might take in a BK.I personally wouldn't want to be at the bottom of the BK with the bargains at hand and my cash tied up in a marginal banking insto.

Looks like there are reasons why they're near the top buy tables.
 

CLose Bros half year to April 23 with some comments.dyor natch

my comments in italics

https://www.closebrothers.com/system/files/press/2023 Interim Results RNS 14.03.23.pdf

page 2-expanding BTL lending into a BK,head hits table.

Well placed to move forward on the delivery of our strategic priorities
• We are continuing to focus on our strategic growth agenda, with over £90 million lent in the first half towards
our ambition to provide £1 billion of funding for battery electric vehicles over five years and the successful
piloting of a specialist buy-to-let extension to our existing Property bridging finance clients.

Page 6-big drop in earnings due to what looks like a really bad call in a risky marekt-Novitas.With a histroy of calls like that,it begs the question of whether the leadership is the right one to expand into BTL as that market gets pummelled

Operating profit and returns
Adjusted operating profit decreased 90% to £12.6 million (H1 2022: £129.8 million), mainly driven
by higher impairment charges in relation to Novitas. Excluding Novitas, adjusted operating profit
reduced 27% to £117.5 million (H1 2022: £160.5 million), primarily reflecting an increase in
impairment charges and a reduction in income in Winterflood

--------------------------------------------------

as an aside here's the details on Novitas

https://www.lawgazette.co.uk/news/owners-of-litigation-funder-novitas-set-aside-90m-for-failed-cases/5114882.article

Operating profit and returns
Adjusted operating profit decreased 90% to £12.6 million (H1 2022: £129.8 million), mainly driven
by higher impairment charges in relation to Novitas. Excluding Novitas, adjusted operating profit
reduced 27% to £117.5 million (H1 2022: £160.5 million), primarily reflecting an increase in
impairment charges and a reduction in income in Winterflood

-----------------------------------------------------

Page 7-Balance sheet

 

Page 9-RWA's at £9bn meaning they're virtually all being carried at par

Page 11-they don't have much wholesale funding

Page 13-the real clue here is the net interest margin.BS's like the COv work around the 1% level.Net interest margin is the difference between what they borrow at and what they lend at.Looks like they're lending at circa 10%-12%.Now ask yourself,who borrows at those rates?

Page 17 gives us some details fo their loan book.

 

1 hour ago, Democorruptcy said:

Hang on I'll give him a shout............. @sancho panza !!!

I was jsut about to head out for my consittuional stroll and now thanks to you I've bitten as above and spent half an hour looking at CLose Bros half years.It's like you knew I was looking at that Close Bros post and thinking 'do I?'..........

Interesting highlight for me was seeing Close Bros net interest margin at 8% when Cov operate circa 1%-1.5% as do msot BS's.

AS @Pip321 alludes I'd rather pick up the taxed income avaialable on gilts than have my moeny in an ISA with teh Cov.

[Stuey]

8 minutes ago, King Penda said:

Will any of the bookies take bets on the next rates rise my mate in Telford will love it 

I'll give you a terminal of 6%. Any lower I win the bet, any higher you win the bet.

A can of lout if you win, a schooner of craft for me. 

[King Penda]

1 minute ago, Stuey said:

I'll give you a terminal of 6%. Any lower I win the bet, any higher you win the bet.

A can of lout if you win, a schooner of craft for me. 

I’ve got my small stash in the branch saver which is now paying 5% I was surprised they withdrew it to new punters . I’m calling 6.5% has the top and before February