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

[Loki]

5 minutes ago, Alifelessbinary said:

That’s the first time I’ve seen an AI generated propaganda video. As someone who’s obsessed with the AI revolution unfolding I expect twitter to become a constant stream of such material moving forward from all nations and political classes. The information war is now AI powered and it’s frighteningly easy to create such things.

We are moving from a position where knowledge was power, to knowledge overload. The key skill moving forward will be ensuring people can analyse, filter and assess information.

So many things are about to change, but governments are going to love their new found power to manipulate and control.

Garbage in, garbage out still holds.  Like the BoE models.  And information isn't knowledge 

[lid]

1 hour ago, Axeman123 said:

That is an incredibly long cycle.

 

6 minutes ago, DurhamBorn said:

Hybrid cars maybe,anything to lower oil use,public transport,bikes,anything,but joined up thinking.

All this incredibly long cycle talk and reducing the need for oil use got me thinking

[MrXxxx]

10 hours ago, Long time lurking said:

 

Interesting, so my 'read' of that is that it wont be the single "My second property is my pension" brigade that will suffer the pain, but the "Property never goes down so I am 'balls in and leveraged upon leveraged" that will suffer. I assume the Conventional 2+ are the 'Accidental landlords'?...who will [if they are sensible] get out 'sooner rather than later with a small loss?

[Lightscribe]

21 minutes ago, MrXxxx said:

Interesting, so my 'read' of that is that it wont be the single "My second property is my pension" brigade that will suffer the pain, but the "Property never goes down so I am 'balls in and leveraged upon leveraged" that will suffer. I assume the Conventional 2+ are the 'Accidental landlords'?...who will [if they are sensible] get out 'sooner rather than later with a small loss?

No debt/paid off - Boomer category or those that have inherited (my property is my pension) won’t be losing their shirt anytime soon. When Labour get in however, with second home/carbon/energy/wealth taxes however…

The conventional mortgages will be as you say ‘accidental landlords’ on ‘consent to let’ on the their standard mortgage conditions which can only be done for 2 years.

BTL repayment is the smaller proportion (they can raise rents for a period of time until they get to a ceiling) but if they don’t sell up they’ll go down with the ship.

BTL interest only is fooked. That’ll bring down the whole kaboodle, 15 years of ZIRP is about to unravel the other way like a dodgey prawn curry.

Edited June 16, 2023 by Lightscribe

[wherebee]

32 minutes ago, Lightscribe said:

No debt/paid off - Boomer category or those that have inherited (my property is my pension) won’t be losing their shirt anytime soon. When Labour get in however, with second home/carbon/energy/wealth taxes however…

The conventional mortgages will be as you say ‘accidental landlords’ on ‘consent to let’ on the their standard mortgage conditions which can only be done for 2 years.

Here in Oz the greens are pushing hard on the Labor gvt for rent caps and rent freezes, due to 'cost of living crisis' (despite the fact that the greens caused a lot of it).  Labor are terrified of losing more ground to the greens, so will probably cave and agree.  Cue private landlords realising that mortgage payments can go up whilst rental income cannot....

[DurhamBorn]

54 minutes ago, Lightscribe said:

No debt/paid off - Boomer category or those that have inherited (my property is my pension) won’t be losing their shirt anytime soon. When Labour get in however, with second home/carbon/energy/wealth taxes however…

The conventional mortgages will be as you say ‘accidental landlords’ on ‘consent to let’ on the their standard mortgage conditions which can only be done for 2 years.

BTL repayment is the smaller proportion (they can raise rents for a period of time until they get to a ceiling) but if they don’t sell up they’ll go down with the ship.

BTL interest only is fooked. That’ll bring down the whole kaboodle, 15 years of ZIRP is about to unravel the other way like a dodgey prawn curry.

Its amazing watching my roadmap work come alive and seeing all the policy makers trapped in the tomb of their own folly.The cycle is not 100% going as i expected,by now i thought we would be seeing more energy work,on-shoring,welfare reforms etc,and we nearly did with Truss,but the polos are too useless.However the macro is doing that well the roadmap is down to rounding errors at this stage.It goes to show the macro always trumps everything else.Im also very pleased with the things iv added.Its the welfare inputs etc iv added to the model that has got to be almost exact on inflation and rates (from over 3 years ago),the original 70s model would of seen direction,but not of been as close.

Interest rate increase will start to kill some demand of course,but its hitting mostly the young working,the very people paying the tax for the idle and scrounging.You really couldnt make it up the policy errors they keep making.They simply cant bring themselves to accept the Shangri La they created is collapsing.

I said the would take the money from pensions (they took £500 billion during the "Truss" crisis),and then they would take housing wealth.Leveraged BTL is over as an investment class outside of specialist investors.Unless of course the government try some massive QE move with the BOE,but that will just crank up inflation.

 

[Long time lurking]

1 hour ago, MrXxxx said:

Interesting, so my 'read' of that is that it wont be the single "My second property is my pension" brigade that will suffer the pain, but the "Property never goes down so I am 'balls in and leveraged upon leveraged" that will suffer. I assume the Conventional 2+ are the 'Accidental landlords'?...who will [if they are sensible] get out 'sooner rather than later with a small loss?

What i see is the 5+ properties IO brigade with 70% debt ,if based on todays prices only have a 10% price drop window before they will have to find money to refinance the a-typical two year fix, as i`m pretty sure just about every BTL IO mortgage requires a minimum 20% deposit    

Equity is all ways the first casualty when prices start to fall 

 

[Long time lurking]

I cant remember who was asking/talking about this subject,i`m not sure if it`s a heavy water reactor or molten salt 

It`s an interesting thread if it`s all correct 

 

Edited June 16, 2023 by Long time lurking

[Pip321]

1 hour ago, MrXxxx said:

Interesting, so my 'read' of that is that it wont be the single "My second property is my pension" brigade that will suffer the pain, but the "Property never goes down so I am 'balls in and leveraged upon leveraged" that will suffer. I assume the Conventional 2+ are the 'Accidental landlords'?...who will [if they are sensible] get out 'sooner rather than later with a small loss?

I began to follow the 118 property website when c24 was introduced ie restricting of mortgage interest tax relief. I was paying a fairly hefty £1k a month interest.

I was disgruntled at the change and was looking at ways to mitigate rather than pay off my debt. However a few things became apparent.

1) many of the posters were talking of payments of £60k and I genuinely thought the meant a year….really I did….but I realised they meant a month 🤢

2) all the the posters were fuming about the change….as entitled as a fat lass on benefits. 

3) many had leveraged against the gains ie buy house for £100k which is now worth £200k with a debt of £180k……so they had reborrowed and used the money to buy more houses and a little treat such as a Range Rover for £70k

Now I knew 3 was possible but respect for debt and a knowledge rates can rise….I used to sell to crystallise gains. But the other reason you don’t do what they had is CGT. You sell the house for £100k and pay say £28k CGT then the equity is effectively minus £8k. Mention that and the response is NEVER SELL. Hmmm…..never say never 😉

I also realised we have 2m landlords. With cheap money, interest only mortgages and an ability to leverage then if left as it was then the 2m landlords might acquire the 20m uk properties and rent them out to the rest of the population. Hardly fair for an essential need…..(although tbf I might argue our essential services should all be non profit ie water etc but that’s another degree of argument) 

Anyway, It was the entitlement and a likening to being treated like Jews during the holocaust 🤦🏻‍♂️……that confirmed where I stood, ie firmly in favour of higher rates and C24 albeit at a potential cost to me.

Many of these guys will be tied in. Effectively they have already spent the gains assuming property can’t fall and there will never be a scenario where they need to sell.
Some individuals borrowed more than a medium/large engineering firm using expensive tooling with 40 staff might borrow. It all became too casual and too easy. The fully leveraged multiple residential property owning model is dying…..but I would say it was always dead and was just a matter of time until the luck ran out. 

[Plan-b]

Hubbert’s Peak is Here

The only source of growth over the past decade, the shales, are now beginning to show signs of exhaustion.

I don't know how accurate this report is but hopefully @Cattle Prod will give it a once over, it seems legit to me.

https://blog.gorozen.com/blog/hubberts-peak-is-finally-here

The West/NATO countries had better start to either make friends with or invade and take the oil of OPEC and other oil producing countries. Perhaps Ukraine and Syria are the start of more serious energy supply confrontations? Maybe.

[Wight Flight]

5 minutes ago, Pip321 said:

I began to follow the 118 property website when c24 was introduced ie restricting of mortgage interest tax relief. I was paying a fairly hefty £1k a month interest.

I was disgruntled at the change and was looking at ways to mitigate rather than pay off my debt. However a few things became apparent.

1) many of the posters were talking of payments of £60k and I genuinely thought the meant a year….really I did….but I realised they meant a month 🤢

2) all the the posters were fuming about the change….as entitled as a fat lass on benefits. 

3) many had leveraged against the gains ie buy house for £100k which is now worth £200k with a debt of £180k……so they had reborrowed and used the money to buy more houses and a little treat such as a Range Rover for £70k

Now I knew 3 was possible but respect for debt and a knowledge rates can rise….I used to sell to crystallise gains. But the other reason you don’t do what they had is CGT. You sell the house for £100k and pay say £28k CGT then the equity is effectively minus £8k. Mention that and the response is NEVER SELL. Hmmm…..never say never 😉

I also realised we have 2m landlords. With cheap money, interest only mortgages and an ability to leverage then if left as it was then the 2m landlords might acquire the 20m uk properties and rent them out to the rest of the population. Hardly fair for an essential need…..(although tbf I might argue our essential services should all be non profit ie water etc but that’s another degree of argument) 

Anyway, It was the entitlement and a likening to being treated like Jews during the holocaust 🤦🏻‍♂️……that confirmed where I stood, ie firmly in favour of higher rates and C24 albeit at a potential cost to me.

Many of these guys will be tied in. Effectively they have already spent the gains assuming property can’t fall and there will never be a scenario where they need to sell.
Some individuals borrowed more than a medium/large engineering firm using expensive tooling with 40 staff might borrow. It all became too casual and too easy. The fully leveraged multiple residential property owning model is dying…..but I would say it was always dead and was just a matter of time until the luck ran out. 

I agree with that.

The hoops you had to jump through to buy a £300k press, a productive asset that would employ 3 people, was extraordinary.

And then you would be expected to pay 5% over base, and repay in 6 years.

in hindsight i should have collected slaveboxes, as many did.

[Lightscribe]

15 minutes ago, DurhamBorn said:

Its amazing watching my roadmap work come alive and seeing all the policy makers trapped in the tomb of their own folly.The cycle is not 100% going as i expected,by now i thought we would be seeing more energy work,on-shoring,welfare reforms etc,and we nearly did with Truss,but the polos are too useless.However the macro is doing that well the roadmap is down to rounding errors at this stage.It goes to show the macro always trumps everything else.Im also very pleased with the things iv added.Its the welfare inputs etc iv added to the model that has got to be almost exact on inflation and rates (from over 3 years ago),the original 70s model would of seen direction,but not of been as close.

Interest rate increase will start to kill some demand of course,but its hitting mostly the young working,the very people paying the tax for the idle and scrounging.You really couldnt make it up the policy errors they keep making.They simply cant bring themselves to accept the Shangri La they created is collapsing.

I said the would take the money from pensions (they took £500 billion during the "Truss" crisis),and then they would take housing wealth.Leveraged BTL is over as an investment class outside of specialist investors.Unless of course the government try some massive QE move with the BOE,but that will just crank up inflation.

 

It’s becoming more apparent that we are an outlier economy (which we already knew on here), a housing market with an economy attached.

Inflationary uplifts to the non-productive majority of the country and the screw turned on those paying the taxes. Quelle surprise - inflation is sticky whilst everyone spends just as much still on Just Eat and garden centres.

It now looks as though our inflation won’t be dropping by much whilst it does in the rest of the west going into recession. 

Either we have to Vlocker it alone (for now), or face the prospect of QE’ing it alone (for now). Both make the UK economy like an unstable load on a trailer and our lorry could be veering off the motorway first.

That may be the intention in order to teach our pesky public a lesson for voting Brexit and tee up Keir an ‘in’ to re-join later down the line.

Meanwhile the embers of the second inflationary wave is smoldering….

 

[Plan-b]

8 minutes ago, Pip321 said:

1) many of the posters were talking of payments of £60k and I genuinely thought the meant a year….really I did….but I realised they meant a month 🤢

Fuckinhell £60k monthly. No way can that be sustainable as you say thats the debt load a decent size business.

[Long time lurking]

17 minutes ago, Pip321 said:

I began to follow the 118 property website when c24 was introduced ie restricting of mortgage interest tax relief. I was paying a fairly hefty £1k a month interest.

I was disgruntled at the change and was looking at ways to mitigate rather than pay off my debt. However a few things became apparent.

1) many of the posters were talking of payments of £60k and I genuinely thought the meant a year….really I did….but I realised they meant a month 🤢

2) all the the posters were fuming about the change….as entitled as a fat lass on benefits. 

3) many had leveraged against the gains ie buy house for £100k which is now worth £200k with a debt of £180k……so they had reborrowed and used the money to buy more houses and a little treat such as a Range Rover for £70k

Now I knew 3 was possible but respect for debt and a knowledge rates can rise….I used to sell to crystallise gains. But the other reason you don’t do what they had is CGT. You sell the house for £100k and pay say £28k CGT then the equity is effectively minus £8k. Mention that and the response is NEVER SELL. Hmmm…..never say never 😉

I also realised we have 2m landlords. With cheap money, interest only mortgages and an ability to leverage then if left as it was then the 2m landlords might acquire the 20m uk properties and rent them out to the rest of the population. Hardly fair for an essential need…..(although tbf I might argue our essential services should all be non profit ie water etc but that’s another degree of argument) 

Anyway, It was the entitlement and a likening to being treated like Jews during the holocaust 🤦🏻‍♂️……that confirmed where I stood, ie firmly in favour of higher rates and C24 albeit at a potential cost to me.

Many of these guys will be tied in. Effectively they have already spent the gains assuming property can’t fall and there will never be a scenario where they need to sell.
Some individuals borrowed more than a medium/large engineering firm using expensive tooling with 40 staff might borrow. It all became too casual and too easy. The fully leveraged multiple residential property owning model is dying…..but I would say it was always dead and was just a matter of time until the luck ran out. 

The real killer is the fact most have spent their CTG liabilities before they were ever due 

That is the real rock and a hard place for those that played that game ,and that comes into play before any price drops are factored in which will only compound the problem even further 

[Cattle Prod]

11 hours ago, Axeman123 said:

You know that if that happens, that is it for our species? There could never be another industrial revolution, as there would never be enough energy accesible to a pre-industrial society to start one. Humans would never settle new worlds, we would just dead-end scrabbling about in the mud until eventually going extinct as a single planet species.

That would be the most depressing thing imaginable, I would honestly rather we go extinct in a plague or full scale nuclear missile exchange. What would be the point of anything?

The good news is that fossil fuels will never run out, they will run down slowly but will be available at a price. So a Manhattan Project type of focussing of brains and resources can always be fuelled. Nuclear power came out of that. Cryptographic and computing advances came out of Bletchley Park for the same reason. Political will to do it again for a better energy source is not there, in fact it’s looking in the other direct, back to the Middle Ages. That’s the danger. And they will need a big shock of some sort to get rid of the ‘tranny admiral equivalents’ running the place and replace them with Churchills and Eisenhowers.

So we will have the benefits of fossil fuels to run such a project as governments can pay whatever it costs. The risk is that the rest of us can’t. If they don’t use the currrent window of opportunity to come up with something it will be a lot harder to do as world population drops in line with fossil fuel production, which it will, with a high correlation. That means fiat money systems will collapse for an opener, then supply chains etc etc. I could see the hypothetical project needing a high grade titanium or something, and just not being able to produce it any more. I believe they had to get titanium for the SR-71 from their enemy, Russia for example.

So yeah if they don’t wake up it’s possible we go irreversibly backward. After they burned the great library of Alexandria and lost a huge amount of knowledge it took centuries to get back to windmills, water wheels, then steam, coal, gas, oil nuclear. 

It’s true that fossil fuels are a one off gift. It’s a shame we do such a bad job of telling that story.

[onlyme]

10 hours ago, DurhamBorn said:

We still have 200 years worth of coal up here for the whole country.I think the green bullshit is such a disaster because there is a real need to come off oil and gas,but we need to be realistic.We need to work out how much we have,and how we need to be careful with it while we develop to new energy.The net zero rubbish is the real threat to humanity and the planet because if we dont develop new energy before oil and gas run out every tree on the planet will be chopped down in short order,then 5 billion will starve.

The first thing to do is expand nuclear to the level where we are not burning much gas for electric.Hybrid cars maybe,anything to lower oil use,public transport,bikes,anything,but joined up thinking.I would tax gas guzzlers hard,not for net zero,but because they are wasting resources we cant afford to waste.Like everything else,it seems we are being led by children and loons rather than hard headed thinkers.

The way they are going grid power is the one to collapse first. In the past a lot of business could partially and almost fully function -   telephones still work so comms OK, paper based systems, everything on computer it would not just be industry affected almost no systems would work under a power cut, zero data.  In some ways this is a good thing as if this situation is due to incompetence rather than malevolence then an immediate course change would need to be made.

Edited June 16, 2023 by onlyme

[M S E Refugee]

28 minutes ago, Lightscribe said:

That may be the intention in order to teach our pesky public a lesson for voting Brexit and tee up Keir an ‘in’ to re-join later down the line.

If we were to rejoin I wonder how many indigenous Brits would up sticks and go to cheaper Sunnier climes in the EU?

The UK would be left with a rapidly diminishing tax base and an ever increasing amount of parasites.

[Lightscribe]

5 minutes ago, M S E Refugee said:

If we were to rejoin I wonder how many indigenous Brits would up sticks and go to cheaper Sunnier climes in the EU?

The UK would be left with a rapidly diminishing tax base and an ever increasing amount of parasites.

I think that’s the idea. Or they are making very good progress towards it through ‘incompetence’.

Only a potential digital ID will make sure that any ‘tax owed’ will follow you wherever you go.

[wherebee]

12 minutes ago, onlyme said:

They way they are going grid power is the one to collapse first. In the past a lot of business could partically and almost full function -   telephones still work so comms OK, paper based systems, everything on computer it would not just be industry affected almost no systems would work under a power cut, zero data.  In some ways this is a good thing as if this situation is due to incompetence rather than malevolence then an immediate course change would need to be made.

I'm hearing on the grapevine of issues with infrastructure maintenance like the electric grid here in OZ; the blue collars withdrawing labor in a go slow way.  Could be rubbish....

[Wight Flight]

30 minutes ago, Long time lurking said:

The real killer is the fact most have spent their CTG liabilities before they were ever due 

That is the real rock and a hard place for those that played that game ,and that comes into play before any price drops are factored in which will only compound the problem even further 

Good enough price drop and there won't be any CGT liability.

Every cloud and all that 

[Long time lurking]

10 hours ago, Alifelessbinary said:

That’s the first time I’ve seen an AI generated propaganda video.

You have clearly not been paying attention,as there have been some hilarious Putin videos mocking the the west dating back well over six months 

At first i thought there's some very clever editors out there,but then i realised they were way to good for that  

[Long time lurking]

5 minutes ago, Wight Flight said:

Good enough price drop and there won't be any CGT liability.

Every cloud and all that 

Yep but the equity needed for them to re mortgage will have disappeared a looooong time before that occurs 

What do they do then 

[onlyme]

14 minutes ago, wherebee said:

I'm hearing on the grapevine of issues with infrastructure maintenance like the electric grid here in OZ; the blue collars withdrawing labor in a go slow way.  Could be rubbish....

The real power is in the physical hands of a very few people in reality, they just don;t realise it, or maybe they are beginning to realise it.

I have heard a lot of stories about the US grid, was a running theme for months, total lack of suppply of basics like transformer kit and the scrap pile being scavenged for temporary replacements.

Port closures Sateside thanks to strikes - have you heard of those? Apparently a thing, Loads of leftfield situations that are below the radar.

Edited June 16, 2023 by onlyme

[Long time lurking]

22 minutes ago, wherebee said:

I'm hearing on the grapevine of issues with infrastructure maintenance like the electric grid here in OZ; the blue collars withdrawing labor in a go slow way.  Could be rubbish....

It`s real for sure , i don`t think its been done intentionally by those doing it, by that i mean they don`t think they are sticking to the man so to speak 

I`m seeing it more and more in my line of work ,i have never seen so many people saying fuck the overtime time ,it`s like they have realised  running on the hamster wheel has achieved fuck all for them ,and are now doing the bare minimum  need to survive ,and to be honest most seem happier by doing so 

Basically people have given up 

Edited June 16, 2023 by Long time lurking

[onlyme]

1 hour ago, Long time lurking said:

It`s real for sure , i don`t think its been done intentionally by those doing it, by that i mean they don`t think they are sticking to the man so to speak 

I`m seeing it more and more in my line of work ,i have never seen so many people saying fuck the overtime time ,it`s like they have realised  running on the hamster wheel has achieved fuck all for them ,and are now doing the bare minimum  need to survive ,and to be honest most seem happier by doing so 

Basically people have given up 

The conscientiousness gap -  Why should I be hard working, conscientious, realible, responsible and legally liable, fixing stuff for others - whilst there are others running away with the spoils, often with zero accountbility, little evidence of ability or any other traits demanded of them.