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

[reformed nice guy]

9 minutes ago, Democorruptcy said:

Re that last bit it's also via public sector pay rises, protecting the NHS etc the money doesn't go on better frontline services, it's largely going on wages that lead to more pension liabilities. Where's the pain for council executives etc. while they are upping the council tax?

The council need to move to a dc scheme, capitalised using the same transfer values the private sector would get.

Then when they want to buy a clapped out shopping centre they can approach their own pension scheme for the funds. That would force better spending decisions!

Same with the NHS. They talk about solidarity with other workers but let's see a bunch of doctors or nurses being convinced by council mongs to invest £200 million of their pensions to 'reinvigorate' a shite part of town

[Stuey]

29 minutes ago, Loki said:

5.022% already 

Meanwhile ours are cratering

 

[DurhamBorn]

51 minutes ago, Democorruptcy said:

Re that last bit it's also via public sector pay rises, protecting the NHS etc the money doesn't go on better frontline services, it's largely going on wages that lead to more pension liabilities. Where's the pain for council executives etc. while they are upping the council tax?

Thats the systemic collapse situation.Government and councils give themselves inflation protected incomes,but they are now so big the private sector simply cannot sustain them.Its why incomes and capital of workers and savers is being destroyed quicker and quicker.Bennies,retired public sector zero pain,everyone else double the pain.Its ludicrous,but its just our polos couldnt care less.Low paid private sector workers are being destroyed.I see zero policy to even slow down the destruction.

Councils and the police only exist for pensions now,they do next to nothing else.

[DurhamBorn]

An example on the police.Lads riding off road motorbikes down our paths at speed for months.Police do nothing.They nearly hit my mates granddaughter in her pram.My mate walked the dog a lot after that until one flew past who he knocked off the bikes,kicked the shit out of him,and i mean a mess,threw him in the ditch and left him there.Luckily the police didnt innvestigate that as well.God help the cities when they blow.

[Long time lurking]

17 minutes ago, Stuey said:

Meanwhile ours are cratering

 

Hows that interest rate cut by Christmas looking 

[Stuey]

1 minute ago, Long time lurking said:

Hows that interest rate cut by Christmas looking 

Highly recommended. 

[leonardratso]

if my gas bill doesnt go down, ill be wanting a refund from stuey, on his advice ive put my heating on 24/7 at 50 deg c.

 

Edited October 23, 2023 by leonardratso

[Stuey]

9 minutes ago, leonardratso said:

if my gass bill doesnt go down, ill be wanting a refund from stuey, on his advice ive put my heating on 24/7 at 50 deg c.

 

Charges are reducing this month. 

[Long time lurking]

14 minutes ago, Stuey said:

Highly recommended. 

It isn't going to happen at Christmas that`s for sure and when it does the £ $ will crash if its any time soon ,with soon being in the next 6 months 

[Harley]

3 hours ago, DurhamBorn said:

I think for us we need to go forward knowing,at least for now this is true.My inital numbers showed this,but i expected it would force investment from government in the backbone of the economy,but so far nothing,they are simply welfare spending instead.I have seen a lot about allocation for risk on here lately.I think the problem with that is although it should avoid wipeout is also likely means slowly losing everything inflation adjusted.Getting an income and holding capital value is going to be very very difficult.Its much worse than i expected.There should be plenty of stocks that should manage it from here,but many more wont.If we are ex growth then its crucial we hold sectors who can hold or increase demand on top of increasing prices.I am worried though.The huge macro signals are being ignored by government.The state is on its way to take everything from private sector workers.The tax allowance freezes with massive bennie and pension increases are the tell.

I don't really understand what that means. 

It's about managing risk against whatever are the objective metrics.  It does not mean sub par (whatever par is).  But also other strategies (whatever they are) could result in losing everything or at least a lot more.  Survivor bias and all that stuff. 

And it depends on attitude to risk.  Some may be happy risking more with a higher potential for large losses or large gains while others may prefer a lower risk with a lower return but one sufficient to meet their needs. 

Simply, expected return = return times probability.  Probability will to some extent vary between people (e.g. ability).  People need to decide where they want to be on the curve, but they can allocate capital to several places on that curve.

You can model all the options and decide where you want to be.  It's just an approach and does not have a prescriptive outcome. 

The key point is to assess and manage risk and not to shoot blind (e.g. just run on narratives).

For me, my optimum is to have a core portfolio (I have not discussed composition) which is lower risk and lower reward (not necessarily no risk, no reward!) combined with more aggressive portfolios. 

Sure, inflation needs to be included (part of the DCF discount rate).

[Plan-b]

3 hours ago, DurhamBorn said:

I am worried though.The huge macro signals are being ignored by government.

Don't worry DB we called it a long time ago, the system must now collapse to clear the decks this is what will be required for a change in direction.

It's even more obvious now than ever 'they' will be forced to, or nothing will change.

Our own personal great reset.

Bring it on I'm ready - I think you all are too.

 

Edited October 23, 2023 by Plan-b

[leonardratso]

Over a long enough time i dont suppose it matters what you do, for example stuff youve bought to beat the inflation (olive oil?) eventually that at a cheap price will run out and you are left with paying the new price, so slowly you are averaging up to the current price if replacing new for old, whats the plan really? is it just to be last man standing but still dying by  a 1000 cuts? albeit over a longer time.

[geordie_lurch]

23 minutes ago, leonardratso said:

Over a long enough time i dont suppose it matters what you do, for example stuff youve bought to beat the inflation (olive oil?) eventually that at a cheap price will run out and you are left with paying the new price, so slowly you are averaging up to the current price if replacing new for old, whats the plan really? is it just to be last man standing but still dying by  a 1000 cuts? albeit over a longer time.

Great points and I agree that all my cheaper stash of stuff has now run out although thankfully one of my largest expenses per month is covered by the 10 year 1.99% mortgage which has 8 years to run so I should be able to stay ahead there However, as I mentioned a few weeks ago, I am still around 30% up in total in my stocks and shares ISA over the last 3 years which sounds great but as we all know, inflation has been at least 15% each of those years so I'm still actually behind in real terms! Short of emigrating somewhere whilst there's some opportunity for arbitrage it seems we are all going to have to get used to the new normal in the west until there is a reset of some sort - hopefully not of the Klaus Scwabb variety

Edited October 23, 2023 by geordie_lurch

[geordie_lurch]

Great 3 min clip with a concise summary above the clip further reinforcing many of our views here that the West is screwed going forward 

 

[Harley]

I'm probably wrong but.....

Fred needs £20k pa to meet essential living costs for his remaining 20 years, everything being constant and with nothing needed at the end.

If inflation is 10% pa for the 20 years he will need a cash sum today of £1.5m.  If he invests in a 5% government bond ladder, he will need £716k today.  "Risk free" bonds because he will be royally fecked without all of that £20k so it's non-negotiable.

Fred currently has £1m in investible capital.  He will therefore have £284k left to invest to generate an income for the optional nice things in life (assuming no emergency fund is needed, etc).

He reckons he needs £10k pa to meet these needs.  He will need an investment return of -3.2% to get £10k pa from £284k over 20 years.  At inflation of 10% pa, Fred will need to target an investment return of 6.8%.

But that 6.8% is not a risk free rate.  He will need to accept the risk of not achieving that rate or seek a higher rate to compensate in part (i.e. to deliver a 6.8% expected rate).

Or he decides he's going to day trade and seek a far higher return at a far higher risk he'll end up with nothing.  Everyone will have a different preference as to where they want to be on that curve.

That's the base model at it's simplest.  No other cash flows (pension receipts, care costs, etc), no change in expenditure requirements over time, no flexing the assumptions, etc.  All these can be included in an advanced model though and Pareto puts you in the ball park.

The key point is Fred has a target investment return he must achieve as it has an implicit level of acceptable risk (the other cheek of the risk:reward arse!).  Ideally no more nor no less.  He can then model a portfolio of investments (the sum of individual expected risks and returns) to deliver that target at an accepted level of risk. 

At its simplest, he could look for a fund that has delivered 6.8% total return (less the final sale) with an acceptable risk (standard deviation).

If Fred only had total capital of £200k, then he must either accept £5,500 pa in a 5% bond ladder or take on increasing risk to achieve a higher return.  It's a throw of the dice but not 50:50 (that's a coin!) whether he achieves that.  The potential distribution of returns for any investment will have a skew.

If Fred had £50k he may just decide to go the George Best route and take the Pension Credits, freebies, etc.  £50k or whatever would depend on the individual's preferences and a calculation of the cut over point (indexed Pension Credits and freebies being worth a hell of a lot, like that £1.5m for £20k pa for 20 years at 10% inflation!).  Hell, we could do this calculation for the whole population and probably find it's over, terminal, like DB says, and just hope people stay "irrational" (i.e be better than what's asked from them) and don't do it!

So in this approach you determine your objectives and flows and then work out allocations, portfolios, aproaches, etc to deliver them at an accepted level of risk.  You may have to go back to the beginning and repeat with lesser ambitions if the answers are no good.  Or just not bother and take the State's shilling after one hell of a party!

Or you don't do any of that and just listen to narratives and throw a dice (or worse, toss a coin) and risk becoming one of the 90% in that footnote about losing money!

Or something like that but I can't be arsed to check!

PS:  Thinking about it, especially given any wealth people have is in an encumbered house, the default question to most maybe should be "why aren't you activey planning to go tax credits"?!  You could spend a few extra £m during your lifetime and then get a £1m+ Pension Credit bonus for doing so!

Edited October 23, 2023 by Harley

[Kendo]

So redundancies at Talk Talk. Maybe my memory fails me but I thought there was an expectation on here of mergers in the telecoms sector rather than de-mergers?

https://www.mobilenewscwp.co.uk/News/article/redundancies-likely-talk-talk-group-splits-three-standalone-businesses

[Ma2]

As a result of some of the great discussions on here the last week, I have been reevaluating what I am trying to achieve. It's difficult to put my finger on and I'm not really sure how to put it. Of course I am interested in growing and protecting my saved labour. But that is just a means to an end.

I have been used to a high degree of freedom throughout my life, whether that has been real or imagined is up for debate. No matter who has been in government here or abroad, I've done what I wanted, always had work, travelled the world for work and pleasure. We've had a tailwind for sure.

So to me all this is about is maintaining a level of freedom that I had taken for granted, up to the point now where I see it slipping away.

Staying here in the UK, in what feels now like an oppressive regime, where I have to think about what is happening, see what is happening, put up with the bullshit and propaganda, trying to second guess, trying to stay one step ahead of my own government and it's "allies" is draining and not the life I want. I am having to think about it all the time and will have to for the next decade at least.

The investments are just one part of the strategy for the future, but I want to enjoy life now as well as in the future (which of course might never come).

If I am able to make a life elsewhere maybe I am paving the way for family to follow, or at least to protect capital for them in the future.

We have had the difficult discussions at home and are prepared to at least look into this more seriously. It's hard when you have set yourself up in the UK to have buffers between you and the failing system, only to see the system trying to close in on you every day. I really get that claustaphobic feeling here now, of the net drawing in.

To start researching all this I've been watching (among others) the nomad capitalist on youtube and have just started reading his book.

His idea is to go where you're treated best. Countries compete and you can take advantage of that.

But you don't have to think about leaving. In fact he breaks it down to 3 ideas, to go-

• Where you are treated best
• Where your money is treated best
• Where your business is treated best

You don't have to look for one country that does all this (it might not exist) but you can look at 2 or 3 to meet these criteria.

The UK might even be one of those but your banking in Singapore and your business in a different tax friendly juristiction. You might even have a small property in each if you had the money and spend equal time between rather than staying resident in a single juristiction.

It's starting to open my eyes to the possibility of the world outside "the west" opening up just as the west shuts itself off.

The idea that you don't have to stay and fight and go down with the sinking ship, that there are countries out there far safer than the UK, with far better services, with better energy and food security.

Of course the grass is not always greener and, in the current climate, any country could be targetted or could change it's direction. But any contract between me and UK plc seems to have been broken a few years ago, in addition I am rather embarrassed at how easily we as a country are played on the global stage.

 

Edited October 23, 2023 by Ma2
sp.

[Harley]

9 minutes ago, Ma2 said:

As a result of some of the great discussions on here the last week, I have been reevaluating what I am trying to achieve. It's difficult to put my finger on and I'm not really sure how to put it. Of course I am interested in growing and protecting my saved labour. But that is just a means to an end.

I have been used to a high degree of freedom throughout my life, whether that has been real or imagined is up for debate. No matter who has been in government here or abroad, I've done what I wanted, always had work, travelled the world for work and pleasure. We've had a tailwind for sure.

So to me all this is about is maintaining a level of freedom that I had taken for granted, up to the point now where I see it slipping away.

Staying here in the UK, in what feels now like an oppressive regime, where I have to think about what is happening, see what is happening, put up with teh bullshit and propaganda, trying to second guess, trying to stay one step ahead of my own government and it's "allies" is draining and not the life I want. I am having to think about it all the time and will have to for the next decade at least.

The investments are just one part of the strategy for the future, but I want to enjoy life now as well as in the future (which of course might never come).

If I am able to make a life elsewhere maybe I am paving the way for family to follow, or at least to protect capital for them in the future.

We have had the difficult discussions at home and are prepared to at least look into this more seriously. It's hard when you have set yourself up in the UK to have buffers between you and the failing system, only to see the system trying to close in on you every day. I really get that claustaphobic feeling here now, of the net drawing in.

To start researching all this I've been watching (among others) the nomad capitalist on youtube and have just started reading his book.

His idea is to go where you're treated best. Countries compete and you can take advantage of that.

But you don't have to think about leaving. In fact he breaks it down to 3 ideas, to go-

• Where you are treated best
• Where your money is treated best
• Where your business is treated best

You don't have to look for one country that does all this (it might not exist) but you can look at 2 or 3 to meet these criteria.

The UK might even be one of those but your banking in Singapore and your business in a different tax friendly juristiction. You might even have a small property in each if you had the money and spend equal time between rather than staying resident in a single juristiction.

It's starting to open my eyes to the possibility of the world outside "the west" opening up just as the west shuts itself off.

The idea that you don't have to stay and fight and go down with the sinking ship, that there are countries out there far safer than the UK, with far better services, with better energy and food security.

Of course the grass is not always greener and, in the current climate, any country could be targetted or could change it's direction. But any contract between me and UK plc seems to have been broken a few years ago, in addition I am rather embarrassed at how easily we as a country are played on the global stage.

 

An epic, The Epic, problem statement.  By my reckoning you're surely halfway through the Looking Glass having got that far.  The remainder will be what it will be but it'll never be less than what it was.

[spunko]

 

Part 7 above.