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Credit deflation and the reflation cycle to come.


DurhamBorn

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12 minutes ago, UnconventionalWisdom said:

This is interesting. If China is reducing its reliance on exports, do you think it'll start offloading its US debt holdings/ reduce its purchases? Seems they could now do with a stronger Yuan. 

I dont know.

The chinese qe credit expansion has been a disaster - see HoF.

There is no cheap employable labour in China.

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44 minutes ago, Funn3r said:

What do you think of BT CEO resigning? Thought I understood you in the past to say you were not impressed so much with BT itself but you really trusted the CEO. 

I didnt trust the CEO at all,i trust the new Chairman 100% and that has proved right already.He has sacked the CEO.BT again is a reflation play.Debt is a bit high when you add in the pension,but they should be able to run free cash higher as prices rise faster than depreciation later into the cycle.They have legacy issues of course,but with being at lows and a cycle that should be kind i think the risk reward should prove decent.

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man o' the year
1 hour ago, Wheeler said:

Actually I was being a bit sarcastic. I assumed the developers would be using section 106 "bribes" to get their developments through.

My apologies. You clearly are just if not more aware than I. This has been a recent discovery for me and unfortunately will likely cost my business jobs and me my business eventually.

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leonardratso
12 minutes ago, man o' the year said:

My apologies. You clearly are just if not more aware than I. This has been a recent discovery for me and unfortunately will likely cost my business jobs and me my business eventually.

how do you get these 'letters of comfort'? can you not get them also? never heard of them.

Mind you i always looked on the hospitality business as probably damn hard work with no guarantees of anything, so i dont really know much about it.

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man o' the year
3 minutes ago, leonardratso said:

how do you get these 'letters of comfort'? can you not get them also? never heard of them.

Mind you i always looked on the hospitality business as probably damn hard work with no guarantees of anything, so i dont really know much about it.

As far as I understand a "letter of comfort" is a legal dispensation from the council. I am already to let to whomever so do not need one. They did need one to legally allow them to let to other than their perceived target market. I dont think the council would be agreeable to allowing me to waive my business rates.

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StrugglingMillennial
7 hours ago, DurhamBorn said:

Money supply growth has been slowing, the yield curve is not far from inverting, the Fed is tightening, loan growth is slowing, consumer credit defaults are rising and credit spreads, though still historically very low have turned upwards.These are all late cycle signals and that a recession will follow. With the leverage in the system (including derivatives), the economic and market reversal are both likely to come very fast when they finally arrive. In other words, we can go from optimism to pessimism and from a consensus scenario of steady as she goes to gloom in a hurry. We might yet see the biggest bear market since the war.

After that i think a wealth creation cycle will begin.The right assets will make people big profits.There is a chance though we go straight to reflation.I see it as unlikely,but possible.Its why im long PMs and their miners now.

I dont know what things are like in the rest of the country but asking prices for house near me have started to fall and the number of homes for sale has fallen aswell. A possible early sign maybe?

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Just now, StrugglingMillennial said:

I dont know what things are like in the rest of the country but asking prices for house near me have started to fall and the number of homes for sale has fallen aswell. A possible early sign maybe?

In the north decent houses are roughly at 2004 levels and havent moved up or down.However we are the cheapest part of the country.The new builds that are mostly horrible are starting to come back onto the market and cant get close to their sale when new prices,those have a lot of Help to Buy buyers as well.

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4 hours ago, spygirl said:

Whos stupid enough to donate to a party who receives most of its donations from public sector unions?

But Unions represent normal working people! The CONservatives as I have pointed out only represent millionaires and billionaires.. Tax avoiders and Corrupt Russian Money Launders..

Why on earth would you vote/donate money to them.. I personally hate the Blairites,, But they have more in Common with the Tories than they do with the Labour leader, that's why they want rid of his PRO fairness, anti war politics.. Dont believe anything you see on the news,,, the elites own that as well!

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9 minutes ago, DurhamBorn said:

In the north decent houses are roughly at 2004 levels and havent moved up or down.However we are the cheapest part of the country.The new builds that are mostly horrible are starting to come back onto the market and cant get close to their sale when new prices,those have a lot of Help to Buy buyers as well.

I track houses to market and I am seeing highest levels for sale in 2 years in the SE of greater London.. 340 (3+ bedroom houses) for sale in my area.. Most I've seen since I started keeping track, previous high was 270 last September. Not sure if this is the S24 effect! I also notice that anything 500k+ is very stagnant.. Who has 500k? I know I don't and could not get it even with 100k deposit..

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leonardratso
7 minutes ago, macca said:

I track houses to market and I am seeing highest levels for sale in 2 years in the SE of greater London.. 340 (3+ bedroom houses) for sale in my area.. Most I've seen since I started keeping track, previous high was 270 last September. Not sure if this is the S24 effect! I also notice that anything 500k+ is very stagnant.. Who has 500k? I know I don't and could not get it even with 100k deposit..

you should sell some of your ipads and cut down on starbucks and avacado toast, then the world is your oyster.

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On 09/06/2018 at 14:40, Frank Hovis said:

I agree with all of that @Solzhenitsyn except fresh props being unlikely.

I think they're highly likely.

Remember MIRAS?  And ehat about bringing back by- borrower MIRAS to support "hard working families" and we don't want to "trash their dreams of home ownership".

The words of David Cameron when bringing in a previous prop; Help to Buy probably.

We'll get base rate tax relief for all all debt interest.  Just a matter of rising interest rates to make it necessary.

[won't help BTL of course, as they get that already (well, more already, but that'll be where they are in 2020).  IMO that is why they kept the base-rate relief -- to align with all relief on interest payments]

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Just now, leonardratso said:

you should sell some of your ipads and cut down on starbucks and avacado toast, then the world is your oyster.

:D

I work full time, My misses works 2 jobs..  My rent is high as I need a house with a garden (greedy of me I know) I really only work to pay for my landlords retirement and new range rover.. Other wise I would retire.. :)

I am the tightest bastard on the planet, I get everything I can 2nd hand, free if possible.. I wear shoes till my toes poke out.. even my car was given too me.. I take pride in having the worst car in my kids school.. :P was out all weekend, took lunch.. 2 full days with the family cost me £14.. I'm still poor though.. but better off than the poor bastards living in their cars down my aunties road

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leonardratso
2 minutes ago, macca said:

:D

I work full time, My misses works 2 jobs..  My rent is high as I need a house with a garden (greedy of me I know) I really only work to pay for my landlords retirement and new range rover.. Other wise I would retire.. :)

I am the tightest bastard on the planet, I get everything I can 2nd hand, free if possible.. I wear shoes till my toes poke out.. even my car was given too me.. I take pride in having the worst car in my kids school.. :P was out all weekend, took lunch.. 2 full days with the family cost me £14.. I'm still poor though.. but better off than the poor bastards living in their cars down my aunties road

you must try harder,  i notice you mentioned the missus having 2 jobs, can that be extended to 3 or 4 perhaps? also you seem to have neglected your untapped labour pool, kids you say? can they get jobs also, around school times obviously. Sheesh, i dont know, these young uns these days, lazy or what, i remember when i was your age, i had 25 kids and 3 wives, had to work all day down a mine and all night in a cotton mill, only had 15 minutes between jobs to nip home and impregnate the wives, and that was 365 days a year.

I was dead by 26 of course, but that was no excuse to stop.

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9 minutes ago, dgul said:

We'll get base rate tax relief for all all debt interest.  Just a matter of rising interest rates to make it necessary.

[won't help BTL of course, as they get that already (well, more already, but that'll be where they are in 2020).  IMO that is why they kept the base-rate relief -- to align with all relief on interest payments]

Why do you say that, given the need to get tax income I expect S24 to be followed by the removal of all tax credits on loan payments?

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No Duff (troll)

http://radio.goldseek.com/archives.php

Wow, Goldseek Radio podcasts may not be your cup of tea but the first segment of last week's (June 1st) podcast (Dr Paul Craig Roberts?) provides an excellent integrated narrative of many macro economic trends discussed here and another place, including fake globalism, neo liberalism, income inequality,  the corrupted economic profession, hollowing out of the middle class, fake stats, rising debt, financialisation of everything, lack of political leadership, the greed of Wall Street, and on and on.  You may not agree with his solutions but as a coherent problem statement it takes some beating.  US centric but applies to the UK and indeed the UK is mentioned.

 

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leonardratso
2 minutes ago, eek said:

Why do you say that, given the need to get tax income I expect S24 to be followed by the removal of all tax credits on loan payments?

i was hoping for this also, but ive been mightily wrong for a long time, wouldnt surprise me to be totally wrong again. Doesnt mean they are right though.

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1 minute ago, eek said:

Why do you say that, given the need to get tax income I expect S24 to be followed by the removal of all tax credits on loan payments?

Tax is the end of the money cycle.  If you let people take out debt then that magnifies the impact of that money on the economy (ie, people take out debt then spend that money.  Sure, they might 'buy a house', but the person that sold it then has loads of money to spend in the economy).  I'm only surprised that they've not introduced tax relief on debt yet.

[Tax policy (fiscal policy) is one of the most powerful ways you can modify the speed of the economy.  I've no idea why they're hung up on the current approach (largely monetarist)]

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4 minutes ago, dgul said:

Tax is the end of the money cycle.  If you let people take out debt then that magnifies the impact of that money on the economy (ie, people take out debt then spend that money.  Sure, they might 'buy a house', but the person that sold it then has loads of money to spend in the economy).  I'm only surprised that they've not introduced tax relief on debt yet.

[Tax policy (fiscal policy) is one of the most powerful ways you can modify the speed of the economy.  I've no idea why they're hung up on the current approach (largely monetarist)]

To save the financial system.Like you say next time (this time) it will be fiscal policy.QE was mostly feeding asset inflation,nobody would invest much at the end of a 35+ year disinflation cycle into production or investment.The start of the next cycle though with the consumer tapped out will see government stepping in.Not on welfare or current spending,but on investment.Like you say fiscal spending has a much greater affect on velocity of money,and with it inflation.Governments wont be doing much to stop houses falling in price.They have much bigger fish to fry.

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Recycling companies:

I don't think this idea has been mentioned before (possibly for good reason!): In a reflation cycle I would have thought that established Recycling companies would do very well: Zero or negative (i.e. Paid to take waste) input costs, existing high capital expenditure equipment and plant facility (depreciating on balance sheet, but barrier to entry to new entrants due to increasing cost of money), and rising value of extracted materials due to the reflation.

Also the increased market price of PMs and industrial materials such as copper (I presume would be in demand in a reflation and inddustrial cycle) in a reflation cycle would encourage the focus on increasing the percentage of valuable materials recovered from e.g. Electronic waste.

P.s. I've come over from the other site. I only have 60 something posts from memory but long time lurker there (mainly because I have a lot to learn!) Big thanks to Durhamborn and all the contributors to this thread, it is a wake-up call

 

 

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Noallegiance
8 hours ago, macca said:

I track houses to market and I am seeing highest levels for sale in 2 years in the SE of greater London.. 340 (3+ bedroom houses) for sale in my area.. Most I've seen since I started keeping track, previous high was 270 last September. Not sure if this is the S24 effect! I also notice that anything 500k+ is very stagnant.. Who has 500k? I know I don't and could not get it even with 100k deposit..

This is the conversation me and the missus have.

We have some deposit, but even if we were given £100k it's still not enough for a nice family home with space indoors and out.

A laughable situation, if it weren't serious.

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7 hours ago, Rhaegal said:

Recycling companies:

I don't think this idea has been mentioned before (possibly for good reason!): In a reflation cycle I would have thought that established Recycling companies would do very well: Zero or negative (i.e. Paid to take waste) input costs, existing high capital expenditure equipment and plant facility (depreciating on balance sheet, but barrier to entry to new entrants due to increasing cost of money), and rising value of extracted materials due to the reflation.

Also the increased market price of PMs and industrial materials such as copper (I presume would be in demand in a reflation and inddustrial cycle) in a reflation cycle would encourage the focus on increasing the percentage of valuable materials recovered from e.g. Electronic waste.

Maybe.  But it is an entirely false market; they exist (in the UK) only because of legislation and government funding.  Tighten legislation and increase funding and they'll do well; loosen legislation (or policing) and decrease government funding and they'll do badly.

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34 minutes ago, Noallegiance said:

This is the conversation me and the missus have.

We have some deposit, but even if we were given £100k it's still not enough for a nice family home with space indoors and out.

A laughable situation, if it weren't serious.

It is a joke.. people who put us renters down as lazy are missing the point of unafordability.. 

ive said it many times to brain dead, I’m alright jack’s on social media... who when people moan having to rent say.. “you should have studied harder and got a better job, I did and I’m alright!”

i say!

so where are the dustmen meant to live? The road sweepers, cleaners, nurses, teachers, engineers, farm workers, warehouse staff... or don’t You want your bins emptied, children educated, car fixed, washing machine repaired, food!

all low paid jobs, but if we all became investment bankers what happens then! 

If housing does not work for everyone, it does not work at all! 

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UnconventionalWisdom
14 minutes ago, macca said:

It is a joke.. people who put us renters down as lazy are missing the point of unafordability.. 

ive said it many times to brain dead, I’m alright jack’s on social media... who when people moan having to rent say.. “you should have studied harder and got a better job, I did and I’m alright!”

i say!

so where are the dustmen meant to live? The road sweepers, cleaners, nurses, teachers, engineers, farm workers, warehouse staff... or don’t You want your bins emptied, children educated, car fixed, washing machine repaired, food!

all low paid jobs, but if we all became investment bankers what happens then! 

If housing does not work for everyone, it does not work at all! 

The situation is at breaking point. I have a friend that was a GP in London and had to move up north because he couldn't stand sharing a place any more. It's got to be the same for nurses and consultants.

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10 minutes ago, macca said:

It is a joke.. people who put us renters down as lazy are missing the point of unafordability.. 

ive said it many times to brain dead, I’m alright jack’s on social media... who when people moan having to rent say.. “you should have studied harder and got a better job, I did and I’m alright!”

i say!

so where are the dustmen meant to live? The road sweepers, cleaners, nurses, teachers, engineers, farm workers, warehouse staff... or don’t You want your bins emptied, children educated, car fixed, washing machine repaired, food!

all low paid jobs, but if we all became investment bankers what happens then! 

 If housing does not work for everyone, it does not work at all! 

Where did people live 100 years ago?  200 years ago?  500 years ago?  1000 years ago?  

There are times when everyone 'owns' their own home, times when homes are owned by others and the majority are in either legal bondage or debt bondage and don't own their own homes.  I find it painful that we appear to be encouraging a return to a 'debt bondage' model.  But don't assume that the natural state is housing that doesn't cost 'as much money as you've got left after food and a knees up at the village hall once a season, because for the vast majority of the history of civilisation that's exactly what we've had.

That said, we appear to be at the end of an asset inflation cycle, so it is likely that housing costs will go down for the 'average person' over the next part of the economic cycle.  But don't assume that this will be trivial to notice -- it doesn't necessarily mean 'the money I've saved over the last 10 years can now buy a nice house' -- it might (in high inflation) mean 'my savings have been decimated, but I've at least got a good job and that's good enough to now buy a nice house'.

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UnconventionalWisdom
5 minutes ago, dgul said:

my savings have been decimated

That's my worry... Hopefully the insights of this thread and can help combat this. 

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