Credit deflation and the reflation cycle to come.

[spygirl]

18 hours ago, Chewing Grass said:

Was out and about in High Peak area of Derbyshire yesterday and you wouldn't believe the amount of building going on 2/3/4 bed houses plus flats on pieces of land nobody would have even considered building houses on 10/20/30 years ago. All in towns with Zero new jobs other than building more houses and with appalling transport links that cease to function in winter.

This photo was taken in 2011, it is now 2018 and the building site is moving at a snails pace but they have cleared what was High Peak College.

https://www.barratthomes.co.uk/new-homes/derbyshire/H773901-Heathfield-Nook/

When it comes to commuting along the A6 they are lying bastards.

its the removal/easing ofr brownfield ite planning permission.

Theresa a lot of construction activity at the mo - every town I visit theres some little corner or forggoten bui,lding - or,, more likely, some office blokc thats been shut i in the last 5-10 years.

All getting knocked down or turned into flats esp. OAP flats.

Lits of demand for builders.

EXCEPT ...... theres just not the money to transact these places.

The OAP builders are in deep shit as the new stuff is not shifting.

I doubt the other flats will shift.

 

Theres going to be a lot of bust building companies and very unemployed builders in a few months.

 

 

[Majorpain]

31 minutes ago, spygirl said:

its the removal/easing ofr brownfield ite planning permission.

Theresa a lot of construction activity at the mo - every town I visit theres some little corner or forggoten bui,lding - or,, more likely, some office blokc thats been shut i in the last 5-10 years.

All getting knocked down or turned into flats esp. OAP flats.

Lits of demand for builders.

EXCEPT ...... theres just not the money to transact these places. 

The OAP builders are in deep shit as the new stuff is not shifting.

I doubt the other flats will shift.

 

Theres going to be a lot of bust building companies and very unemployed builders in a few months. 

Everyone looks at the economic cycle as GDP increase or decrease, at its basic level its very much capacity expansion and contraction.

An increase in the productive capacity doesnt lead to an increase in GDP unless its used for a productive purpose, those flats are an example where they cant be sold off so what was the point in building them?  Further QE will make this worse as the only thing the builders will do is build even more flats they cant sell.  The numbers HAVE to add up eventually.

[spygirl]

8 minutes ago, Majorpain said:

Everyone looks at the economic cycle in GDP increase or decrease, at its basic level its very much capacity expansion and contraction.

An increase in the productive capacity doesnt lead to an increase in GDP unless its used for a productive purpose, those flats are an example where they cant be sold off so what was the point in building them?  Further QE will make this worse as the only thing the builders will do is build even more flats they cant sell.  The numbers HAVE to add up eventually.

The 10 of QE should have been used to force people with debt to pay it off.

And they could have sorted out tax credits, getting people into productive work.

Instead personal debt has cranked up.

Gone now.

BoE needs to raise rates or see the pound fall even more.

[Band]

2 hours ago, spygirl said:

BoE needs to raise rates or see the pound fall even more.

They seem happy for that to happen, good for exports and tourism innit!

[King Penda]

9 minutes ago, Banned said:

They seem happy for that to happen, good for exports and tourism innit!

i wonder how many with a morgage have never seen an interest rates rise yet

[spygirl]

12 minutes ago, Banned said:

They seem happy for that to happen, good for exports and tourism innit!

UK export perromance is terrible.

Thats becausie few people work in the private sector and, of thiose, few work in exporting cos.

 

The benefit and public sector have a very hard wake up call coming.

 

[King Penda]

11 minutes ago, spygirl said:

 

 

The benefit and public sector have a very hard wake up call coming.

 

hope your not thinking they might prune there juicy pensions,but your right about benifits.a lot of 50 years plus people could end up in shared acomidation in the future not a house each

[spygirl]

5 minutes ago, stokiescum said:

hope your not thinking they might prune there juicy pensions,but your right about benifits.a lot of 50 years plus people could end up in shared acomidation in the future not a house each

Ha! See my response to 'shortage of rental!'

Its currently there for blokes 50+.

[Festival]

Hi all

 

First if all thanks to the regular contributors like them I’m over from TOS. The quality of ideas and debate is excellent here and very thought provoking.

I have one question today regarding sterling. I’m increasingly of the view that a currency collapse is close at hand for the £. Whether it’s the relative decline in North Sea oil exports, the effect of a yield inversion and deflationary event on bank profits, the coming Brexit dislocation or the failure to raise interest rates I’m seeing no good outcomes for the £ within the next year. The £ lost 65 percent of its value against the DM between 1967 and 1977 so there is some precedent for a collapse the kind of which we haven’t seen for decades. There seems to be strong resistance just above £:$ 1.40 but not much by way of support below that I can see. Parity would be psychological support as would be the 1985 bottom at £:$ 1.05.

i have two questions - firstly is anybody concerned about the probability of a currency crisis? Secondly how would you hedge against it investment wise. I’ve been thinking the best bet is to go overweight TLT, gold and FTSE companies with  large overseas earnings recognising that some of these companies eg Victrex have already gone up a considerable amount. Currently I have a GBP cash holding but I’m getting nervous that this won’t provide the protection I have thought it would. Ie so despite a deflationary event GBP cash won’t help much to get through it. 

 

 

 

 

[Castlevania]

@Festivalif Steptoe gets elected then yes I think we’ll not be far off parity with the USD

[Festival]

I’d be surprised if he gets elected but if his election was to follow a government falling with a global bear market in stocks then I’d fear for where sterling would catch a bid.

 

Normally the FTSE rises when sterling is falling but the one period I can find where it didn’t was 1973/4 - 75 percent off in UK stocks and a 20 percent fall in sterling vs the DM. That’s the kind of risk I’m worried about where capital flight leads to stagflation and the politicians let the £ go as the path of least resistance. How do you protect yourself for that set of outcomes do you get funds completely out of the U.K. and if I’m thinking that are others planning for a similar outcome?

 

[Castlevania]

Not sure to be honest. I personally think I should open a Panamanian bank account just in case.

[Band]

13 hours ago, Castlevania said:

@Festivalif Steptoe gets elected then yes I think we’ll not be far off parity with the USD

More to do with 2 decades of insane borrowing and running an economy on house price inflation and cheap immigrant labour. Steptoe will at worst speed the process up.

[Festival]

Don’t disagree Banned think the Uk’s problems go way back to the empire decline and the failure to compete on a national level with Germany in high tech manufacturing and engineering which has led us to financialise more and more of the economy and invite capital (and labour)  in whilst running a serious balance of payments deficit.

 

My belief is that North Sea oil has prevented a more drastic currency decline in the past three decades but that is nearly done now and we need something to replace it. If capital takes flight for whatever reason it’s game over for sterling.  However because the Brexit outcome is so uncertain short term  markets are not pricing sterling for what’s coming in the medium and longer term. Sooner or later the currency market will look beyond  Brexit and the economic fundamentals will be the focus

[Castlevania]

51 minutes ago, Festival said:

Don’t disagree Banned think the Uk’s problems go way back to the empire decline and the failure to compete on a national level with Germany in high tech manufacturing and engineering which has led us to financialise more and more of the economy and invite capital (and labour)  in whilst running a serious balance of payments deficit.

 

My belief is that North Sea oil has prevented a more drastic currency decline in the past three decades but that is nearly done now and we need something to replace it. If capital takes flight for whatever reason it’s game over for sterling.  However because the Brexit outcome is so uncertain short term  markets are not pricing sterling for what’s coming in the medium and longer term. Sooner or later the currency market will look beyond  Brexit and the economic fundamentals will be the focus

Fracking. There are too many nimby’s at the moment, but things can change. Combine that with offshore wind and there’s vast potential for super cheap energy.

[DurhamBorn]

1 hour ago, Castlevania said:

Fracking. There are too many nimby’s at the moment, but things can change. Combine that with offshore wind and there’s vast potential for super cheap energy.

Sure is,the UK is probably one of the best set going forward for energy,and dont forget water.SSE have finished the high throughput cables now they need to feed all the offshore wind farms .Fracking will deliver massive amounts of gas once it gets going.The UK has potential to really lead on energy and our big utility companies are ahead of things.Distributed energy is the future.Wind in the UK will play a big part as will solar.The rest of the world solar will lead mostly.

[Shatner's Bassoon]

On 22/07/2018 at 13:38, Festival said:

Hi all

 

First if all thanks to the regular contributors like them I’m over from TOS. The quality of ideas and debate is excellent here and very thought provoking.

I have one question today regarding sterling. I’m increasingly of the view that a currency collapse is close at hand for the £. Whether it’s the relative decline in North Sea oil exports, the effect of a yield inversion and deflationary event on bank profits, the coming Brexit dislocation or the failure to raise interest rates I’m seeing no good outcomes for the £ within the next year. The £ lost 65 percent of its value against the DM between 1967 and 1977 so there is some precedent for a collapse the kind of which we haven’t seen for decades. There seems to be strong resistance just above £:$ 1.40 but not much by way of support below that I can see. Parity would be psychological support as would be the 1985 bottom at £:$ 1.05.

i have two questions - firstly is anybody concerned about the probability of a currency crisis? Secondly how would you hedge against it investment wise. I’ve been thinking the best bet is to go overweight TLT, gold and FTSE companies with  large overseas earnings recognising that some of these companies eg Victrex have already gone up a considerable amount. Currently I have a GBP cash holding but I’m getting nervous that this won’t provide the protection I have thought it would. Ie so despite a deflationary event GBP cash won’t help much to get through it. 

 

 

 

 

Found this article quite thought provoking re. positioning for Brexit. 

https://simplelivingsomerset.wordpress.com/2018/06/28/battening-hatches-opportunities-brexit/ 

"If Brexit is an economic success and I adopted a brace for impact position, then I look a bit stupid, but I get to live in a country that is doing well, though I’ve lost money on my ISA I have gained it in the future income stream of my pension...If Brexit leads to a 10 year recession, that’s at least a third of my life blighted by that from now on"

[Option5]

4 hours ago, Festival said:

My belief is that North Sea oil has prevented a more drastic currency decline in the past three decades but that is nearly done now and we need something to replace it.

There's plenty of North sea oil left it's just that it's expensive to extract compared to Middle Eastern and Russian oil.

We can get it we need it but need a 4-8 year lead time.

[leonardratso]

we still got coal. Probably lots of it, we can use the coal to generate lectric to spin the turbines up when theres no wind to make wind for other turbines. Probably.

 

 

[sleepwello'nights]

38 minutes ago, Shatner's Bassoon said:

Found this article quite thought provoking re. positioning for Brexit. 

https://simplelivingsomerset.wordpress.com/2018/06/28/battening-hatches-opportunities-brexit/

"If Brexit is an economic success and I adopted a brace for impact position, then I look a bit stupid, but I get to live in a country that is doing well, though I’ve lost money on my ISA I have gained it in the future income stream of my pension...If Brexit leads to a 10 year recession, that’s at least a third of my life blighted by that from now on"

You know what, if a forum like this existed in New York in the early 20th Century I 'd most likely be one of the contributors bemoaning the fact that on current trends in 20 years time we'd be up to our necks in horse shit from the continued use of that animal for transport and agriculture. 

 

[Funn3r]

29 minutes ago, sleepwello'nights said:

You know what, if a forum like this existed in New York in the early 20th Century I 'd most likely be one of the contributors bemoaning the fact that on current trends in 20 years time we'd be up to our necks in horse shit from the continued use of that animal for transport and agriculture. 

 

Er, we are up to our necks in horse shit... 

 

[Band]

5 hours ago, Festival said:

My belief is that North Sea oil has prevented a more drastic currency decline in the past three decades but that is nearly done now and we need something to replace it.

Or you could look it the other way, if it wasn't for the easy money of North Sea oil the govt would have had to set the scene to enable the country to stay a manufacturing nation as we were back then, and move into hitech/quality goods as per the Germans ... We'll never know.

Besides much of it has been spent on keeping people on the dole in varying forms.

[sleepwello'nights]

16 minutes ago, Funn3r said:

Er, we are up to our necks in horse shit... 

 

Figuratively, not literally. 

The story goes back to early 20 the Century New York when there was a concern over the increase in horse drawn traffic. Some were concerned that unless contingency plans were prepared the streets of New York would be feet deep in horse droppings. 

[Festival]

1 hour ago, Option5 said:

There's plenty of North sea oil left it's just that it's expensive to extract compared to Middle Eastern and Russian oil.

We can get it we need it but need a 4-8 year lead time.

Yep it’s uneconomical with oil at 50$ a barrel and a bit more attractive at current oil prices but given this we won’t pump anywhere near the volume we did between 1980 and 2010

[Festival]

29 minutes ago, Banned said:

Or you could look it the other way, if it wasn't for the easy money of North Sea oil the govt would have had to set the scene to enable the country to stay a manufacturing nation as we were back then, and move into hitech/quality goods as per the Germans ... We'll never know.

Besides much of it has been spent on keeping people on the dole in varying forms.

Agree it’s been spent on benefits and on consumption and not on investment - let’s hope this changes this is the hope of the thread