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Credit deflation and the reflation cycle to come.


DurhamBorn

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8 hours ago, DurhamBorn said:

Its a very difficult thing to answer but im with @sancho panza in that i prefer utility shares etc than UK gilts.Id take my chance on 8% dividends outperforming any share falls over 5 years.I also consider cash at this point a good investment.I bought a lot of US treasuries quite a while ago but have taken some profits (about 40% sold).Iv actually got a small pension i cant transfer as its connected to a final salary part as well (the salary went into final salary but the shift element went into money purchase) and its for about £20k in the money purchase side.That whole £20k is now sat in the cash fund.

 

Ay yes, I forgot about the divis...although with a crash you would expect these to be reduced. I suppose also that if people had a number of pots of investments I.e DC pension, premium bonds, cash isa etc they could rebalance I.e as you have done with your DC pension.

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12 hours ago, Dogtania said:

Back on topic :). I've finally found a good Tesco for big reductions that since yesterday is hopefully going to be a mainstay.  Mainly it's stuff I'll eat within the day like gorgeous watermelon chunks 80% reduced and snacks for work like sushi 75% off and orzo salad etc.  My second day popping in at about 5.30 there was less in the chilled but more in the fresh fruit, thinking now it's about 5.15 when they do some of the big reductions.  I would have thought that's quite early but could be the location being a factor or near office park.  

Anyway as soon as I arrived there is a pop up table at the door with various longer life stuff as well as bakery crated behind.  All big 80% off type affair.  Then at the other end of the large store there is a section with various reduced things I think permanently set up.  Picked up for example a nice £1.80 can of soup for 45p, still got until 2021 to eat.  

Apart from my bottle of Trappist beer everything at checkout was golden yellow stickered... Now considering buying the prepaid card that gives 4% off Tesco which I do for other shops ranging from 5-8% off.  My own personal deflation story

Can I ask what the prepaid card is that gives 4% at Tesco? Don't most of those cards have fees?

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11 hours ago, MrXxx said:

DB,SP, AP, thanks for  your thoughts...OK, that makes sense if you had a trading account, but what if it was a pension plan?...I was thinking along the lines of Bonds (read Gilts really) are almost guaranteed secure whilst giving a better return than cash, so if you were currently invested in mainly stocks would it not make sense in the short term to make the move to bonds to avoid the stock crash and then move back into stocks (or a higher %) just after the crash event?

You're now getting into market timing. If you can't/don't want to ride out a possible market crash/correction then I imagine your pension fund has several options to move into something lower risk, perhaps even 100% cash. My auto enrolment pension is probably one of better ones in regard to investment options as I can cherry pick from a range of asset classes/indexes, bonds, cash and pre-made funds and can set my own allocations.

You are correct that bonds eg Gilts and Treasuries will pretty much guarantee your money back. They are good for lowering risk and volatility of equities. With that said within a pension you'll hold a basket of bonds that are traded, subsequently their price can also fall and rise. These a different than buying gilts directly from the DMO or through a broker.

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1 hour ago, Barnsey said:

Silver has just broken below long term support line from 2008, interesting to just how low it goes from here...

Silver has price insensitive supply (plenty of production is byproducts) with demand very dependent on how the economy is doing (35% of US demand Electronics industry) .  AISC for a few of my silver miners is in the region of $12-13USD, below that level a lot of supply will start going offline.  I bought back FRES and HOC at the end last week, i like to be aware of the pitfalls of my investments, and if the carnage in silver continues i will take a massive hit!  Equally if that is the bottom then i just got some high quality miners at a cheap price....  This risk was worth taking IMO.

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7 hours ago, null; said:

Can I ask what the prepaid card is that gives 4% at Tesco? Don't most of those cards have fees?

Sure, it's actually just a Tesco gift card that they sell on the HSF health insurance/ fund (an extra they introduced called HSF perkbox).  (I signed up years ago and do get a slight discount on HSF through work so what I pay in every month is very much less then what I claim back for glasses or dentist every year)

I have known other people with similar access to the card through likewise perk/ shopping discount sites... Usually I think through there work.  I believe there are a lot of them around.  Strangely with the one I use I need to log in to see some of the deals like Tesco card.

A friend who now works at Tesco says it occasionally goes to 5% (used to work somewhere else with similar type site access hence knows) Anyway he was wanting me to buy 1k when it does as he already gets 10% of as an employee.  Couple that with club points and items on sale and I do wonder if Tesco will be in the red on those specific occasions.

 

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1 hour ago, Dogtania said:

A friend who now works at Tesco says it occasionally goes to 5% (used to work somewhere else with similar type site access hence knows) Anyway he was wanting me to buy 1k when it does as he already gets 10% of as an employee.  Couple that with club points and items on sale and I do wonder if Tesco will be in the red on those specific occasions.

I used to work at Tesco (Bank) and we all had 10% colleague discount card. Funny enough, it was active for almost a year after I've left them.

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57 minutes ago, Dogtania said:

Sure, it's actually just a Tesco gift card that they sell on the HSF health insurance/ fund (an extra they introduced called HSF perkbox).  (I signed up years ago and do get a slight discount on HSF through work so what I pay in every month is very much less then what I claim back for glasses or dentist every year)

I have known other people with similar access to the card through likewise perk/ shopping discount sites... Usually I think through there work.  I believe there are a lot of them around.  Strangely with the one I use I need to log in to see some of the deals like Tesco card.

A friend who now works at Tesco says it occasionally goes to 5% (used to work somewhere else with similar type site access hence knows) Anyway he was wanting me to buy 1k when it does as he already gets 10% of as an employee.  Couple that with club points and items on sale and I do wonder if Tesco will be in the red on those specific occasions.

 

Thanks, I imagine Tesco go into the red on quite a lot of the offers but only for the very canny shoppers, they rely on many being too lazy to completely max out the offers.

Many years ago we used to do very nicely on the 10p off a litre of fuel offers. They used to be stackable, up to 50p a litre off and maximum of 100 litres. At the time I was doing a lot of mileage so we were bulk buying anything that we would normally buy and that would keep. I think it was £50 you had to spend so we would always aim to get to just over £50 and if needed go back in and do another £50 shop. I was then getting 50p a litre off the fuel and I had a load of 25l litre jerry cans so I could get the 100 litres at every fill up. They were certainly going in to the red on that.

Unfortuntely the fuel offers are no longer stackable.

The other downside is that you need to factor in the value of your time, maxing out some of the offers can be a bit of a faff and sometimes you have wonder if its worth it, vs say doing an hour of overtime at work.

But.... You then need to consider that a £1 saved has a higher value than £1 earned (gross). And also some will place a high a value on minimising your donation to the government via taxation.

For me, I quite enjoy maxing out any offers, everyone likes to stick it to the man once in while dont they?

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10 hours ago, Admiral Pepe said:

You're now getting into market timing. If you can't/don't want to ride out a possible market crash/correction then I imagine your pension fund has several options to move into something lower risk, perhaps even 100% cash. My auto enrolment pension is probably one of better ones in regard to investment options as I can cherry pick from a range of asset classes/indexes, bonds, cash and pre-made funds and can set my own allocations.

You are correct that bonds eg Gilts and Treasuries will pretty much guarantee your money back. They are good for lowering risk and volatility of equities. With that said within a pension you'll hold a basket of bonds that are traded, subsequently their price can also fall and rise. These a different than buying gilts directly from the DMO or through a broker.

Yes, thats exactly the point I was thinking about...we are all familiar with active and passive approaches to share dealing, but with bog standard company pensions most people do nothing and as they get closer to retirement the pension providers adjust their %s, This isn't a big deal with normal market fluctuations, but if we are going to have the big crash that people think we going to have, if pension holders iregardless of how close they are to retirement could benefit massively by being active just this one moment if they time it right. Once they have bought back in they can go back to doing nothing I.e become passive investors again.

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leonardratso
2 hours ago, The XYY Man said:

Do you lot know what I love about this thread the most...?

Take away the graphs, the insider language terms used, and the amounts of money involved - and you fuckers sound exactly the same as my grandad and his mates in the betting-shop discussing their Saturday afternoon profit/loss performance.

Funnily enough - me and him are (County) Durham born too...

;)

 

XYY

its not really surprising, its basically the same thing, a bit of a gamble, might come off, might not. Theres no science, just likelyhoods and favourites.

Doesnt mean you wont get stung and strung out to dry though. I reckon the trick is to make sure that if you get burned, its not life threatening. Dont bet the farm.

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15 hours ago, The XYY Man said:

Do you lot know what I love about this thread the most...?

Take away the graphs, the insider language terms used, and the amounts of money involved - and you fuckers sound exactly the same as my grandad and his mates in the betting-shop discussing their Saturday afternoon profit/loss performance.

Funnily enough - me and him are (County) Durham born too...

;)

 

XYY

A very good friend of mine refused to accept his wifes divorce papers because one of the reasons she had added was he was always gambling.He refused to accept it.He said gambling involved the chance of loss,where he was doing arbitrage.To be fair to him he was,he was simply scanning markets for differences in price etc.In the end she removed it from the request xD.All financial investment has an element of a gamble in it,as does everything you do in life of course.

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2 hours ago, DurhamBorn said:

A very good friend of mine refused to accept his wifes divorce papers because one of the reasons she had added was he was always gambling.He refused to accept it.He said gambling involved the chance of loss,where he was doing arbitrage.To be fair to him he was,he was simply scanning markets for differences in price etc.In the end she removed it from the request xD.All financial investment has an element of a gamble in it,as does everything you do in life of course.

So would being in cash be like sitting at home under the mattress and shorting be like base jumping off the BoE building with your parachute on fire then?

 

 

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sancho panza
9 hours ago, MrXxx said:

So would being in cash be like sitting at home under the mattress and shorting be like base jumping off the BoE building with your parachute on fire then?

 

 

Moving to cash is a short of sorts imo

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sancho panza

Look at what happens when HPI goes negative.Whoda thunk it?

https://www.afr.com/business/retail/ahg-boss-says-house-price-falls-put-handbrake-on-new-car-sales-20180824-h14fbk

'The boss of Australia's biggest car dealership company says falling house prices and the negative wealth effect it has on households is a bigger factor than banks and finance companies tightening their lending practices in a slowing new car sales market.

Total new vehicle sales across the industry slumped by 7.8 per cent in July according to official VFACTS figures compiled by industry body Federal Chamber of Automotive Industries and Mr McConnell said he didn't want to predict what the August outcome would be.

Automotive Holdings Group on Friday revealed that net profit after tax was down 41.2 per cent to $32.6 million in 2017-18, although revenues were up 6 per cent to $6.5 billion. '

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1 hour ago, sancho panza said:

Look at what happens when HPI goes negative.Whoda thunk it?

https://www.afr.com/business/retail/ahg-boss-says-house-price-falls-put-handbrake-on-new-car-sales-20180824-h14fbk

'The boss of Australia's biggest car dealership company says falling house prices and the negative wealth effect it has on households is a bigger factor than banks and finance companies tightening their lending practices in a slowing new car sales market.

Total new vehicle sales across the industry slumped by 7.8 per cent in July according to official VFACTS figures compiled by industry body Federal Chamber of Automotive Industries and Mr McConnell said he didn't want to predict what the August outcome would be.

Automotive Holdings Group on Friday revealed that net profit after tax was down 41.2 per cent to $32.6 million in 2017-18, although revenues were up 6 per cent to $6.5 billion. '

Wheels are seriously coming off here in Oz:

https://www.macrobusiness.com.au/2018/08/mortgage-rejections-skyrocket-1347-credit-crunches/

The 'major banks reduction in borrowing power' table says it all, but the comments are worth a giggle as well..

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8 hours ago, sancho panza said:

Look at what happens when HPI goes negative.Whoda thunk it?

https://www.afr.com/business/retail/ahg-boss-says-house-price-falls-put-handbrake-on-new-car-sales-20180824-h14fbk

'The boss of Australia's biggest car dealership company says falling house prices and the negative wealth effect it has on households is a bigger factor than banks and finance companies tightening their lending practices in a slowing new car sales market.

Total new vehicle sales across the industry slumped by 7.8 per cent in July according to official VFACTS figures compiled by industry body Federal Chamber of Automotive Industries and Mr McConnell said he didn't want to predict what the August outcome would be.

Automotive Holdings Group on Friday revealed that net profit after tax was down 41.2 per cent to $32.6 million in 2017-18, although revenues were up 6 per cent to $6.5 billion. '

Yes and its really very simple.Increasing liquidity feeds through to increased spending and asset prices.Falling liquidity feeds  through to falling spending and falling asset prices.Its amazing to think the CBs pushed things to where interest rates were pretty much zero and printing was enough to print away the working age welfare budget.It really has been pure theft from workers and savers.On a brighter note housing will take a huge chunk of the deflation and will be hated as an investment soon.Banks,government and individuals will need to find more productive areas to invest in.

I keep seeing my daughters friends and workmates buying these Help to Buy houses and they really are a disaster going forward.Terrible estates,terrible houses (they are ok inside for half the price),but outside a different matter.They are probably locking themselves into a 30 year disaster,

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24 minutes ago, DurhamBorn said:

On a brighter note housing will take a huge chunk of the deflation and will be hated as an investment soon.Banks,government and individuals will need to find more productive areas to invest in.

I keep seeing my daughters friends and workmates buying these Help to Buy houses and they really are a disaster going forward.Terrible estates,terrible houses (they are ok inside for half the price),but outside a different matter.They are probably locking themselves into a 30 year disaster,

Just to revisit your thoughts on housing, do you still predict an initial severe hit in the next bust and then inflation to accelerate ahead further lowering the value of housing in real terms?

Still trying to form my game plan, decent deposit building up now and still planning to jump in during the bust, in the depths of despair, hopefully securing a long term fix at a low reasonable rate (hopefully BOE facilitates responsible lending during this time) to see me through to at least 2025 when hopefully it'll be fully paid off. Thinking it might be best to buy a very modest house in an area that hasn't seen huge HPI (merely keeping up with inflation since the crash) to minimise potential downside?

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2 minutes ago, Barnsey said:

Just to revisit your thoughts on housing, do you still predict an initial severe hit in the next bust and then inflation to accelerate ahead further lowering the value of housing in real terms?

Still trying to form my game plan, decent deposit building up now and still planning to jump in during the bust, in the depths of despair, hopefully securing a long term fix at a low reasonable rate (hopefully BOE facilitates responsible lending during this time) to see me through to at least 2025 when hopefully it'll be fully paid off. Thinking it might be best to buy a very modest house in an area that hasn't seen huge HPI (merely keeping up with inflation since the crash) to minimise potential downside?

Yes i do,though i admit i put little work into housing as it doesnt directly affect me as im mortgage free and never moving.However i do have two other children,one will build a house as her partner owns a lot of land,and the other will need to buy.One thing im pretty certain off is houses are going down in price by a lot and 40%+ nominal looks baked in to me in the bubble areas.The north might see 20% seeing as we are at 2004 prices now.Rising interest rates during the next cycle will keep a lid on prices and i expect they will go up by RPI inflation minus around 2%.If it does come to pass id be planning pretty much what you are.Buy on the bust and lock in a long enough interest rate to give me time to clear the mortgage.

In inflation adjusted terms i dont think we will ever see house prices where they are now in our lifetimes give or take a few percent.

I also dont think we will see the price of the PM sector much around where it is now again in our lifetimes,going the other direction.Time will tell.

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9 hours ago, sancho panza said:

Look at what happens when HPI goes negative.Whoda thunk it?

https://www.afr.com/business/retail/ahg-boss-says-house-price-falls-put-handbrake-on-new-car-sales-20180824-h14fbk

'The boss of Australia's biggest car dealership company says falling house prices and the negative wealth effect it has on households is a bigger factor than banks and finance companies tightening their lending practices in a slowing new car sales market.

Total new vehicle sales across the industry slumped by 7.8 per cent in July according to official VFACTS figures compiled by industry body Federal Chamber of Automotive Industries and Mr McConnell said he didn't want to predict what the August outcome would be.

Automotive Holdings Group on Friday revealed that net profit after tax was down 41.2 per cent to $32.6 million in 2017-18, although revenues were up 6 per cent to $6.5 billion. '

With the switch from diesel to hybrid my company has told all its staff to keep their old company cars even after the 4 year lease is up.. 

The government are taxing diesels to death, car manufactures can’t produce the new hybrids with the lower company car tax that all the staff want.. 

bmw, Mercedes hybrids have been removed completely from the list due to over 1 year waiting times for delivery.. 

The company car tax on a basic diesel has gone up massively, Guy at work said he would have to pay another £200 a month tax just to replace his current car for the same model, if he keeps his old diesel for 5 years instead of 4 the tax remains the same. 

This must effect all companies, if they will do the same as mine? Although it was the lease company that pushed for this fearing that they would be stuck with loads of old diesels they can’t sell.. 

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8 hours ago, Sugarlips said:

Wheels are seriously coming off here in Oz:

This is why when push comes to shove Oz will side with China and leave the US in the dust.

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Talking Monkey
39 minutes ago, DurhamBorn said:

Yes i do,though i admit i put little work into housing as it doesnt directly affect me as im mortgage free and never moving.However i do have two other children,one will build a house as her partner owns a lot of land,and the other will need to buy.One thing im pretty certain off is houses are going down in price by a lot and 40%+ nominal looks baked in to me in the bubble areas.The north might see 20% seeing as we are at 2004 prices now.Rising interest rates during the next cycle will keep a lid on prices and i expect they will go up by RPI inflation minus around 2%.If it does come to pass id be planning pretty much what you are.Buy on the bust and lock in a long enough interest rate to give me time to clear the mortgage.

In inflation adjusted terms i dont think we will ever see house prices where they are now in our lifetimes give or take a few percent.

I also dont think we will see the price of the PM sector much around where it is now again in our lifetimes,going the other direction.Time will tell.

Hi DB do you not see the PMs dropping during the initial stages of a major correction, I recall you expect PMs to go up to I think a target of 1350-1450 then perhaps down to 800-900 and from there to really take off. Does your analysis still see the potential for that dip that would put PMs briefly lower than they are now before taking off much higher

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53 minutes ago, Talking Monkey said:

Hi DB do you not see the PMs dropping during the initial stages of a major correction, I recall you expect PMs to go up to I think a target of 1350-1450 then perhaps down to 800-900 and from there to really take off. Does your analysis still see the potential for that dip that would put PMs briefly lower than they are now before taking off much higher

Isn't this generally what happens in downturns? Gold up initially as a safe haven, but then drops as everyone sells everything to try to stay solvent?

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14 minutes ago, Barnsey said:

Isn't this generally what happens in downturns? Gold up initially as a safe haven, but then drops as everyone sells everything to try to stay solvent?

Not necessarily.  It did last time, but it depends if the ones with the gold are the ones that need to sell to stay solvent.

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