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Credit deflation and the reflation cycle to come.


DurhamBorn

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5 minutes ago, Yellow_Reduced_Sticker said:

i live 40 mins by train from london, haven't been there for a pint in ages...but i know theres palces that are cheap, just look where the EE's / POLES go!xD

They go to the corner shop and sit in the park

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simply put 2 drops if iodine in a pint of tap water and blow bubbles into it with a straw.

I guarantee its a higher ABV than fosters (ie 0.0%), and it wont taste like piss like fosters does.

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Just now, leonardratso said:

simply put 2 drops if iodine in a pint of tap water and blow bubbles into it with a straw.

I guarantee its a higher ABV than fosters (ie 0.0%), and it wont taste like piss like fosters does.

It’s the “Amber Nectar”. The finest of Australian pints.

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4 minutes ago, Yellow_Reduced_Sticker said:

i live 40 mins by train from london, haven't been there for a pint in ages...but i know theres palces that are cheap, just look where the EE's / POLES go!xD

The Polish and EE’s don’t tend to go to pubs and I live in a densely populated Polish/EE area. They usually drink cans in groups on corners. They also enjoy squatting which must get very uncomfortable. Perla lager seems to be the favourite and Zubr a close second. 

3 minutes ago, Castlevania said:

It’s the “Amber Nectar”. The finest of Australian pints.

That they don’t drink or have ever heard of in Australia.

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1 minute ago, Sideysid said:

The Polish and EE’s don’t tend to go to pubs and I live in a densely populated Polish/EE area. They usually drink cans in groups on corners. They also enjoy squatting which must get very uncomfortable. Perla lager seems to be the favourite and Zubr a close second. 

they are merely topping up their alcohol systems. Occassionaly theyll eat the odd pig for the blood.

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2 hours ago, Castlevania said:

Going back to the universally recognised inflation measure that is the price of a pint. When I worked in a pub as a student over the Summer holidays in 2015, we sold a pint of Fosters for £2.05. This was in Wales by the way.

So you’ve somehow gone back 13 years in time?

Yep great isnt it.My dividends come in just the same as they would anywhere in the country,but go a long way.With no mortgage i find it easy to live up here very well for £200 a week including car etc.Got another £50 worth of real good quality food tonight in Tesco for £12.I had to leave lots as well until i get freezer no 3 this week.Me and the other half had £8s worth of cod fillets and a lovely salad tonight for £1.60 all in.The £2.20 a pint also includes all the sport channels of course,all streamed through dodgy boxes and apps.Go in on a sunday and youl come out with tomatoes,veg,eggs,all sorts of things for free from the old fellas who still have their allotments.Yellow sticker is thinking of moving up here at some point and why not.2 hrs 15 mins to London on east coast mainline from Durham or Darlington,even less to Edinburgh, and can retire in your 30s if you want to,;).

 

 

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16 hours ago, Sideysid said:

Lego will generally always appreciate after they retire, just some sets more than others. The key is avoiding the temptation to open, as with everything else, it instantly loses value.  

Xmas toys get shot of as early into the xmas buying period as possible. Don’t wait until December, as thats when sellers expect demand to be greatest. In reality the hype of getting something thats out of stock that the dear little one has been hounding them about has died down and the parents have already paid through the nose to get it. Sellers then start competing cutting the prices of tat their desperate to shift.

When Star Wars was sold to Disney a large shop near me sold off old Lego star wars sets for £12 a box.. 

i bought 15 boxes and sold for £60 each on eBay.. I recon I should have kept some.. 

5 hours ago, Castlevania said:

Did you not read my post. £6.20 a pint!

Over £10 a pint in Norway.. I was very sober that week.. 

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10 hours ago, Castlevania said:

Going back to the universally recognised inflation measure that is the price of a pint. When I worked in a pub as a student over the Summer holidays in 2015, we sold a pint of Fosters for £2.05. This was in Wales by the way.

So you’ve somehow gone back 13 years in time?

Yes I know that feeling too, whenever I go up North or West across the bridge I feel as though I have gone back a century...the only way I realize I haven't is that there aren't any miners! :-) 

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12 hours ago, Castlevania said:

To someone who lives down south, the above is crazy talk. I paid £6.20 for a pint the other week (actually worse than that as I got the round in). Needless to say we didn’t stick around for another.

Quite rare to find a pint for less than £4.00 now in Edinburgh. Most places in the city centre £4.50-5.50 a pint.

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11 minutes ago, azzuri82 said:

Quite rare to find a pint for less than £4.00 now in Edinburgh. Most places in the city centre £4.50-5.50 a pint.

Thats insane.Are there not a few Wetherspoons doing £2.50ish a pint?.Our workmans club is £3.20 a pint,but the pub over the road is £2.20.Highly likely they will go to £2.50 at some point though.Iv actually never known the cost of living so cheap around where i live.

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5 minutes ago, DurhamBorn said:

Thats insane.Are there not a few Wetherspoons doing £2.50ish a pint?.Our workmans club is £3.20 a pint,but the pub over the road is £2.20.Highly likely they will go to £2.50 at some point though.Iv actually never known the cost of living so cheap around where i live.

There are quite a few Wetherspoons, but they are all in the city centre and rammed full of tourists. The only one I can think of outside the city centre is the 'Foot of the Walk' at the bottom of Leith Walk, but the place is absolutely filthy.

I prefer, where possible, to give my money to independent / local pubs. You have 'The Central Bar' literally across the street from that Wetherspoons which is £2.70 for a pint of Carling and £1.50 spirit and mixers, cash only business and I doubt more than 60-70% of sales are legit / declared, but pubs like that are rare as hens' teeth in Edinburgh these days.

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Yellow_Reduced_Sticker
12 hours ago, Sideysid said:

The Polish and EE’s don’t tend to go to pubs and I live in a densely populated Polish/EE area. They usually drink cans in groups on corners. They also enjoy squatting which must get very uncomfortable. Perla lager seems to be the favourite and Zubr a close second.

YES I get that, i see that with the more older EE's..even picking up dog-ends of the pavement to make a rolly!!! xD...however i do see the younger ones in Wetherspoons etc...

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Yellow_Reduced_Sticker
9 hours ago, DurhamBorn said:

Yep great isnt it.My dividends come in just the same as they would anywhere in the country,but go a long way.With no mortgage i find it easy to live up here very well for £200 a week including car etc.Got another £50 worth of real good quality food tonight in Tesco for £12.I had to leave lots as well until i get freezer no 3 this week.Me and the other half had £8s worth of cod fillets and a lovely salad tonight for £1.60 all in.The £2.20 a pint also includes all the sport channels of course,all streamed through dodgy boxes and apps.Go in on a sunday and youl come out with tomatoes,veg,eggs,all sorts of things for free from the old fellas who still have their allotments.Yellow sticker is thinking of moving up here at some point and why not.2 hrs 15 mins to London on east coast mainline from Durham or Darlington,even less to Edinburgh, and can retire in your 30s if you want to,;).

 

 

Reading your YRS CLEANING-UP posts ...I'll be relocating SOONER rather than later!

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3 hours ago, Yellow_Reduced_Sticker said:

Reading your YRS CLEANING-UP posts ...I'll be relocating SOONER rather than later!

Had some great stuff lately.Had a poor patch for a while,but picked up now.Got a few packs of Sea bass for 88p from £4.25 as well.I havent gone today,too many people in on a sunday.Im having to leave a lot of stuff until i get freezer number 3 sorted out.Iv been getting quite a lot of their finest meals lately.Tonights is Cumberland sausage and mash,picked up two of them for 82p each down from £3.30.Luckily i got some reduced asparagus and veg to go with it as well.Iv been leaving far too much behind though as out of space until i get another freezer.

Iv found Morrison's time is 5pm now as well,but there are several regulars who are in every day and take it out of the poor guys trolley as he is wheeling it to the reduced bit.Might give it a go though,usually if you stare them down they keep out of your way xD

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@azzuri82 I've passed that central bar place a few times and always think looks like quite a historic building/ tiles inside.  But it also smells heavily like a toilet and that's just passing not even stepping inside.

Sounds very keenly priced but honestly can't imagine enjoying a pint if it smells anything close to that inside.  

 

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2 hours ago, Dogtania said:

@azzuri82 I've passed that central bar place a few times and always think looks like quite a historic building/ tiles inside.  But it also smells heavily like a toilet and that's just passing not even stepping inside.

Sounds very keenly priced but honestly can't imagine enjoying a pint if it smells anything close to that inside.  

 

maybe its the fosters.

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2 hours ago, Dogtania said:

@azzuri82 I've passed that central bar place a few times and always think looks like quite a historic building/ tiles inside.  But it also smells heavily like a toilet and that's just passing not even stepping inside.

Sounds very keenly priced but honestly can't imagine enjoying a pint if it smells anything close to that inside.  

 

I didn't say it was good, but it's certainly cheap!

Karaoke on a Saturday evening is something to behold! xD

It used to be Leith Central train station, hence the name. It's also where the name of the book 'Trainspotting' originates.

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1 hour ago, sancho panza said:

Unreal.Deserves it's own thread.

When i was a councillor he came to our meetings a few times as he lived in our town (Bishops of Durham).Typical left wing nut job.Always looking for the victim.Someone should tell him the customers will all bump the loans anyway the same as theyd happily whip the lead of a church roof.No wonder most people only go to church twice now.Once for a few christening photos and once in a box.A growing number are now avoiding the second one as well and going straight to the crem.if your going to play the game boy you gotto learn how to play it right.

 

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5 minutes ago, DurhamBorn said:

When i was a councillor he came to our meetings a few times as he lived in our town (Bishops of Durham).Typical left wing nut job.Always looking for the victim.Someone should tell him the customers will all bump the loans anyway the same as theyd happily whip the lead of a church roof.No wonder most people only go to church twice now.Once for a few christening photos and once in a box.A growing number are now avoiding the second one as well and going straight to the crem.if your going to play the game boy you gotto learn how to play it right.

 

I agree.

Quite how they'll run it on a not for profit basis,I'm going to be intrigued to see

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Wolf arguing that default risk is related to the momentum in the housing market.Particualrly

' The paper warns: “Most importantly, higher leverage, and in particular a household being underwater on its mortgage(s), is a strong predictor of mortgage default and foreclosure.” '

Something i've always felt,that it's about the LTV more than the monthly repayment

 

https://wolfstreet.com/2018/09/16/what-can-cause-the-next-mortgage-crisis-in-the-us/

'The soothingly low mortgage delinquency rate is a deceptive indicator: the New York Fed weighs in.

Mortgage delinquencies at all commercial banks in the US inched down to 3.14% in the second quarter, the lowest since Q2 2007, according to the Federal Reserve. But after those soothingly low delinquency rates in 2007, something happened. By Q3 2008, the delinquency rate hit 5.2%, and in Q4 2009, it went over 10%, and stayed in the double-digits until Q1 2013. This was the mortgage crisis. And we’re a million miles away from it, thank God. Or are we?

This chart compares home prices in the US (green, left scale) to delinquency rates (red, right scale). Delinquency rates started surging after home prices started falling. The inflection point is marked by the vertical purple line, labeled “it starts”:

US-home-prices-v-mortgage-delinquencies-

Home prices began falling in 2006. By 2008, some homeowners were seriously “underwater” – they owed more on their house than the house was worth. When they ran into financial trouble because they were in over their heads, or because one of the breadwinners in the household lost their jobs, or because they’d lied on their mortgage application and never had enough income to begin with, or because they were investors who couldn’t make the math work out anymore, or whatever, they were stuck.

In a rising housing market, they would just sell the home and pay off the mortgage. But they couldn’t sell their home because it was worth less than the mortgage, and default was the only option.

The chart above shows the relationship between home prices and delinquencies. In a rising housing market, delinquencies will always be low but are not an indicator of future default risks. But home prices are an indicator of default risk.

“Borrowers’ ability to withstand economic shocks depends importantly on housing equity,” the New York Fed explained in its new Economic Policy Review. “This dynamic played a key role in the 2007-09 recession, when surging mortgage debt followed by falling home prices put many homeowners ‘underwater’ on their mortgages.”

When home equity turns “negative,” that’s when serious trouble begins. The New York Fed:

Over the first half of the 2000s, U.S. household debt, particularly mortgage debt, rose rapidly along with house prices, leaving consumers very vulnerable to house price declines. Indeed, as house prices fell nationwide from 2007 to 2010 and unemployment rates soared, mortgage defaults and foreclosures skyrocketed because many households were “underwater”…

But the national averages don’t do a good job. About a third of homeowners own their homes free and clear, and there is no risk associated with them. Another third of homeowners owe relatively small amounts or very manageable amounts on their homes, after years of having made payments without cash-out refinancing. And they’re not a risk factor either. They can always sell their home and pay off their mortgage, even if home prices drop 40%.

The risk lies at the remaining third of the homeowners, the most vulnerable, the most leveraged, those that bought recently at the highest prices, those that refinanced to cash out their home equity….

Then there’s the issue of home prices dropping a lot more in some regions – and this is averaged out in the national statistics. The New York Fed (emphasis added):

At a more disaggregated level, the time series of our leverage metrics clearly reflect the dramatic regional home price dynamics that others have observed, with the widest swings in prices found in the “sand states”: Arizona, California, Florida, and Nevada. Studying these states illustrates one of the key lessons from our analysis: Looking at measures of leverage based on contemporaneous housing values will often lead one to misestimate the vulnerability of a housing market to shocks.

Homeowners in the sand states were much less levered in 2005 than those in other regions, yet as home prices reverted to their mean, the leverage of these homeowners rapidly increased and extremely high mortgage defaults followed.

The paper warns: “Most importantly, higher leverage, and in particular a household being underwater on its mortgage(s), is a strong predictor of mortgage default and foreclosure.”

In fact, according to research cited by the paper, negative equity is a “necessary condition” for mortgage default:

Negative-equity loans represent a pool of default risks: If the borrowers are hit with liquidity shocks resulting from, say, a lost job, then default may be the only viable option. Positive-equity borrowers faced with liquidity shocks, on the other hand, are generally able to sell the property and avoid default.

Thus, “household leverage” blowing out is not a function of the mortgage, which doesn’t change much, but a function of the home price, which can decline sharply. This increases household leverage due to market forces, without even any input from the household. It happens on a case-by-case basis, and the national averages fail to predict this condition.

Even if they don’t default, households that have become overleveraged due to declining home prices impact the broader economy, the New York Fed points out:

  • They may cut back consumption in response to a negative shock, in part because they lack “debt capacity” that could help them smooth consumption.
  • They’re often unable to refinance to take advantage of lower mortgage rates.
  • They may reduce spending on property maintenance or investments.
  • The may not be able to move when opportunities arise for them elsewhere.
  • High leverage in conjunction with down-payment requirements further reduces transaction volume and prices, “thereby generating self-reinforcing dynamics.”

And the differences, as real estate in general, are local, according to the report: “In cities where more homeowners are highly leveraged, house prices are more sensitive to shocks (such as city-specific income shocks).”

It all boils down to this: There can be no mortgage crisis unless home prices decline enough in some markets. And given how inflated home prices are in many markets, and that mortgage rates are now climbing, any reversion toward the mean of home prices in those markets would cause the delinquency rate to do a beautiful “déjà-vu all over again,” so to speak. That low national delinquency rate these days, often touted as a sign of low risk in the housing market, has zero meaning as an indicator of risk for the most vulnerable households when the prices of their homes begin to drop.

Refinancing activity plunges to the lowest level since 2000. Read…  What Will These Mortgage Rates Do to Homeowners Trying to Refinance, Homebuyers, and Mortgage Lenders?  

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