Credit deflation and the reflation cycle to come.

[Harley]

6 minutes ago, Inoperational Bumblebee said:

There's some of us from Off Topic who spend a lot of time on this thread.

Will pop over to the other thread.

I warn you, it's boring (and in need of update).

[dgul]

19 minutes ago, Harley said:

The budget today included making HRMC perferred creditor.  We were all scratching our heads as we thought they already were.  And then someone says, maybe not (behind the charge holder) for property!  As they say, watch the hands!

Ahha!  I was wondering what that was about.

[Harley]

1 minute ago, dgul said:

Ahha!  I was wondering what that was about.

Just a guess, needs checking.

[Harley]

2 minutes ago, Harley said:

Just a guess, needs checking.

Just read this.  Looks like I need to spend more on my CPD:

"Before 2002, HMRC was always considered a preferential creditor. However, the Enterprise Act of 2002 removed this right, placing them as merely an unsecured creditor in all forms of tax".

 

[dgul]

21 minutes ago, Harley said:

Just read this.  Looks like I need to spend more on my CPD:

"Before 2002, HMRC was always considered a preferential creditor. However, the Enterprise Act of 2002 removed this right, placing them as merely an unsecured creditor in all forms of tax".

 

I didn't know that.  Nice that they keep accountants in employment by continually changing the rules.

[Barnsey]

Gold's relatively placid response to all the recent market plunge drama quite telling, still believe it's being largely influenced by USD/CNY which is still on its way to break 7.00, one to watch.

[King Penda]

2 hours ago, DurhamBorn said:

Agree pretty much 100% SP.The pain in the UK will be over leveraged home owners and even more so leveraged BTL.There is also a side people dont consider.A divi payer can go down 40% and youl get your money back in 8 years if you hold on just in divis (even with a few cuts).In a leveraged BTL once interest rates go up and your rents dont/voids etc you can lose it,your house and everything else.

There was a part in the budget documents today where the government said in the small print they want to issue less inflation linked gilts and more standard ones.Of course they do.

tw. went down to less than 10p.within 8 years they hit 2.11 and had paid back close to 40p in divis.pretty sure it will be around another 15p next year unless they cancel it .

[macca]

5 hours ago, Yellow_Reduced_Sticker said:

LOVE it, YES i'll put my name as number 1 for the FRUGAL git candidate!

Had to replace my shoes recently as my foot came out the side, wet socks I could handle from the hole but it was starting to impede walking..

[leonardratso]

cheap bastard

[Majorpain]

8 hours ago, Harley said:

The budget today included making HRMC perferred creditor.  We were all scratching our heads as we thought they already were.  And then someone says, maybe not (behind the charge holder) for property!  As they say, watch the hands!

They did change the rules some years ago, probably to help the banks taking a bath when companies went under.  Obviously, now the government is not awash with printed cash, they have to grab everything they can, so its back to HMRC having first dibs on the company assets!

I'm getting more and more sure that they have detected something they really don't like, CB's all tightening even though its obvious it will crash the everything bubble, the chancellor in interviews warning about the economic fallout from brexit or "other events", something is in the pipeline and I would quite like to know what it is!

[Harley]

12 hours ago, Yellow_Reduced_Sticker said:

we are all a... bunch frugal gits! 

I'm frugal in all forms, including git!

[Harley]

6 hours ago, macca said:

Had to replace my shoes recently as my foot came out the side, wet socks I could handle from the hole but it was starting to impede walking..

My mum used to talk about not having shoes as a valley kid.  Except when the local methodist minister gave out throw aways in winter.  How times have changed.

[Talking Monkey]

25 minutes ago, Majorpain said:

They did change the rules some years ago, probably to help the banks taking a bath when companies went under.  Obviously, now the government is not awash with printed cash, they have to grab everything they can, so its back to HMRC having first dibs on the company assets!

I'm getting more and more sure that they have detected something they really don't like, CB's all tightening even though its obvious it will crash the everything bubble, the chancellor in interviews warning about the economic fallout from brexit or "other events", something is in the pipeline and I would quite like to know what it is!

Any thoughts from the Dosbodders on what it could be, what do they see down the road for them to tighten even though it is certain to crash the bubble

[Harley]

42 minutes ago, Talking Monkey said:

Any thoughts from the Dosbodders on what it could be, what do they see down the road for them to tighten even though it is certain to crash the bubble

The government and some highly educated civil servants (technically BoE) apparently admitted they printed money to inflate asset prices so people would feel wealthy and consume.  Presumably to create a bit of "fake" GDP and tax revenue. 

Maybe they now see just how bad that childish idea was as well as all the unintended consequences (no "something for nothing").  Maybe they're now just making sure they don't have to pay for their mostly <insert university> induced economic illiteracy.

Technically, most of what this thread is about - no trickle down, just debt deflation (bankcruptcy and crash in asset prices) followed by the lighting of the inflationary bonfire all this money has created.  And/or massive regulation of your economic life to continue the pretence.

They need to be at the front of the queue again 'cause there's very little real wealth out there.

Oh and maybe to ensure a slice of any bank bail ins.

Or are they just tightening now so they can loosen later?  More illiteracy.

[Bricks & Mortar]

1 hour ago, Talking Monkey said:

Any thoughts from the Dosbodders on what it could be, what do they see down the road for them to tighten even though it is certain to crash the bubble

Blowing the bubble was lunacy from the beginning.  I assume they've realised the popping is inevitable. So they got together and made a plan to pop it.  I think the've decided doing it deliberately, in a concerted effort - is better than a surprise pop in one or other of the major economy's.

[darkmarket]

1 hour ago, Harley said:

Or are they just tightening now so they can loosen later?  More illiteracy.

This is what the BoE chap who went on LBC recently admitted.

[A_P]

11 hours ago, Harley said:

Tradingview.com service but alas they don't have the two indicies you requested.  I could use ETFs or funds if you have the tickers.

Thanks. Took me a while to find it on mine, it was hiding under FTSE Mid 250 index.

Chart is FTSE 100, 250 and S & P 500. The top one isn't the S & P 500 btw

[Majorpain]

32 minutes ago, Bricks & Mortar said:

Blowing the bubble was lunacy from the beginning.  I assume they've realised the popping is inevitable. So they got together and made a plan to pop it.  I think the've decided doing it deliberately, in a concerted effort - is better than a surprise pop in one or other of the major economy's.

This is probably a big part of it, a recession cant be put off forever, however the political winds are also changing and in a years time the landscape may be completely different.  Far left and Far right are gaining strength is all countries, and its the hardest hit like Italy where they are strongest, with inequality from QE only getting worse its only going one way IMO.

If they don't act now whilst the politicians are on board, they may not get another chance without strings being attached.

On another note:

http://www.constructionenquirer.com/2018/10/30/opinion-we-cant-build-anything-without-finance/

Quote

The depth of the problem is best illustrated by the plight of one firm that has been turned down by two high street banks for loans to fund modest working capital demands despite having assets of nearly £30m.

The problem is not on the scale of the financial crunch a decade ago, when bad debt contagion undermined the banks themselves constraining access to cash across the board.

This time around the banks are picking off the construction and property industry as being too risky for their loan books.

It is a dangerous policy that could tip the balance for many stretched firms threatening another wave of company collapses in a vital UK industry.

Banks cannot be allowed to switch lending away from construction on a whim.

The Government needs to get banks back into line to support the sector before it is too late.

Banks are running a mile from both property development and construction.

[A_P]

12 hours ago, sancho panza said:

I think there are many shares that are overvalued but I suspect the bulk of the pain wil be felt by BTLers and BTL lenders.There are a number of shares that have been elevsted way above where there revenue/profit growth would normnally take them,but I'm struggling to see BP and the like take a 50% bath from here.

The real leverage in the UK-imho-is the BTLers sat on 70%+ LTV loans spread across their portfolio.The mechanics of the vicious circle in FRB,equity exposure to their own home/salary etc etc will come into ply but these people in my expereince have one asset class to fall back on and they are unaware of how leveraged theyr are to it.

Did you see the thread on the ToS of the lady threatening to kick out 45 of her tennents. Turns out she has 100 properties, from zero to 70 in less than a year, total loans over £4m. It's utter madness that they're allowing people to scale up that fast, whilst making razor thin profit with massive downside.

[sancho panza]

13 hours ago, Harley said:

The budget today included making HRMC perferred creditor.  We were all scratching our heads as we thought they already were.  And then someone says, maybe not (behind the charge holder) for property!  As they say, watch the hands!

I'd never thought about this aspect.It lays the way open for HMRC to repo BTL chains lynched by S24 (and there will be many) and screw the banks off.........last bit in bold is bang on.Watch what they do etc

 

It's interesting in terms of the repercussions if it is true in terms of altering the way mortgage lending risk is balanced if banks are no longer first charge on BTL loans.Would be interested to know 100% if this is possible,because it could be a game changer.

10 hours ago, macca said:

Had to replace my shoes recently as my foot came out the side, wet socks I could handle from the hole but it was starting to impede walking..

I'm currently walking around in shoes that enable me to feel most stones.When it comes to Mrs P and the kids I'm prepared to spend.On myself,I'm happy to wear second hand clothes.

It's perverse when I look at what I'll gamble on.But I always remember this female poker player saying soemthing to the effect of

'I spend more time debating whether to buy a $70 blouse than whether to  call for $70,000 '

I'm not in that league for either for the blouse at 70 bucks or the $70k but my point remains.

Frugality isn't a badge of shame on this thread thankfully.

3 hours ago, Majorpain said:

They did change the rules some years ago, probably to help the banks taking a bath when companies went under.  Obviously, now the government is not awash with printed cash, they have to grab everything they can, so its back to HMRC having first dibs on the company assets!

I'm getting more and more sure that they have detected something they really don't like, CB's all tightening even though its obvious it will crash the everything bubble, the chancellor in interviews warning about the economic fallout from brexit or "other events", something is in the pipeline and I would quite like to know what it is!

I've underwrittent he first bit in bold because it's something I share.Powell-as I've said previously is a game changer-,we've debated why the US is raising and the accepted conclusion was to preserve the $ hegemony.The fact that it will crash the everything bubble is inevitable.Wolf St has had a few articles highlighting how even Fed doves are calling it the 'everything bubble'.

 

You can only go on wht you see and in terms of the debate we had I think dollar hegemony was the right call in the end.That doesn't stop that nagging feeling that there may be something else we can't see and I think you're right that it's the rise of populist politicans.At least you can cut deals with the likes of merkel et al.Salvini/the guy in Brazil/AFD/Austrian right etc etc.

From the shares I monitor-and there are a lot,the top has blown off.Whetehr it's straight down or a a long limp down I wouldn't like to say,but down it is.There may well be no Powell put this time.

I suspect Powell will force the hand of many Western CB's

2 hours ago, Bricks & Mortar said:

Blowing the bubble was lunacy from the beginning.  I assume they've realised the popping is inevitable. So they got together and made a plan to pop it.  I think the've decided doing it deliberately, in a concerted effort - is better than a surprise pop in one or other of the major economy's.

I think an Italian default is baked in now.

13 hours ago, DurhamBorn said:

Agree pretty much 100% SP.The pain in the UK will be over leveraged home owners and even more so leveraged BTL.There is also a side people dont consider.A divi payer can go down 40% and youl get your money back in 8 years if you hold on just in divis (even with a few cuts).In a leveraged BTL once interest rates go up and your rents dont/voids etc you can lose it,your house and everything else.

 

There are also many shares that have backed up on the property bubble eg Ashtead/Travis perkins etc.Oil/Telecoms/Utilities don't carry th risk they do.

[sancho panza]

@Majorpain

Just watching Wolf's weekend podcast talking about how trump should have taken the credit for raising rates as it will get many savers spending(which refers back to the debate on velocity earlier in thread)

Talking about how CRE loans have seen rising rates,that markets aren't raising risk pricing on commercial loans because they think the fed has their backs and saying fed will raise rates until risk pricing returns to normal and asset prices reset to normal.

CPI rising already,inflation is in the system.

Worst case scenario is that markets don't take on board feds message and then fed continues to tighten until credit markets freeze.

Well worth 10 minutes for anyone with the time.

https://wolfstreet.com/2018/10/28/the-wolf-street-report-when-will-the-fed-stop-raising-interest-rates/

[Wheeler]

26 minutes ago, sancho panza said:

I'd never thought about this aspect.It lays the way open for HMRC to repo BTL chains lynched by S24 (and there will be many) and screw the banks off.........last bit in bold is bang on.Watch what they do etc

It's interesting in terms of the repercussions if it is true in terms of altering the way mortgage lending risk is balanced if banks are no longer first charge on BTL loans.Would be interested to know 100% if this is possible,because it could be a game changer.

 

From the red book:

3.87 Protecting your taxes in insolvency – From 6 April 2020, when a business enters insolvency, more of the taxes paid in good faith by its employees and customers, and temporarily held in trust by the business, will go to fund public services rather than being distributed to other creditors. This reform will only apply to taxes collected and held by businesses on behalf
of other taxpayers (VAT, PAYE Income Tax, employee NICs, and Construction Industry Scheme deductions). The rules will remain unchanged for taxes owed by businesses themselves, such as Corporation Tax and employer NICs. (69)

 

I don't think it will apply to BTL taxes unfortunately.

[sancho panza]

38 minutes ago, Wheeler said:

From the red book:

3.87 Protecting your taxes in insolvency – From 6 April 2020, when a business enters insolvency, more of the taxes paid in good faith by its employees and customers, and temporarily held in trust by the business, will go to fund public services rather than being distributed to other creditors. This reform will only apply to taxes collected and held by businesses on behalf
of other taxpayers (VAT, PAYE Income Tax, employee NICs, and Construction Industry Scheme deductions). The rules will remain unchanged for taxes owed by businesses themselves, such as Corporation Tax and employer NICs. (69)

 

I don't think it will apply to BTL taxes unfortunately.

Thanks for clarifying Wheeler.my mind was boggling at the thought,.

[Majorpain]

@Wheeler@sancho panza

Its still a massive change in insolvency, that one para radically reduces the share of the banks unsecured assets pie as typically HMRC is one of the biggest creditors in the cases ive seen in the recent past.  Im not surprised the banks have got cold feet on risky lending, their margin for error has reduced and its easier for them to get badly burnt in a recession.  Perhaps that's the aim?

This doesn't cause a direct problem for BTL, but if I was a bank and this change came in, it would be on my mind that there is nothing to stop the government reverting to pre-2002 rules next budget and HMRC being near the top of the pile for everything.  When loans run to 10 years + that would be a problem.

[sancho panza]

3 hours ago, Majorpain said:

 

http://www.constructionenquirer.com/2018/10/30/opinion-we-cant-build-anything-without-finance/

Banks are running a mile from both property development and construction.

Is this linking the dots MP ref the article below? Banks front running guidance on the Budget?

The big banks may have had some advance warning of budget changes.When you lookat how marginal the profit was on soemthing like Carillioin,then any small change in bankruptcy arrangements could make a massive difference to lending policies.

8 minutes ago, Majorpain said:

@Wheeler@sancho panza

Its still a massive change in insolvency, that one para radically reduces the share of the banks unsecured assets pie as typically HMRC is one of the biggest creditors in the cases ive seen in the recent past.  Im not surprised the banks have got cold feet on risky lending, their margin for error has reduced and its easier for them to get badly burnt in a recession.  Perhaps that's the aim?

This doesn't cause a direct problem for BTL, but if I was a bank and this change came in, it would be on my mind that there is nothing to stop the government reverting to pre-2002 rules next budget and HMRC being near the top of the pile for everything.  When loans run to 10 years + that would be a problem.

Excellent point btw.I sometimes get tunnel vision.