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Credit deflation and the reflation cycle to come.


DurhamBorn

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On 25/01/2019 at 21:35, Dogtania said:

When I was in SA in 2013 food was amazingly cheap, granted the exchange was very favourable and I was made to feel like Mr moneybags.  I think a glass of wine was like 8 Rand though could be mistaken, could have been 12 Rand but £1 gave 20 Rand plus at the time.  

The thing was inflation was quite high at the time and I'm assuming has continued.  The standard rate I was told for savings accounts was 7%( or easily found) where we were at 1.  Strange how things develop but I've been aware the 20 Rand to £1 has slipped and even though I've not kept check on their inflation I've guessed it has continually got worse from a GBP -R perspective (as in we've had low inflation if that).

Possibly planning a trip later in the year for a wedding but don't think it'll be Mr moneybags visiting the colony this time!

Comign from the UK SA is still cheap,I was referencing how hard life must be for locals who earn rand and have expenditures in rand.We were at about 18 rand /£1.

Thigns in shops were expensive eg bread/washing up lqiuid/mustard and random stuff like that.Meat seems cheap by compoarison.Like I said tho,average wages are low and house prices very high co pared to the min wage of 20R

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On 27/01/2019 at 14:43, null; said:

My experian credit score just updated, its perfect - 999 out of 999. Yet only one 0% card coming up and its one I already have. I think they allow mulitple accounts but split credit limits across the cards. It may just be that I've had most of the 0% cards and need to wait a bit longer before they let me have another.

So I may have to change tactics and start collecting points instead.

Some of you may want to look into the Amazon/Newday card. You get points that convert into amazon gift vouchers.

As for debt forgiveness, I think there is a good chance of something being introduced by a Labour/socialist government as a means to buy votes. Might not be a write off on the debt but a replacement with a government long term loan at 0%. A sort of debt scrappage.

I'll always take as much 0% as I can get my hands on. As A_P said - always, always make sure you have the means to repay it.

Fascinating insight Null.I've always thought these 0% deals were absurdly illogical from the perpsective of a business,but they were around even pre crisis.So the fact that they appear to be getting culled in 2018 augurs badly for the debt bubble.

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On 27/01/2019 at 15:25, Bear Hug said:

FT: ‘Stick or twist’ moment looms for Deutsche Telekom over BT stake

DT owns 12% of BT and can buy or sell on 29 Jan for the first time in 4 years (they were previously limited to only buying a further 3%).  Any views?  They are sitting on almost 50% loss.

Be interesting to see what they do.

 

4 hours ago, DurhamBorn said:

Bonds will be paying coupons of 8%+ in the next cycle and thats quality stuff.A lot of companies wont be able to roll over debt at all.Thats why free cash flow is key.Worst case they can cut dividends and focus the free cash on paying off the bonds as they come due (structure will be key here).On the flip side this also means much less competition for companies who have already done their investing for the cycle,and they should be able to increase prices in an inflation cycle while de-leveraging.

Its an area that would need pages and pages on it,but some companies who do well in the cylcle will have large debts now,the key is that those debts are due to investment in assets that become worth much more in a reflation,while bond holders are sat getting 2% coupons.Those companies must start to de-leverage from here on in though,as by 2028 you dont want to be having to re-issue bonds at the scale a lot of companies are holding now.

Spot on.Particualrly the last bit in bold.

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Domino's missed, currently down 10% as well.

They should be toast in the next cycle, £15+ pizza's when you can pick up an equally good one in Asda for £2.50.

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Things are getting from bad to worse at my place. We've missed forecasts in 17 out of 21 weeks this business year, including the last nine on the trot. We have already revised our forecast down and delivered a profit warning, but we're still consistenly coming under that revised forecast and missing by ever-increasing margins, sometimes by double digits. I think another profit warning in the Spring might be in order.

We're stil showing growth YoY but it used to be in 25-30% range two years ago and now it's in the low teens.

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14 minutes ago, Majorpain said:

Domino's missed, currently down 10% as well.

They should be toast in the next cycle, £15+ pizza's when you can pick up an equally good one in Asda for £2.50.

Dominos is certainly massively over-priced. I can remember when it was £10-11 for a large pizza. Now it's £15.

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7 minutes ago, kibuc said:

Things are getting from bad to worse at my place. We've missed forecasts in 17 out of 21 weeks this business year, including the last nine on the trot. We have already revised our forecast down and delivered a profit warning, but we're still consistenly coming under that revised forecast and missing by ever-increasing margins, sometimes by double digits. I think another profit warning in the Spring might be in order.

We're stil showing growth YoY but it used to be in 25-30% range two years ago and now it's in the low teens. 

Turnover is vanity, profit is sanity!

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30 minutes ago, Majorpain said:

Domino's missed, currently down 10% as well.

They should be toast in the next cycle, £15+ pizza's when you can pick up an equally good one in Asda for £2.50.

Yeap if there's a night where we fancy a pizza because we got home late I can get 2 pizzas and a few beers cheaper than one large Dominos pizza

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On 27/01/2019 at 14:43, null; said:

My experian credit score just updated, its perfect - 999 out of 999. Yet only one 0% card coming up and its one I already have. I think they allow mulitple accounts but split credit limits across the cards. It may just be that I've had most of the 0% cards and need to wait a bit longer before they let me have another.

So I may have to change tactics and start collecting points instead.

Some of you may want to look into the Amazon/Newday card. You get points that convert into amazon gift vouchers.

As for debt forgiveness, I think there is a good chance of something being introduced by a Labour/socialist government as a means to buy votes. Might not be a write off on the debt but a replacement with a government long term loan at 0%. A sort of debt scrappage.

I'll always take as much 0% as I can get my hands on. As A_P said - always, always make sure you have the means to repay it.

An update on this, I applied for a 28 month 0% purchases card that isn't listed on the MSE credit club. I was approved but only got a credit limit of around 70% of what I normally get.

It's only an anecdote, but my personal experience is that there does seem to be some tightening of credit.

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11 minutes ago, null; said:

An update on this, I applied for a 28 month 0% purchases card that isn't listed on the MSE credit club. I was approved but only got a credit limit of around 70% of what I normally get.

It's only an anecdote, but my personal experience is that there does seem to be some tightening of credit.

Spot on, took a while for credit to tighten but we're finally here so clearly signalling very very late cycle. Exact same dynamic occurring over in the States, reeling in of mainstream lending whilst subprime lending goes into overdrive. Just like 2007.

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1 hour ago, Barnsey said:

Spot on, took a while for credit to tighten but we're finally here so clearly signalling very very late cycle. Exact same dynamic occurring over in the States, reeling in of mainstream lending whilst subprime lending goes into overdrive. Just like 2007.

I used to have easy access to anything up to £30k with Barclays. Now they have stopped online access and if I want to borrow any amount, large or small, then I would need to go into a branch with proof of earnings etc etc..yet they still offer me credit cards with 20% interest pa...

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Napoleon Dynamite
15 hours ago, sancho panza said:

Fascinating insight Null.I've always thought these 0% deals were absurdly illogical from the perpsective of a business,but they were around even pre crisis.So the fact that they appear to be getting culled in 2018 augurs badly for the debt bubble.

Yep, I wondered about them too, on the surface they don't make any sense.  However I think it's a lot about getting people hooked.

Some will be sensible, not incur any fees and pay it off before the higher rate starts.  They'll cost the CC companies, aside from what they recoup on any retailer percentage fees paid.

Some won't be so sensible. Their circumstances may change, a big unexpected bill may hit, they may lack willpower and build up a balance etc.  Then the CC company wins, they've got somebody at higher rates of interest or who'll incur a fee balance transferring.

There's the side effect that once you have debt, and you try and increase it you'll struggle to get a decent rate again.  Those Lloyds TSB loans I was on about.  At first bite you'll get a decent (3 or 4%) rate.  Try and extend the loan to borrow more and they'll hit you with a much higher rate (>10%).

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4 minutes ago, Napoleon Dynamite said:

Yep, I wondered about them too, on the surface they don't make any sense.  However I think it's a lot about getting people hooked.

Some will be sensible, not incur any fees and pay it off before the higher rate starts.  They'll cost the CC companies, aside from what they recoup on any retailer percentage fees paid.

Some won't be so sensible. Their circumstances may change, a big unexpected bill may hit, they may lack willpower and build up a balance etc.  Then the CC company wins, they've got somebody at higher rates of interest or who'll incur a fee balance transferring.

There's the side effect that once you have debt, and you try and increase it you'll struggle to get a decent rate again.  Those Lloyds TSB loans I was on about.  At first bite you'll get a decent (3 or 4%) rate.  Try and extend the loan to borrow more and they'll hit you with a much higher rate (>10%).

I agree. It`s all very cynical. Don`t listen to what banks tell you about caring just watch what they do..

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2 hours ago, null; said:

An update on this, I applied for a 28 month 0% purchases card that isn't listed on the MSE credit club. I was approved but only got a credit limit of around 70% of what I normally get.

It's only an anecdote, but my personal experience is that there does seem to be some tightening of credit.

I'm having a very similar experience. Over a year ago was given a HSBC CC with £4500 limit, now with M&S Bank (which is HSBC anyways) I was given just £2500 which is much less than my monthly wage and they know it.

Planning to apply for Santander Everyday CC, let you know how it goes :)

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33 minutes ago, Napoleon Dynamite said:

Yep, I wondered about them too, on the surface they don't make any sense.  However I think it's a lot about getting people hooked.

Some will be sensible, not incur any fees and pay it off before the higher rate starts.  They'll cost the CC companies, aside from what they recoup on any retailer percentage fees paid.

Some won't be so sensible. Their circumstances may change, a big unexpected bill may hit, they may lack willpower and build up a balance etc.  Then the CC company wins, they've got somebody at higher rates of interest or who'll incur a fee balance transferring.

There's the side effect that once you have debt, and you try and increase it you'll struggle to get a decent rate again.  Those Lloyds TSB loans I was on about.  At first bite you'll get a decent (3 or 4%) rate.  Try and extend the loan to borrow more and they'll hit you with a much higher rate (>10%).

Yes, this exactly. Many people take on 0% cc's with good intentions but its easy to overspend and underpay and then suddenly wham - you are hit with extortionate rates of 20%. The sort of rates you see on cards today I recall seeing about the same back in the 90's.

The house always wins, but as a player in this game you can make your own luck.

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25 minutes ago, BearyBear said:

I'm having a very similar experience. Over a year ago was given a HSBC CC with £4500 limit, now with M&S Bank (which is HSBC anyways) I was given just £2500 which is much less than my monthly wage and they know it.

Planning to apply for Santander Everyday CC, let you know how it goes :)

Virgin and Post Office are both doing 0% for 28 months. If you go direct to their websites you can do a soft search eligbility check without affecting your credit rating.

Keep an eye on both your total available credit and utilisation of that credit.

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18 minutes ago, kibuc said:

Infrastrata EU funding application unsuccessful, share price falling like a rock.

I'll definitely have a nibble later in the day.

And I thought my Royal Mail holding would be my biggest loser of the day!

 

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Just found this which may be of interest. Note that all the data sets seem to exclude credit cards but its certainly useful to get an idea of where we are.

 

https://www.bankofengland.co.uk/boeapps/database/FromShowColumns.asp?Travel=NIxAZxI1x&FromCategoryList=Yes&NewMeaningId=ALONET&CategId=6&HighlightCatValueDisplay=Consumer credit - net lending

 

I think to make sense of this we need to see both the growth/decline of debt and the culmlative total debt and also per capita.

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6 hours ago, DoINeedOne said:

Yeap if there's a night where we fancy a pizza because we got home late I can get 2 pizzas and a few beers cheaper than one large Dominos pizza

https://www.amazon.co.uk/Ferrari-G10006-Delizia-Pizza-Oven/dp/B002VA4CDI 

Buy one of these.Iv a lot of Italian friends and they told me they are as close to a clay oven as youl get.I get pizza flour from sainsbury about £1.10,but really good quality,cheese,make a paste from tomato puree water garlic and oregano and that above makes them in about 4 minutes.When i have family around il make 4 or five,garlic break,pasta bake chips etc for less than £6 or if its me and the other half a pizza for about 90p and they are superb.

 

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2 hours ago, Wheeler said:

And I thought my Royal Mail holding would be my biggest loser of the day!

 

Time  to ladder into RM and i bought some today as did my dad,dis-inflation is hard work for companies like them,they will increase prices soon to business etc and they will have no choice but to pay.its also a sector that will see a lot of changes going forward(more contracts for click and collect etc) and consolidation.Im about 31% allocated now into FTSE stocks,i also added a few more BAT this last week.I sold a huge holding above £50 id owned for 20 years and and happy to get about 20% of that back at £25 or below.They arent an inflation stock,but i think they will return 7% a year over the next decade.

The PMs are moving up very nicely and many are showing really strong profits now.HMY is touching 2.00 and up 30%+ from the lows .I use the SA miners as tracking stocks (and own them) as they tend to turn first both up and down and lead the sector,due to their marginal nature.Iv sold my bottom ladder in Harmony today and used some of it for some RM and some Vod.

Hopefully the PMs can continue to run,though there is a lot of resistance to get through in the present area.

Very happy with how things are going and all pretty much as expected where people are caught looking the wrong way at a key inflection point.

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Shatner's Bassoon
2 hours ago, kibuc said:

Infrastrata EU funding application unsuccessful, share price falling like a rock.

I'll definitely have a nibble later in the day.

Been a torrid few days with the placing and now this. Bit gutted I didn't top slice when it hit 2p but all valuable investing psychology lessons for me...crazy AIM stock  - it's up and down more than a kid on tartrazine. 

Planning to top up if it goes sub-1p again. The project isn't dependent on EU funding so feels like an over-reaction. 

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41 minutes ago, Shatner's Bassoon said:

Been a torrid few days with the placing and now this. Bit gutted I didn't top slice when it hit 2p but all valuable investing psychology lessons for me...crazy AIM stock  - it's up and down more than a kid on tartrazine. 

Planning to top up if it goes sub-1p again. The project isn't dependent on EU funding so feels like an over-reaction. 

Watch out, the chart looks like the classic AIM pump and dump to me.  Excellent time to top up on the "dip" as the shareprice grinds ever lower.

Even with good companies, AIM is the wild west and ive lost a lot of money on it the past.  Dont assume its a one way bet!

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