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Credit deflation and the reflation cycle to come.


DurhamBorn

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This is big! :ph34r:

https://www.bloomberg.com/news/articles/2019-06-03/u-k-retail-sales-drop-by-most-on-record-in-may-survey-finds

Quote

U.K. retail sales declined by the most on record in May, reinforcing a gloomy picture for the industry that’s seen a number of high-profile businesses run into trouble.

Industry figures show total sales fell 2.7% from a year earlier, the biggest drop since at least 1995 when excluding Easter distortions. While some of the drop relates to strong figures a year earlier, when sales were boosted by sunshine, a royal wedding and the buildup to the football World Cup, political and economic uncertainty also played a significant role, the British Retail Consortium said.

Important to note that online sales ALSO fell, recession close?

Also this morning:

Untitled.thumb.jpg.9dc617597c6dde2ed1597aaf3b01fa36.jpg

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King Penda
31 minutes ago, dgul said:

This is huger than is being reported -- the risk of contagion is massive.

The mail was biging him up for years

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Underperformance is down to 'irrational market' according to Woodford

Market can stay irrational longer than you can stay solvent eh Neil?

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31 minutes ago, dgul said:

This is huger than is being reported -- the risk of contagion is massive.

It’s the equivalent of a bank run. Those directly affected may need to sell other assets if they need the money. Anyone watching will be worried their fund might do the same so better to sell now while they can. I can see this potentially having a big impact on the stock market.

It won’t have an impact on the rest of the financial market; we need a real bank run for that.

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5 minutes ago, Wheeler said:

It’s the equivalent of a bank run. Those directly affected may need to sell other assets if they need the money. Anyone watching will be worried their fund might do the same so better to sell now while they can. I can see this potentially having a big impact on the stock market.

It won’t have an impact on the rest of the financial market; we need a real bank run for that.

The problem with these funds is their investment in illiquid assets -- the stock market should be able to cope (in that any money extracted from the fund by selling shares will then exist for investment elsewhere -- probably in a tracker fund, which will then support share price).  The impact on less liquid investments could be more significant (including commercial RE).

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39 minutes ago, dgul said:

The problem with these funds is their investment in illiquid assets -- the stock market should be able to cope (in that any money extracted from the fund by selling shares will then exist for investment elsewhere -- probably in a tracker fund, which will then support share price).  The impact on less liquid investments could be more significant (including commercial RE).

Good point. I’d imagine that a significant proportion would be moved out of the stock market and into cash deposits and such like. A retail investor in a fund might feel that’s safer and this becomes reinforced as more leaves and the stock market falls.

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sancho panza

 

1 hour ago, Barnsey said:

This is big! :ph34r:

https://www.bloomberg.com/news/articles/2019-06-03/u-k-retail-sales-drop-by-most-on-record-in-may-survey-finds

Important to note that online sales ALSO fell, recession close?

Also this morning:

Untitled.thumb.jpg.9dc617597c6dde2ed1597aaf3b01fa36.jpg

Long time no post Barnsey.

Firstly,decl-short a few UK retial- some stocks are acting as if there's nothing up,but one by one,aside froma  few sectors eg grocery shopping,the rest are proving they are vulnerable to a drop in footfal/online competition and to higher costs.

 

Jsut spoke to a mate in the building trade and he delivers for a big wholesaler to the trade and he was saying it's quiet as anything,nationally,not jsut locally. @Bricks & Mortar and a few of our resident construction experts may have something to say from where they are but this guy is firm,that it's turning down.

As I've said before,builders started dropping well before Northern Rock in 07

47 minutes ago, Majorpain said:

Market can stay irrational longer than you can stay solvent eh Neil?

He was also a big investor in Purple Bricks MP

https://www.fnlondon.com/articles/purplebricks-share-slump-is-latest-woe-for-woodford-20190221

38 minutes ago, dgul said:

The problem with these funds is their investment in illiquid assets -- the stock market should be able to cope (in that any money extracted from the fund by selling shares will then exist for investment elsewhere -- probably in a tracker fund, which will then support share price).  The impact on less liquid investments could be more significant (including commercial RE).

Woodford is invested in shares,they're not illiquid unless they invested in some property fund that buys the bricks n mortar that is illiquid.I suspect they've done it because they need to readjust their cost base and merge funds.

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1 hour ago, dgul said:

This is huger than is being reported -- the risk of contagion is massive.

...and the canary sings!

....boiling frog, could never happen in the UK!

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3 hours ago, StrugglingMillennial said:

"AJ Bell removed the Woodford Equity Income Fund from its favourites list in September but fund supermarket Hargreaves Lansdown remained a supporter. When the investment manager reviewed its list of top 50 funds early this year, Woodford's flagship fund still had a firm footing".  WTFx1!

"Following the trading suspension, Hargreaves Lansdown stripped the fund from its Wealth 50 list of top picks. Emma Wall, head of investment analysis at the firm, said: 'We are advocates of long-term investing and think Woodford's multi-decade track record remains compelling – but we don't underestimate the disappointment investors must feel with Woodford's recent performance".  WTFx2!

"'The value of your investment will be dependent on the share prices of the portfolio's underlying holdings, which are not directly impacted by the suspension'". WTFx3, er, yes they very may do! 

"Since the launch of the fund in June 2014, investors have received only a 0.36 per cent return on their money, according to Willis Owen".  WTFx4!

FFS, DYOeffingR!

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1 hour ago, Wheeler said:

It’s the equivalent of a bank run. Those directly affected may need to sell other assets if they need the money. Anyone watching will be worried their fund might do the same so better to sell now while they can. I can see this potentially having a big impact on the stock market.

It won’t have an impact on the rest of the financial market; we need a real bank run for that.

So, hedge fund looks at the fund holdings shorts them, then sits back and watches the force fund sales and lower share prices?  Downward momentum builds, more falls, more profit?  Maybe been at it a while already?  Could check the shorting data but I've kept away from this 0.36% dog (although does that refer to capital return or total return as I'd expect the divs to be OK?).  Meanwhile someone says "The value of your investment will be dependent on the share prices of the portfolio's underlying holdings, which are not directly impacted by the suspension".  Well I suppose we could argue over what is "directly" versus "indirectly" while we wait for the pool to re-open!

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Bricks & Mortar
10 minutes ago, sancho panza said:

@Bricks & Mortar and a few of our resident construction experts may have something to say

I'm afraid I'm well insulated from this.  Having been burned in 2008, while working at a national housebuilder and finding the entire subsidiary I was at closed down and made redundant - I've deliberately made sure I'm doing repairs and maintenance for domestic clients in a retirement community. 
All I can offer, is that some clients have seemed anxious about their investments and accessing their funds for paying bills recently.  So far, we've always been paid though.
Our local merchant seems busy as ever - but he's serving other small tradesmen doing small projects in a collection of retirement communities.

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sancho panza
1 minute ago, Bricks & Mortar said:

I'm afraid I'm well insulated from this.  Having been burned in 2008, while working at a national housebuilder and finding the entire subsidiary I was at closed down and made redundant - I've deliberately made sure I'm doing repairs and maintenance for domestic clients in a retirement community. 
All I can offer, is that some clients have seemed anxious about their investments and accessing their funds for paying bills recently.  So far, we've always been paid though.
Our local merchant seems busy as ever - but he's serving other small tradesmen doing small projects in a collection of retirement communities.

That's a really good business plan if you don't mind me saying.When you're customers are on inflation proof incomes with zero debts,there's a lot that has to go wrong before they fail to pay.

My mate delivers plasterboard(mainly),told a me a month or tow back he's been dropping deliveries on top of previous deliveries.

But then other contacts were saying the builders were strugglign to get trades.

Around me,we've a host of new developments that appear to be on go slow.

But then I'm a bear,been shorting UK hosuebuilders for a while on and off,so I have to watch I don't anchor on the bad news and miss the good.But the value of talking to people on the front line is totally underestimated imho.Especially delivery drivers.

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16 hours ago, DurhamBorn said:

Harvey might have some thoughts on the technical set up if he is along later

Oy, who's this Harvey ("the rabbit"?) guy parking his tank on me lawn!

Haven't a clue on targets, I just hold on until they tell me to stop, dropping a few as I go!

TBH, I have been busy elsewhere, etc so have not made the trade yet.  Hoping for the pullback you mentioned as we've not yet had the one I would look for (on the weekly).

Loved the way GDX sliced through some potential resistance levels but the higher it goes, potentially the bigger drag so maybe a bit of a pullback at the myriad set of resistance levels here and above.

If I wanted to worry, I would point to the good momentum indicators but notice how quickly they went up:

. Worked in the Jan 16 bull but that was maybe influenced by the ETF inception

. Those since then have faded out

. The Sep 18 bull was built on a nice and steady eddie rise in the momentum indicators.

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27 minutes ago, Bricks & Mortar said:

I'm afraid I'm well insulated from this.  Having been burned in 2008, while working at a national housebuilder and finding the entire subsidiary I was at closed down and made redundant - I've deliberately made sure I'm doing repairs and maintenance for domestic clients in a retirement community. 
All I can offer, is that some clients have seemed anxious about their investments and accessing their funds for paying bills recently.  So far, we've always been paid though.
Our local merchant seems busy as ever - but he's serving other small tradesmen doing small projects in a collection of retirement communities.

Housing and house renovation is still looking strong, I think it will be the last domino to fall after people start getting laid off.  Hopefully in the long run housing costs will fall and stop sucking income out of the real economy, average house prices should be at the £120,000 level IMO.  That's a nasty 50% drop.

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Noallegiance
1 hour ago, Harley said:

 

FFS, DYOeffingR!

Surely not! We should have another section of government invented to protect everybody from themselves and their lack of (insert missing ability here).

It's a disease I tell thee. The search for the quick buck without knowledge of what's happening.

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Yellow_Reduced_Sticker
48 minutes ago, Majorpain said:

Housing and house renovation is still looking strong, I think it will be the last domino to fall after people start getting laid off.  Hopefully in the long run housing costs will fall and stop sucking income out of the real economy, average house prices should be at the £120,000 level IMO.  That's a nasty 50% drop.

EDIT: Beautiful Tasty ...50% drop.:Jumping:

@DurhamBorn AND ALL the contributing folks here...MASSIVE thanks!

"Credit deflation and the reflation cycle to come"

Thread... is 1 year old today!

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DoINeedOne
1 hour ago, sancho panza said:

Around me,we've a host of new developments that appear to be on go slow.

2

When I quit carpentry in 2009 I had a few friends working on new builds they told me that sites were getting the front doors on and locking up the buildings to pull everyone off the site, there a few new build sites around me I should take drive around them

Another thing I like keeping an eye on is estate agents a few have closed down near me and now the shops sit empty, but there's one very small high street about 20 minutes away with i think it's 6 estate agents on a parade of around maybe 40 shops, again I should visit to see if any have closed

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DoINeedOne
2 hours ago, Harley said:

"AJ Bell removed the Woodford Equity Income Fund from its favourites list in September but fund supermarket Hargreaves Lansdown remained a supporter. When the investment manager reviewed its list of top 50 funds early this year, Woodford's flagship fund still had a firm footing".  WTFx1!

"Following the trading suspension, Hargreaves Lansdown stripped the fund from its Wealth 50 list of top picks. Emma Wall, head of investment analysis at the firm, said: 'We are advocates of long-term investing and think Woodford's multi-decade track record remains compelling – but we don't underestimate the disappointment investors must feel with Woodford's recent performance".  WTFx2!

"'The value of your investment will be dependent on the share prices of the portfolio's underlying holdings, which are not directly impacted by the suspension'". WTFx3, er, yes they very may do! 

"Since the launch of the fund in June 2014, investors have received only a 0.36 per cent return on their money, according to Willis Owen".  WTFx4!

FFS, DYOeffingR!

 

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sancho panza
41 minutes ago, DoINeedOne said:

When I quit carpentry in 2009 I had a few friends working on new builds they told me that sites were getting the front doors on and locking up the buildings to pull everyone off the site, there a few new build sites around me I should take drive around them

Another thing I like keeping an eye on is estate agents a few have closed down near me and now the shops sit empty, but there's one very small high street about 20 minutes away with i think it's 6 estate agents on a parade of around maybe 40 shops, again I should visit to see if any have closed

I think the recent lettings fee ban will be the killer blow.If you take a psotcode then divide the number of transactions by the number of agents,you realsie many have been on the edge for years,Running a small office with 3 staff wil cost maybe £10,000 a month if they rent their shop,minimum.eg LE 2,100 transactiosn, 30 agents or so......

I suspect that the lettings fee ban wont result in rising LL costs jsut rather reduced income.

My guess is that the EA shuttering ups will begin in the autumn to Christmas and then really begin in earnest in the new year.

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1 hour ago, Majorpain said:

Housing and house renovation is still looking strong, I think it will be the last domino to fall after people start getting laid off.  Hopefully in the long run housing costs will fall and stop sucking income out of the real economy, average house prices should be at the £120,000 level IMO.  That's a nasty 50% drop.

House prices are finally starting to go sideways (rather than stratospheric) outside of the SE, which went sideways or falling a long time ago. Cheapest areas still seeing strongest gains as folks search in desperation for value. I wrongly assumed that Brexit pain would be felt sooner, but looks like it's only just really beginning, perfectly timed with a global recession almost upon us (more than 50% of global PMI's now in contraction).

House building inevitably always reaches it's peak before the bust (see: crane index), certainly huge numbers of developments flying up all around the areas I visit, however these will of course have been approved and sites prepped a LONG time ago. As you rightly point out Majorpain, once we see the unemployment rate really start to tick up, s**t's getting real, then once people start hearing of friends and family being made redundant, well, the last thing people will be doing is buying a house as the banks start tightening up lending criteria. Then it's the waiting game for rates back to 0% and QE to be unleashed once more (guaranteed IMO), so my original time frame of buying in summer 2020 may now be 2021.

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Castlevania
3 hours ago, dgul said:

The problem with these funds is their investment in illiquid assets -- the stock market should be able to cope (in that any money extracted from the fund by selling shares will then exist for investment elsewhere -- probably in a tracker fund, which will then support share price).  The impact on less liquid investments could be more significant (including commercial RE).

Woodford’s problem is that he bought huge stakes in small to mid cap companies. I mean he owns a 20%+ stale in total rubbish such as the Provident and Kier. They’re not that liquid. So him needing to offload to fund redemptions will move the price lower. 

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sancho panza
1 hour ago, Harley said:

Oy, who's this Harvey ("the rabbit"?) guy parking his tank on me lawn!

Haven't a clue on targets, I just hold on until they tell me to stop, dropping a few as I go!

TBH, I have been busy elsewhere, etc so have not made the trade yet.  Hoping for the pullback you mentioned as we've not yet had the one I would look for (on the weekly).

Loved the way GDX sliced through some potential resistance levels but the higher it goes, potentially the bigger drag so maybe a bit of a pullback at the myriad set of resistance levels here and above.

If I wanted to worry, I would point to the good momentum indicators but notice how quickly they went up:

. Worked in the Jan 16 bull but that was maybe influenced by the ETF inception

. Those since then have faded out

. The Sep 18 bull was built on a nice and steady eddie rise in the momentum indicators.

I use mvoing averages a lot to discern the geneeral underlying trend and then fish with the tide.With the goldfies,it's impossible to discern the trend using my normal timeframes.I've now resorted to averaging in over a couple of years in the manner of my granfather having had my backside handed to me on a plate in 2017  with New River/EGO.Although the latter is coming back.

1 hour ago, Majorpain said:

Housing and house renovation is still looking strong, I think it will be the last domino to fall after people start getting laid off.  Hopefully in the long run housing costs will fall and stop sucking income out of the real economy, average house prices should be at the £120,000 level IMO.  That's a nasty 50% drop.

LE2 average price is circa £230k average wage circa £23.5k......................crazy.Only going to end in tears

3 minutes ago, DoINeedOne said:

 

Thanks for that I'm amazed at those figures.I didn't realsie how in bed HL were with these funds.I thought they were jsut a broker,having preferred lists seems akin to giving advice

 

Decl-short HL

5 minutes ago, Castlevania said:

Woodford’s problem is that he bought huge stakes in small to mid cap companies. I mean he owns a 20%+ stale in total rubbish such as the Provident and Kier. They’re not that liquid. So him needing to offload to fund redemptions will move the price lower. 

I'm beginning to get the liquidity issue now.Yikes.What was he thinking?

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DoINeedOne

House prices should be left to do what they need to do but what other crap will they bring out to help people buy houses they can afford

Housing secretary: Let young people raid pension pots for housing Young people should have access to pension pots to help fund the deposit for their first home, housing secretary James Brokenshire said on Monday, raising the prospect of a rewrite of the UK’s pension rules.

1*CfD7Y7LtZPfd_uFZNp0w6g.gif

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