Jump to content
DOSBODS
  • Welcome to DOSBODS

     

    DOSBODS is free of any advertising.

    Ads are annoying, and - increasingly - advertising companies limit free speech online. DOSBODS Forums are completely free to use. Please create a free account to be able to access all the features of the DOSBODS community. It only takes 20 seconds!

     

IGNORED

Credit deflation and the reflation cycle to come.


DurhamBorn

Recommended Posts

4 hours ago, DurhamBorn said:

My partner rents two room out in her house for the tax free income.Much better than renting the whole house out.You can boot out any loons with no notice and zero income tax.The bang into a Sipp i presumed for people who pack in at 55 and simply draw down with no more saving and have no intention of saving in a pension again.Like you say though there is a chance to make a free £600 a year by banging in that amount they let none taxpayers pay in.Thinks its about £3k or something,nice little free bit of money though each year.

Can someone explain this free £600? not sure i follow

Link to comment
Share on other sites

  • Replies 11.2k
  • Created
  • Last Reply
1 hour ago, Harley said:

IMO top down talk of safe withdrawal rates, like that nonsense of having a bond:equity split according to your age, is a bit like saying you'll not get pregnant if you do it standing up!  Arguably extremely basic and rather silly.  Work out what's needed in retirement (serious people should really know what they're currently spending), what to have left on death (if wanted and affordable), and choose a suitable risk:return (with matching investments) to deliver it.  Ideally add a bit of sensitivity analysis to stress test the assumptions.  If the results don't work (as they won't for a lot of people) then cut back on expectations and start saving - the targets would have been set.  The lucky few may find they can actually ease up on the risk (and return).  Fairly basic discounted cash flow techniques (of which Excel has loads, as do a number of internet calculators).  Sure beyond some people, mostly those who did not pay attention in class or who see the internet as for entertainment purposes only.  But also not totally people's fault given the pervasiveness of such "wisdom". 

According to: https://www.mycalculators.com/ca/retcalc1m.html

Dreamer Joe wants to retire at 55 with a £250k pension pot and reckons he needs £15k pa to live on (for simplicity, let's ignore the state pension whenever that kicks in).  Joe reckons he'll live to 85 like his mum and dad.  He doesn't want to leave any legacies other than his house which anyways may be needed for care.  Joe's done his research, listening to the former sports presenter now economics correspondent on the TV, and understands inflation is well under control at 2% and he can get 7% invested "somewhere".  Joe's right!  He can draw down an inflation adjusted £15k pa and end up thirty years later on £0 savings.

Then the truth fairy pays Joe a visit one night.  First she paints a picture of Joe living on £15k pa.  Fine for the basics thinks Joe but a basic 30 years is a long time.  So let's say £20k (although truth be known, he really thinks £25k).  Then the truth fairy reads him a bed time story about the deviousness behind the inflation figure and Joe realises he should have plumped for 5%.  Oh, and those investment returns, other than that 5:1 down the bookies, maybe should be more like 5% tops just to take some of the "excitement" out of the next 30 years.  Back to his calculator and, oh dear....£8k pa for you son!  But then he'll have his state pension, eventually, which assuming several things, may make up some of the shortfall, if he can live on the £8k until then.

Joe, thinking early retirement not so great, decides to work a bit easier a bit longer and happily books 2048 with the Grim Reaper!

Joe goes his merry downsized way, working part time while taking out his £8k a year.  Actually, turns out working at that checkout is good fun, meeting all those happy people.  But dark clouds start to gather.  Turns out that 5% return rate was a bit of a wish as the stock market just went down 25% the same year he "retired" and his pot shrunk to £187,500.  Hopefully it will go up again but alas hope doesn't pay the bills and it'll have to go up a lot to catch up and compensate.  Anyways this stock market thing is too scary so he gets talking to this bloke who says UK bonds are safer, at a cost of a 2% rate of return.  This other bloke cuts in the conversation and mentioned an optimised portfolio approach and expected rates of return but Joe don't do math.  So back to the calculator....£4k pa for you son!

Joe works out how long his £187,500 will last and calls back the Grim Reaper to re-book for 2036!  Agreed, a bit pessimistic given he's ignored his state pension but it turns out the Grim Reaper was on his way to visit HM Treasury for a "chat"!  Meanwhile, you can find Joe during his time off down the pub.  Buy him a drink and he'll now tell you about how a withdrawal rate is the answer and not the question.  That involves: the actual amount needed, the amount to leave behind, how long you've got, a real personal inflation rate, and a sensible rate of return versus risk (which is predicated on a chosen asset allocation), plus a few other assorted odds and sods.  

PS: A top down "safe" withdrawal rate of 4%?  That would be £10k pa on £250K, assuming that assumes a drawn down of a stable capital base to zero.  Or, looking beneath the sheets, 30 years at 7% return at 5% inflation, every year, no surprises.  Point is, how many would know how crucial these (brave?) assumptions are and are successfully managing things accordingly?  Me?  Even now, I only get one right!

I have no plans to give the Grim Reaper advanced notice...first thing he will know is when I knock on his door asking to `couch surf`! :-) :-) :-)

Link to comment
Share on other sites

11 minutes ago, RJT1979 said:

Can someone explain this free £600? not sure i follow

 You can contribute as much as you earn into a pension up to £40K per annum. If you're jobless you can still contribute up to £3,600 pa and claim 20% tax relief. Essentially a net contribution of £2880 and getting an extra £720 top up. Obviously if you haven't worked or paid any income tax it seems like its free. But you would have paid tax many times over throughout your life so it's just a nice little top up for locking money away.

Link to comment
Share on other sites

1 hour ago, Harley said:

IMO top down talk of safe withdrawal rates, like that nonsense of having a bond:equity split according to your age, is a bit like saying you'll not get pregnant if you do it standing up!  Arguably extremely basic and rather silly.  Work out what's needed in retirement (serious people should really know what they're currently spending), what to have left on death (if wanted and affordable), and choose a suitable risk:return (with matching investments) to deliver it.  Ideally add a bit of sensitivity analysis to stress test the assumptions.  If the results don't work (as they won't for a lot of people) then cut back on expectations and start saving - the targets would have been set.  The lucky few may find they can actually ease up on the risk (and return).  Fairly basic discounted cash flow techniques (of which Excel has loads, as do a number of internet calculators).  Sure beyond some people, mostly those who did not pay attention in class or who see the internet as for entertainment purposes only.  But also not totally people's fault given the pervasiveness of such "wisdom". 

According to: https://www.mycalculators.com/ca/retcalc1m.html

Dreamer Joe wants to retire at 55 with a £250k pension pot and reckons he needs £15k pa to live on (for simplicity, let's ignore the state pension whenever that kicks in).  Joe reckons he'll live to 85 like his mum and dad.  He doesn't want to leave any legacies other than his house which anyways may be needed for care.  Joe's done his research, listening to the former sports presenter now economics correspondent on the TV, and understands inflation is well under control at 2% and he can get 7% invested "somewhere".  Joe's right!  He can draw down an inflation adjusted £15k pa and end up thirty years later on £0 savings.

Then the truth fairy pays Joe a visit one night.  First she paints a picture of Joe living on £15k pa.  Fine for the basics thinks Joe but a basic 30 years is a long time.  So let's say £20k (although truth be known, he really thinks £25k).  Then the truth fairy reads him a bed time story about the deviousness behind the inflation figure and Joe realises he should have plumped for 5%.  Oh, and those investment returns, other than that 5:1 down the bookies, maybe should be more like 5% tops just to take some of the "excitement" out of the next 30 years.  Back to his calculator and, oh dear....£8k pa for you son!  But then he'll have his state pension, eventually, which assuming several things, may make up some of the shortfall, if he can live on the £8k until then.

Joe, thinking early retirement not so great, decides to work a bit easier a bit longer and happily books 2048 with the Grim Reaper!

Joe goes his merry downsized way, working part time while taking out his £8k a year.  Actually, turns out working at that checkout is good fun, meeting all those happy people.  But dark clouds start to gather.  Turns out that 5% return rate was a bit of a wish as the stock market just went down 25% the same year he "retired" and his pot shrunk to £187,500.  Hopefully it will go up again but alas hope doesn't pay the bills and it'll have to go up a lot to catch up and compensate.  Anyways this stock market thing is too scary so he gets talking to this bloke who says UK bonds are safer, at a cost of a 2% rate of return.  This other bloke cuts in the conversation and mentioned an optimised portfolio approach and expected rates of return but Joe don't do math.  So back to the calculator....£4k pa for you son!

Joe works out how long his £187,500 will last and calls back the Grim Reaper to re-book for 2036!  Agreed, a bit pessimistic given he's ignored his state pension but it turns out the Grim Reaper was on his way to visit HM Treasury for a "chat"!  Meanwhile, you can find Joe during his time off down the pub.  Buy him a drink and he'll now tell you about how a withdrawal rate is the answer and not the question.  That involves: the actual amount needed, the amount to leave behind, how long you've got, a real personal inflation rate, and a sensible rate of return versus risk (which is predicated on a chosen asset allocation), plus a few other assorted odds and sods.  

PS: A top down "safe" withdrawal rate of 4%?  That would be £10k pa on £250K, assuming that assumes a drawn down of a stable capital base to zero.  Or, looking beneath the sheets, 30 years at 7% return at 5% inflation, every year, no surprises.  Point is, how many would know how crucial these (brave?) assumptions are and are successfully managing things accordingly?  Me?  Even now, I only get one right!

Harley, do you sell annuities for a living, as I haven't seen a better argument than this for buying one!...also, it should make people with a DB pension realise a) how valuable it really is, and b) how taking a cash redemption for it may not be the best policy given the unsure financial future ahead of us!?

Link to comment
Share on other sites

1 hour ago, DurhamBorn said:

Its interesting Harley how much a final salary pension helped things.Even if you had £100 a week from one at say 60 it made planning much much easier given that and the state pension are inflation hedged mostly.

Of course the back up is if you end up running out of assets you get pension credit,and simply cash in a couple of grand of silver/gold over in Blackpool a year.

One mate of mine grows weed for his pension and is worried they might make it legal as big tobacco will nick his retirement.

Don't think it will ever be made fully legal to grow/supply otherwise the Govt will lose the taxation...be more like spirits I.e. you will need a license to produce, and so the Govt will keep a `tab` on who and what they should be paying.

Link to comment
Share on other sites

Agent ZigZag
4 hours ago, DurhamBorn said:

They will never means test the state pension.Never.They will increase council tax etc instead.

Council tax is the big concern for me looking into the future. Everything else I can more or less accommodate. The amount people pay is scandalous and will hit pockets especially savings hard.. At present my council tax is outstripping inflation. When will the govt and council take a hair cut or austerity which they like to call it like the rest of us. Even more so council tax hits those living in the north worse on an earnings ratio than those living in the south. I can see another Council Tax (Poll Tax) situation brewing here in the future.

Link to comment
Share on other sites

31 minutes ago, MrXxx said:

Harley, do you sell annuities for a living, as I haven't seen a better argument than this for buying one!...also, it should make people with a DB pension realise a) how valuable it really is, and b) how taking a cash redemption for it may not be the best policy given the unsure financial future ahead of us!?

At the end of the day nobody can be certain of many factors, nobody knows how long they are going to live, whether the state pension will still exist, whether inflation will go mental and whether your investments will keep up with it. You can be fairly certain though on some things - how much money you'll need in retirement, that you are unlikely to make it to 90 (statistics), that you don't want to spend forever in an office...

If you keep detailed expenditure records for a couple of years then you can be pretty certain of your outgoings so that's one factor you can solidify. I am confident that £15k a year for me is comfortable. My biggest problem is average annual returns after inflation, all I can do here is try to use a conservative figure based on past performance.

 

 

Link to comment
Share on other sites

18 minutes ago, Starsend said:

At the end of the day nobody can be certain of many factors, nobody knows how long they are going to live, whether the state pension will still exist, whether inflation will go mental and whether your investments will keep up with it. You can be fairly certain though on some things - how much money you'll need in retirement, that you are unlikely to make it to 90 (statistics), that you don't want to spend forever in an office...

If you keep detailed expenditure records for a couple of years then you can be pretty certain of your outgoings so that's one factor you can solidify. I am confident that £15k a year for me is comfortable. My biggest problem is average annual returns after inflation, all I can do here is try to use a conservative figure based on past performance.

 

 

The missus and I spent £26k combined last financial year. £8.5k on rent and £4.5k on a season pass. Although was pretty frugal living by "normie" standards it was nowhere near as frugal as it could have been. £15k a year per head at current rates with no housing or transports costs seems like plenty of money if you know how to manage money and cashflow.

£300k yielding 4% plus state pension plus any other workplace pensions seems like the life of riley to me. The average 30 year old would bite your hand off for that kind of disposable

Link to comment
Share on other sites

1 hour ago, MrXxx said:

Harley, do you sell annuities for a living, as I haven't seen a better argument than this for buying one!...also, it should make people with a DB pension realise a) how valuable it really is, and b) how taking a cash redemption for it may not be the best policy given the unsure financial future ahead of us!?

No but I might buy some one day as part of a de-risked balanced portfolio when either rates go up, my ability to manage things goes down, I get sufficiently ill to get a good rate, approaching financial Armageddon, or I have loadsa money and want a quiet life.

Spot on about a DB versus DC pension .  Two totally different things when looking at risks  as well as returns.

Link to comment
Share on other sites

1 hour ago, A_P said:

The missus and I spent £26k combined last financial year. £8.5k on rent and £4.5k on a season pass. Although was pretty frugal living by "normie" standards it was nowhere near as frugal as it could have been. £15k a year per head at current rates with no housing or transports costs seems like plenty of money if you know how to manage money and cashflow.

£300k yielding 4% plus state pension plus any other workplace pensions seems like the life of riley to me. The average 30 year old would bite your hand off for that kind of disposable

That's pretty good going for two of you. I get by easily on £15k but I have no rent/mortgage and my children are now independent and costing me nothing other than birthdays/christmas. I live very well on that as well, a modest summer holiday and another cheap city trip or two. I run an older car. I do most household and some car maintenance myself which saves a lot of money. I even allow £100 a month to replace my car every 7 years or so and the boiler every 10.

All depends what type of person you are. A lot of the things I like doing cost very little, walking in the countryside, reading etc. Some people I know couldn't survive on £40k a year so they've got a lot of saving to do before they can retire.

Link to comment
Share on other sites

5 hours ago, Cattle Prod said:

I bought SPLT and a little LPLA in my HL ISA, fwiw

F*uck, when did I stop speaking English?!

thanks for this CP, i'm fully invested in gold/silver but after reading recent posts realised that I held no platinum. Thankfully no harm done I think as I've still time to get in before price moves.

Do you hold any etf/etc in copper or uranium? I'd like to get exposure to these metals also if possible.    

Link to comment
Share on other sites

5 hours ago, VeryMeanReversion said:

https://www.hl.co.uk/shares/shares-search-results/i/invesco-physical-markets-platinum-p-etc   

(Should have said ETC rather than ETF in my post)

Simply backed by physical with no leverage.

ETC charge is 0.39%. No platform charge with HL.

The more the bankers print and the more the governments lie about inflation, the more I like shiny stuff.

 

thanks very much VMR, both you and CattleProd have each mentioned HL ETC's which is great as I use the HL platform so shall take a look in more detail and do my own DD before buying.

btw would you know also of any worth-a-look copper or uranium ETC's? 

Link to comment
Share on other sites

Castlevania
34 minutes ago, JMD said:

thanks very much VMR, both you and CattleProd have each mentioned HL ETC's which is great as I use the HL platform so shall take a look in more detail and do my own DD before buying.

btw would you know also of any worth-a-look copper or uranium ETC's? 

For Uranium the closest proxy is probably Yellow Cake.

Link to comment
Share on other sites

Talking Monkey
10 hours ago, DurhamBorn said:

Its a conservative target CP and is only stage one in a cyclical bull,though i think the GDXJ might put on 50%+ during stage 1.A lot depends on how far the dollar goes down.A lot of miners give back on currency what they gain on gold,but investors tend to sentiment on gold price alone.Expect platinum to take over from gold at some point as well,it should double going forward.

For myself my aim is to re-deploy capital from miners into reflation stocks and defensives.Iv been buying back the likes of Imperial Brands.Sold at double where they are now and although they are disinflation stocks they should run when bonds are routed.A lot of capital will leave the junk bond market and if the US 10 year is giving 1/2% some should leak into bond proxies.Ignore the hyperbole about no future for them,iv heard that many times in the past.

Jury still out if we go straight to inflation or get a sharp deflation,but the mid term is clear.Inflation cometh.

How far do you see the dollar going down DB, also once equity markets really start falling do you expect the dollar to recover most of that fall

Link to comment
Share on other sites

Is there a chance pensions will go bust?

state pension deficit runs into £trillions

private pensions linked to investments.. 

Im worried investing in a private pension might not be that safe, and a state pension will not exist for me unless I’m penniless.. 

Link to comment
Share on other sites

18 minutes ago, macca said:

Is there a chance pensions will go bust?

state pension deficit runs into £trillions

private pensions linked to investments.. 

Im worried investing in a private pension might not be that safe, and a state pension will not exist for me unless I’m penniless.. 

This is a point discussed previously, and whether to take a work based pension early I.e at 55 with a penalty I.e. reduced sum. As someone else pointed out `A bird in the hand is worth two in the bush`!

Link to comment
Share on other sites

Not deflation or credit cycle related but I am tempted to chuck something on 3X DAILY LONG WHEAT (3WHL) as the weather changes as solar cycle 24 comes to an end and 25 starts, affecting crops/agriculture. (Nothing to do with CO2)

My question is, is losing it all the worst that can happen? I would only put an amount down I could afford to lose, of course, but don't want to end up owing money.

 

Link to comment
Share on other sites

Bobthebuilder

Just want to say thank you to all the contributers on this thread, it makes my day catching up here on whats happening. Some of the miners are running really well, nice big greens on Harmony and Yamana.

Link to comment
Share on other sites

25 minutes ago, Loki said:

Not deflation or credit cycle related but I am tempted to chuck something on 3X DAILY LONG WHEAT (3WHL) as the weather changes as solar cycle 24 comes to an end and 25 starts, affecting crops/agriculture. (Nothing to do with CO2)

My question is, is losing it all the worst that can happen? I would only put an amount down I could afford to lose, of course, but don't want to end up owing money.

 

Russia will be one of the largest winners in agriculture:

 

Putin predicts doubling of Russian agriculture exports by 2024

Sales of Russia’s agricultural products abroad are expected to reach $45 billion in the next five years, according to President Vladimir Putin.

That is “quite an achievable target,” Putin said on Thursday, during his annual Direct Line Q&A session.

“If, ten years ago, someone had told us that Russia would export agricultural products worth $25.7 billion-a-year, like in 2018, we would have laughed and said: “Thanks for your good-but-unfeasible intentions,” the Russian president said. But that has been already accomplished, he pointed out.

“We are striving to ensure that, by 2024, our agricultural exports reach $45 billion, and I think this is an attainable figure,” Putin said.

https://www.rt.com/business/462294-putin-agriculture-exports-russia/

Link to comment
Share on other sites

1 minute ago, Errol said:

Russia will be one of the largest winners in agriculture:

 

I have it at the back of my mind they were giving land to anyone willing to farm it - and the soil there is incredible. 

Although, at that latitude, if we do get a solar minimum of mention, it will be unfarmable. 

Link to comment
Share on other sites

Don Coglione
13 minutes ago, Loki said:

I have it at the back of my mind they were giving land to anyone willing to farm it - and the soil there is incredible. 

Although, at that latitude, if we do get a solar minimum of mention, it will be unfarmable. 

Having done quite a bit of business with Russia, I would be happy to invest in their potential. The tricky bit is how.

Link to comment
Share on other sites

bfm661C.jpg?itok=Yt6sT7TW

Negative yielding bonds just make no sense to me.  Your going to lend money to the Germans for 15 years, two potential economic cycles, and pay them money for the privilege?  Central banks can do nothing but dig the hole deeper until it collapses in on them.

Link to comment
Share on other sites

Inoperational Bumblebee
4 hours ago, Cattle Prod said:

I like uranium, but the only way I found to access URA is an IG spreadbet. Done fuckall for months, but I don't mind. Price is low. Went well today top

YCA (Yellowcake) and GCL (Geiger Counter Ltd) are the two I'm aware of.

Link to comment
Share on other sites

10 hours ago, JMD said:

Harley, do you use any particular etfs to get exposure to copper and uranium?

For UK listed ETFs I only know of COPA and none for uranium.  Maybe one listed on another exchange with a KID.  Else spread betting.  Never tried COPA myself though so bid/offer spreads, tracking error, etc all unkown.

Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.

  • Recently Browsing   0 members

    • No registered users viewing this page.

×
×
  • Create New...