Credit deflation and the reflation cycle to come.

[UnconventionalWisdom]

15 hours ago, Orpington_Madness said:

I am amazed at how unprepared the world is going to be for this, particular those professionals who should be prepared (just like 2008, i suppose though).

My boss is purchasing a house which doubles his remaining mortgage. Stated that he can sell in a few years and pocket the £300k increase. I told him no chance...FED just raised, ECB stopping QE. He has no idea about the effect monetary policy has had on the economy and asset prices. 

Most people just look at past performance and believe it'll always continue. Like you say, 2008 wasn't predicted by the masses and no one would have thought we would be about to have ZIRP and $0.5trillion in QE in the mid-2000's. 

[Band]

49 minutes ago, Gordie Lastchance said:

It's hellish to think how bad things have become when your target is 2012 prices plus RPI. For us to have been conditioned so much by raging house price inflation to be left thinking that that somehow is a low price/bargain point to get in at is nuts. The only reason I found ToS in about 2007 or so was that I had done a web search along the lines of "are house prices due to fall" after the wild rises up to that point. And to think I was bewildered by the insanity of prices back then... 

I'm not sure if it was DB who said something here or on ToS about coming events potentially providing a once-in-a-lifetime opportunity (or words to that effect) for investors generally or those looking more specifically at precious metals/mining.

Dare we hope that the opportunity of a lifetime also somehow be extended to take in property (for those wanting it as a home, not a business)?

Exactly i didnt buy because prices were fucken outrageous back then, now i'd jump straight in at pre HTB prices, just to put myself out of this misery and give the little en a settled place to live

[Barnsey]

32 minutes ago, Banned by HPC said:

Exactly i didnt buy because prices were fucken outrageous back then, now i'd jump straight in at HTB prices, just to put myself out of this misery and give the little en a settled place to live

For me it's a position of realism now, I've slowly begun to resign myself to this target, rightly or wrongly, of 2012 prices + rpi,  as I'm not convinced prices will fall much further in this new age of price manipulation. I'd love to be proved wrong of course! At that point, pre HTB and props, prices seemed to find a level which looking back doesn't seem too insane, especially compared to what happened in the 6 years since.

In the SE (outside the M25) it means further falls of around 30% on top of the current 10% drops. I don't bother telling anyone I know this as it gets immediately laughed off, banging on about this for years etc, until I show them things are actually on the downward trend finally. In my mid thirties so feel as though I'm going to have to jump in around 2020, don't think I'll be able to wait until 2025 even though prices may be much lower then due to remaining BTL and over leveraged home buyers buckling under high rates, a long term fix seems to be a way of riding things out, and buying somewhere I can see myself for a while to come no matter what.

Mainly in cash at the moment but have all my deflation event price points for certain stocks and PMs set up (nice chunk of Silver in bullion vault my main goal) should we get a nice drop prior to inflation kicking up rapidly. 

[Band]

21 minutes ago, Barnsey said:

For me it's a position of realism now, I've slowly begun to resign myself to this target, rightly or wrongly, of 2012 prices + rpi,  as I'm not convinced prices will fall much further in this new age of price manipulation. I'd love to be proved wrong of course! At that point, pre HTB and props, prices seemed to find a level which looking back doesn't seem too insane, especially compared to what happened in the 6 years since.

In the SE (outside the M25) it means further falls of around 30% on top of the current 10% drops. I don't bother telling anyone I know this as it gets immediately laughed off, banging on about this for years etc, until I show them things are actually on the downward trend finally. In my mid thirties so feel as though I'm going to have to jump in around 2020, don't think I'll be able to wait until 2025 even though prices may be much lower then due to remaining BTL and over leveraged home buyers buckling under high rates, a long term fix seems to be a way of riding things out, and buying somewhere I can see myself for a while to come no matter what.

Mainly in cash at the moment but have all my deflation event price points for certain stocks and PMs set up (nice chunk of Silver in bullion vault my main goal) should we get a nice drop prior to inflation kicking up rapidly. 

Good luck to you i was a matter of months away from buying around the time HTB was announced but then things went bonkers as the link below shows there were 20% rises in  a matter of month. This was my topic on HPC back then (for which i got banned) when the usual suspect tossers on there refused to accept prices were rising rapidly
https://www.housepricecrash.co.uk/forum/index.php?/topic/196430-prices-in-hampshire-are-booming/&page=1

Im needing a fall of 20% for houses currently priced at circa 280k, if i was looking in the 800k region i'd be fairly certain of this happening, but in this range i'm still going to be up against tossers looking to be landlords.

[DurhamBorn]

16 hours ago, Orpington_Madness said:

Hi

Long-term lurker from the other site.

Love this thread and have learned loads.  

Timing could be quite important with this - particularly if you are looking to buy a house (I'm thinking a good time would be towards the end of any deflation event - with as a reasonable amount of deposit and as long a fixed term mortgage than can be obtained)

It's all crystal ball stuff but it a deflation event isn't evident in the period Q4, 2018 - Q1, 2019, I would be concerned that we might go straight to reflation.

I was talking to my FD the other day and asked him if there was any macroeconomic contingency contained within the companies strategic planning. He asked me what I mean't and I floated a scenario where interest rates and inflation were to be getting on for double figures at which point he looked at me as if I had just landed from outer space. I am amazed at how unprepared the world is going to be for this, particular those professionals who should be prepared (just like 2008, i suppose though).

 

 

 

 

 

Crazy isnt it.People think it cant happen.I think inflation might be way over double figures by 2025.I agree that if i was buying a house id probably be looking to buy about a year after any big debt deflation,or perhaps 18 months depending on the speed of the falls.Id then look to fix for as long as possible.A 10 year fix where i could capital repay 10% a year would be perfect.

Companies now should be moving their debt over onto 10 year corporate bonds if they can.Most can be got away for 3.5%.The likes of Vodaphone have bonds at about 2% going out decades.

[Gordie Lastchance]

6 minutes ago, Barnsey said:

For me it's a position of realism now, I've slowly begun to resign myself to this target, rightly or wrongly, of 2012 prices + rpi,  as I'm not convinced prices will fall much further in this new age of price manipulation. I'd love to be proved wrong of course! At that point, pre HTB and props, prices seemed to find a level which looking back doesn't seem too insane, especially compared to what happened in the 6 years since.

In the SE (outside the M25) it means further falls of around 30% on top of the current 10% drops. I don't bother telling anyone I know this as it gets immediately laughed off, banging on about this for years etc, until I show them things are actually on the downward trend finally. In my mid thirties so feel as though I'm going to have to jump in around 2020, don't think I'll be able to wait until 2025 even though prices may be much lower then due to remaining BTL and over leveraged home buyers buckling under high rates, a long term fix seems to be a way of riding things out, and buying somewhere I can see myself for a while to come no matter what.

Mainly in cash at the moment but have all my deflation event price points for certain stocks and PMs set up (nice chunk of Silver in bullion vault my main goal) should we get a nice drop prior to inflation kicking up rapidly. 

If things go as DB has been charting (and his calls have been pretty near spot on so far, haven't they?), am I right in thinking your silver should set you up nicely for making your entrance? As for being laughed at - I hope you get the last laugh. I'm fed up of those who ladle on the debt to get the big house, and the top marque cars parked outside, scoffing at those - like me - who haven't. I'm so frightened of debt, but I feel like I'm the one being punished for trying to avoid it where I can. In the past, those with loans up to their eyeballs who looked down their noses at me wouldn't have done so for long, because the market would have taught them a few lessons. 

[DurhamBorn]

16 hours ago, Game_of_Homes said:

@DurhamBorn, I probably asked you this already on the ToS thread (apologies if so, I have a terrible memory!) but I want to understand your reasoning for thinking that the precious metals (and especially silver) are going to go up? What industries will they be used in, in the future that you see their value not just being about their intrinsic worth but also as a utility? Do you see more of a focus on PM in new technologies such as battery power increasing as new technologies are developed? Also, what do you think about palladium? I put some money into that a few years ago and it has done very well, increased by about 50% (wish I'd put more in). Do you see it rising more along with the other PMs?

Silver because of clean energy use at the same time as investment demand will explode.Gold as a store of value.We think the next cycle will be inflationary,and that people will slowly lose faith in Fiat over that cycle.There is a very real chance people might once again see gold and silver as the go to asset to protect from financial pain and savings destruction.

I think palladium and platinum will do very well.Sibanye have pretty much bought up the PGMs space and after Anglo-American they are now a very big player.They have a lot of debt,but if the Rand gold price can stay over 550k a kg they should be able to get the debt down,or if desperate do a streaming deal for something.They are risky,but for a risky play on the PGM sector they might 10 or 20 bag in a PM bull market.

[No Duff (troll)]

7 minutes ago, DurhamBorn said:

Companies now should be moving their debt over onto 10 year corporate bonds if they can.Most can be got away for 3.5%.The likes of Vodaphone have bonds at about 2% going out decades.

Wish they would so I could buy their stock (greater fool and all that).  We need a list, starting with VF!

[DurhamBorn]

15 hours ago, Dogtania said:

@Game_of_Homes. In leui of dB I will say one potential industry is solar which is clearly in the ascendancy. 

Also PM's in general are arguably undervalued at the moment?  In so far as the macro cycle being discussed here these commodities should benefit if we come into a massive amount of government sponsored/ encouraged infrastructure spending.  

I also go by the simple idea that different things like for example silver will have a day in the sun at some point whenever that will be.  

Thats exactly what we see ahead Dogtania.Solar will be huge going forward.Once battery tech gets better even more so.High end parts in telco networks also use silver in their switches and this is another area we see doing very well.This is all at the same time as investment demand should return.

[Band]

Just now, DurhamBorn said:

Thats exactly what we see ahead Dogtania.Solar will be huge going forward.Once battery tech gets better even more so.High end parts in telco networks also use silver in their switches and this is another area we see doing very well.This is all at the same time as investment demand should return.

Which companies are looking good for battery technology? Surely Lithium will be a good investment also

[DurhamBorn]

12 minutes ago, Gordie Lastchance said:

If things go as DB has been charting (and his calls have been pretty near spot on so far, haven't they?), am I right in thinking your silver should set you up nicely for making your entrance? As for being laughed at - I hope you get the last laugh. I'm fed up of those who ladle on the debt to get the big house, and the top marque cars parked outside, scoffing at those - like me - who haven't. I'm so frightened of debt, but I feel like I'm the one being punished for trying to avoid it where I can. In the past, those with loans up to their eyeballs who looked down their noses at me wouldn't have done so for long, because the market would have taught them a few lessons. 

Remember the market always hurts the most people possible.Once everyone who wants a BTL has one they get whacked.Once everyone has everything on debt,debt dries up.Its always been so and always will be.

[Gordie Lastchance]

8 minutes ago, Banned by HPC said:

Good luck to you i was a matter of months away from buying around the time HTB was announced but then things went bonkers as the link below shows there were 20% rises in  a matter of month. This was my topic on HPC back then (for which i got banned) when the usual suspect tossers on there refused to accept prices were rising rapidly
https://www.housepricecrash.co.uk/forum/index.php?/topic/196430-prices-in-hampshire-are-booming/&page=1

Im needing a fall of 20% for houses currently priced at circa 280k, if i was looking in the 800k region i'd be fairly certain of this happening, but in this range i'm still going to be up against tossers looking to be landlords.

I know I don't have any charts or evidence to offer, but what about the old saying "never say never" about prices coming down, and I mean crashing down? Say that to anyone who worships property as an asset on a balance sheet and they'll say "it only goes one way".

But if I said to you 15 years ago "I can foresee cars parking themselves" or "it'll not be long before you'll be able to hail a driverless car" you'd have laughed. If I'd said to you, say 50 years ago, they'll be eradicating polio, you'd have perhaps done the same. What if I said "one day not far away, you'll be able to control your central heating from your workplace"? Or that folk would be taking weekend breaks to South Africa from the UK? I could go on. But you get my drift, hopefully.

So, to those property worshippers who don't see a house as a home and who say "never" to a house price crash - I'd respond: "Never say never."

[DurhamBorn]

3 minutes ago, Banned by HPC said:

Which companies are looking good for battery technology? Surely Lithium will be a good investment also

I wouldnt invest in battery technology,i dont know who will win.I do know silver will be used in every solar system though.All commodities will be good investments in the next cycle,i just prefer silver.

 

[No Duff (troll)]

1 minute ago, DurhamBorn said:

Remember the market always hurts the most people possible.Once everyone who wants a BTL has one they get whacked.Once everyone has everything on debt,debt dries up.Its always been so and always will be.

I have enough grey hairs to have seen this over and over again.  Can't beat the long term.  No emotion.  No noise.  No tinkering.  Buy low sell high.  Simples. 

[Band]

7 minutes ago, Gordie Lastchance said:

I know I don't have any charts or evidence to offer, but what about the old saying "never say never" about prices coming down, and I mean crashing down? Say that to anyone who worships property as an asset on a balance sheet and they'll say "it only goes one way".

But if I said to you 15 years ago "I can foresee cars parking themselves" or "it'll not be long before you'll be able to hail a driverless car" you'd have laughed. If I'd said to you, say 50 years ago, they'll be eradicating polio, you'd have perhaps done the same. What if I said "one day not far away, you'll be able to control your central heating from your workplace"? Or that folk would be taking weekend breaks to South Africa from the UK? I could go on. But you get my drift, hopefully.

So, to those property worshippers who don't see a house as a home and who say "never" to a house price crash - I'd respond: "Never say never."

If someone had said to me in 2009 prices would be much higher in 2018 when wages would be at similar levels i'd have called them a thick as fuck landlord, sadly they'd have been right.

At the moment all im seeing is stagnation with kite flyers dropping prices a little, absolutely no signs of a crash for ordinary property.

I thnk when we see the back of May, Hammond and Carney things will change, but i also thought that about Blair/Brown + Gidiot/Dave.

[No Duff (troll)]

4 minutes ago, Gordie Lastchance said:

What if I said "one day not far away, you'll be able to control your central heating from your workplace"?

I would have asked why you still needed to be at work!

[Gordie Lastchance]

21 minutes ago, DurhamBorn said:

Remember the market always hurts the most people possible.Once everyone who wants a BTL has one they get whacked.Once everyone has everything on debt,debt dries up.Its always been so and always will be.

So maybe not just a lesson, but the mother of all lessons on its way? 

Here's hoping Barnsey, after being laughed off as he says, won't just be able to proclaim "never say never" - but "I told you so!"

[Castlevania]

35 minutes ago, Banned by HPC said:

Which companies are looking good for battery technology? Surely Lithium will be a good investment also

It’s far too early to tell. I have a very small amount in Johnson Matthey. I’d expect them to get smashed in a deflation though. And currently they make most of their money from catalytic convertors, which could well go the way of the dodo. Then again, it’s the sort of rather boring company I like. So yes do your own research, and don’t take the above as advice to buy, it’s not.

[NogintheNog]

1 hour ago, DurhamBorn said:

I wouldnt invest in battery technology,i dont know who will win.I do know silver will be used in every solar system though.All commodities will be good investments in the next cycle,i just prefer silver.

 

Just out of interest DB, what about the PM 'streamers' as opposed to the miners. Wheaton Precious Metals, Franco Nevada Corporation being the most obvious?

[DurhamBorn]

17 minutes ago, NogintheNog said:

Just out of interest DB, what about the PM 'streamers' as opposed to the miners. Wheaton Precious Metals, Franco Nevada Corporation being the most obvious?

Probably good investments,though they are already quite highly rated.In a gold bull though i prefer the miners because they own the ounces in the ground.At this stage of a cycle they price gold miners shares on profits,but in a gold bull you start to get people talking about ounces in the ground.Some of the miners have market caps of only $20 an ounce in the ground (and thats reserves,not resources).If gold went to $2000 and then the market started to value miners at $200 an ounce in the ground we see the potential.

[Thorn]

What do people think will happen with derivatives.

 

[PatronizingGit]

11 hours ago, Talking Monkey said:

I didn't realise folks had their faith in India, I can't see it myself this time around as well, maybe a decade or so from now

India is an odd one. I think people assume its similar in many ways to China, and yet it is one of the worlds largest debtor nations, with a more or less permanent trade deficit, quite the opposite to China. I assume that means they have a lot less global clout than China. No real oil reserves. I believe they have thorium, or can produce thorium, if ever that takes off. 

 

Their 'plan' is probably to export as much of their surplus population to Europe/N America/Australia as possible, and get more in remittances. Most these 'trade' talks May does with india seem more about 'labour mobility' (ie, filling UK posts with Indians)

[Majorpain]

46 minutes ago, Thorn said:

What do people think will happen with derivatives.

I can guarentee you no one really knows.

There are millions of transactions and trillions of $'s worth in the system, its impossible to 100% predict how they will unwind.  You would be better off spinning a roulette wheel!

[Bobthebuilder]

Great thread.

Its a real "light in the tunnel" moment for me thinking about the next cycle. I find i am still a bit focused on what has happened since 2008, and feel i need to sell some stuff that has done well since then and allow that to drip feed into some reflation stocks, PMs., etc.

As others have said, Im always learning, dont have much to add to the thread, but i will try.

Thank you.

Bob.

[Thorn]

41 minutes ago, Majorpain said:

I can guarentee you no one really knows.

There are millions of transactions and trillions of $'s worth in the system, its impossible to 100% predict how they will unwind.  You would be better off spinning a roulette wheel!

It seems to be somewhere between 12 and 542 Trillion dollars. 

The whole lot seems to be just bets. Bets that the prices of things might go up or down or whatever.

Its like the real economy is a wee shop. And the Derivatives market is a bookies next door.

Full of lads having a smoke and betting on the price of Freddos  next Wednesday.