Credit deflation and the reflation cycle to come.

[spygirl]

On 16/08/2019 at 22:03, DurhamBorn said:

Funny enough thats the sort of amount of companies i like in my dividend portfolio,20 to 25.I do go up to 7% sometimes,but thats as im building it and as it settles down 5% tends to be max.Iv always been pretty much 100% equity,but im now having to think about retirement.I retired twice already once in my 30s and once in my early 40s,but the difference then was i always knew i could get another job if disaster struck,or if i simply chose to,as i did last year.Going forward a few years and that gets a harder option.Its likely once my portfolio is built out again il have around 30% to 40% in other assets.Silver,gold,foreign stocks,ETFs etc.

Im also thinking about buying a holiday home on the coast,Bridlington,Scabbie or Whitby.Main reason is im going to have quite a bit spare over what i need to produce an income i want.I saw some nice semi's etc a couple of weeks ago in Brid around the £130k mark,and once houses take a bath id be tempted.Plus we are affiliated to the area through spygirl and he reckons once all the probates flood the market will we get some bargains.

Holiday lets will are going to get taxed high. At mo, they are basically untaxed.

There are few holiday lets in scabby. Theres a few long running holiday rentals n all but tgey are more flats apartments than ye olde captain rest.

Brid is more flophouses n caravans.

Its whitby where the dumb money has flowed in. Id reckon 50% of last 15 years transaction have been people buying holiday lets  - We missed out on btl, lets not miss holiday lets....

Holiday lets have been very heavily sold. Its an idiots market at current prices.

However....

You cant make money if youve any finance on them. You only get 10-15 weeks let. And you need a reliable cleaner for each changeover. 

Its just dumb eomen, taking out equity or redundo or inheritance or all 3, putting down 50% cash to buy a place, so they can indulge seaside decorating.

My guess is there will be an unholy exit of whitby as the tax are changed - pribably 2x c tax or apply business rates.

 

[spygirl]

On 16/08/2019 at 20:19, Castlevania said:

The big shift has been post financial crisis.   Nimbler specialists without the rubbish infrastructure and costs of the incumbents ate a lot of their lunch.

Edit: it’s a similar thing with equity broking for small investors. My old man used to use Barclays. In the 90’s their share dealing service was one of the biggest in the country. Paid far more than I do now a trade, but did have his own personal broker at the end of the line who to be fair did well for him (got my old man to buy into the industrial miners back in the late 90’s). I get the impression the only people who still use Barclays are their historic customers.

Not nimble, its software.

FinSec was last bastion in ptivate sector of layer after layer of warm, expensive bodies.

Automated now.

Its why i think London and regional South is a nassive sell as FinSec was only game in town.

[spygirl]

On 16/08/2019 at 13:47, DurhamBorn said:

I was the highest grade manufacturing technician at Glaxosmithkline,they had grades from 4 to 1,i was a 1.In affect a 1 set up and ran the plant making the active drugs.The other grades worked on packaging machines etc.We would have 2 guys me and someone else on a job making probably £2million a batch of drug.One mistake whole batch lost.I never lost a batch.The job was for QA,i said i wasnt a QA,but they werent bothered,they said they thought my experience was what they wanted.They have a new plant making medical products,not drugs,but wipes etc for surgery,so similar.Setting up and running a pharma plant is similar to building an engine.Its all about understanding getting everything set right,not making mistakes etc.I worked on Zantac and in a room about 30 foot by 30 we knocked out a billion pounds worth of drug a year.(thats making the tablets).

The number of people seitched on, able to follow complex processes and use some sense is pretty low in the uk.

Its even lower in china.

If you have an automated, high volume andor high value product line then skimping around on saving pennies or using piotr from  gdansk to save 20-30k a year on salary cost is fucking nuts. Any company pissing around that fuckwittery deserves to go under. See 2 sisters chicken.

[spygirl]

On 17/08/2019 at 11:43, DurhamBorn said:

When i started work,many of the guys cared about finance.Not to the levels we do,but still they understood the world.The saved,they invested,they worked out how much they needed on top of their pension to go early etc.Everyone,and i mean everyone i knew when i was 20 wanted to pay the mortgage off.They didnt pay them off early,but they didnt extend them.I saw the big change when Blair got in.I think once Brown exploded benefits (and of course stopped you getting them if you had capital) then slowly people stopped bothering about saving.The didnt need to.Its a bit like the Dodo not needing to learn to fly as there was no predators on the island.Once predators turned up in the shape of hungry sailors they were wiped out.

 

It was avoiding debt.

Uk mass mortgage is a pretty recent creation  - 60s 70s.

The mortgage market was riddled with funny money via endowments. Before that people would try and knock a few years of the mortage, trying to get it cleared in 10 or 15 years time - that was a huge saving with irs at 5-10%

Endowment encouraged people to carry on for the full term, being promused magic return at the end. It was a lowscale ponzi, magic returns stopping dead late 90s.

Then the combined idiocy of both io mortgages and working age equity withdrawl.

Io ooo is mainly concentrated in london/se.

Equity drawdown - consolidate those debt with one, lower payout.... is every where.

It appears to be chronic with 50+ people working in public sector esp LAs n nurses. Id guess its a combination of job safety and mathematical stupidity and dumb belief housing only goes up.

I know a few nurses who, despite working 20 years, have seriously well paying jobs for their skills have spent every penny and all the equity in the house. They have some dumb ideas of what housing goes for - i show them the land registry figure which show that house prices are still at nominal rates as 2005ish.

[Harley]

24 minutes ago, spygirl said:

Holiday lets have been very heavily sold. Its an idiots market at current prices.

I had a renovation opportunity which I would have turned into a holiday let (a high level Rural Retreats type thing).  Would have done most of the work myself.  Didn't make sense, even ignoring the financing costs.  Only made sense if the property value increased and there are better and more liquid investment opportunities out there.  And yes, the tax holiday is an obvious target, especially to be seen as doing something about locals being priced out of the market.

[Harley]

3 minutes ago, spygirl said:

It was avoiding debt.

I remember regularly walking through a German airport back in the day and seeing folk walk well out of their way to avoid the credit card promotion stand.  I would then get to the UK and it was like some orgy!

6 minutes ago, spygirl said:

i show them the land registry figure which show that house prices are still at nominal rates as 2005ish.

Hope you stuck to GBP as no amount of medical training would have helped them otherwise!

[spygirl]

On 18/08/2019 at 08:31, A_P said:

One thing to consider with this article is it has a major flaw.

HTB purchasers don't get a mortgage at 95% LTV. Government loans them 20% (40% in London) so they get a 75% LTV mortgage. After the five years when they remortgage most are, or are planning to roll the HTB element into the new mortgage. Lower home prices help them to some degree as their 20% equity loan is now smaller.

Oh god! That makes so much sense! Ive been an idiot not buying a new build!!

Except its not easy or cheap. And htb is a financial disaster you need 10% wage or house inflation above 5% for the 5 years to make it work.

And house builders have to keep prices low.

All that has happened with htb is mr n mrs htb have bough a new build, which was put up 20%+ negating the 'help'.

In the 5 years, mrs htb has had kids, so gone pt or stopped working. Or using expensive childcare.

Mr htb has not had real wage increase for 5 years.

The 5 years end, they cannot remortgage house is valued less than they paid, income fown 40% so fail mmr, stuvk on svr plus the equity loans needs to be paid back.

Anf tgphe new estate has 20% social housing so you have scum riding around on mbikes with silencer removed.

 

[Harley]

https://www.dividenddata.co.uk/dividendyield.py?market=ftse100&sort=yield&order=1

https://www.dividenddata.co.uk/dividendyield.py?market=ftse250&sort=yield&order=1

Sort by descending dividend yield and you could be in the supermarket reduced isle (where I know a few of you like to hang out)!

Only thing is, will there be further reductions, and which ones are going to make you ill!

[Harley]

Posting here might stop me doing something silly (or not!) but when I see things like this I do get itchy.  So some sages here might help to put me right....

And defo not investing advice but this seems to be getting a bit more common in the FTSE, from a technical only POV.....

RIO is currently yielding 6.8%.  I know nothing about it's fundamentals (so it may be a dog, about to be bought, about to slash its dividend, run out of stuff, or whatever) but look at the weekly chart:

Momentum is in the crapper, although it may not be over as it's only recently hit the oversold zone, MACD has yet to play out fully, and the monthly momentum is only just starting to turn down.  Personally, I'll do more research and maybe wait a bit longer but if I bought now, a fall in yield to a still happy 5% would be 27%.  That buy would be a fire and forget buy and hold for a long term annuity like income portfolio where capital value matters somewhat less than return (the alternatives being to actively and repeatedly trade to generate and liquidate a series of total returns or just spread, at a lower yield, in a fund).  A 27% price fall (everything else being equal) would take the share price to £2975.  Sure that could go down a lot further, and indeed has done so in the past for this cyclical stock.

And it's not been alone in the past (but may have further to fall) and any of these could turn down again at any time (especially as they've had a few false rallies in the past):

So sages, not about RIO per se, but is this kind of thought process just plain daft for someone who's seeking income?

PS: At least I didn't panic (but boy was I stressed) and try and play catch-up by buying a whole load of stuff in 2016-17!

[Castlevania]

Understand what you’re buying. Rio is an industrial miner and as such is a hugely cyclical stock. In a severe global downturn that dividend would be slashed hard.

[Harley]

16 minutes ago, Castlevania said:

Understand what you’re buying. Rio is an industrial miner and as such is a hugely cyclical stock. In a severe global downturn that dividend would be slashed hard.

Sure, but not about Rio per se (as I tried to stress).  Plus in a severe global downturn we're all effed!

So not the same as giving your capital to an annuity provider (hopefully not Equitable Life as was?) but instead you retain capital with a commensurate increase in risk on the return (which could go either way). 

Minimum, surely such an approach (not RIO per se) is worthy of consideration as part of a portfolio, in current times of low to negative interest rates, if it suits the investor's objectives, risk tolerance, etc.

[Castlevania]

Ah you mean just buying a portfolio of dividend paying blue chips as an alternative to buying an annuity? That’s what I’d do based on where interest rates and annuity yields currently are.

[JMD]

On ‎16‎/‎08‎/‎2019 at 01:32, sancho panza said:

I use the data on investing.com.There are loads of free sites with good relaiable data.I do pay for some research as I'm time poor-kids/work etc and it savesa lot of time but so much is free .Sites like the one you link are a waste of cash imho.Just charging people for an opinion-pass/fail.What I'll pay for is analysis but as DB has said,this thread has thrown up some better analysis than a lot of people are paying for.

If your a chartist then I beleive stockcharts.com might be worth a sub but best ask someone like @Harley.I use the charts on investing.comI pay the sub on investing.com but only because I feel guilty with the amount I use it.£40 or so p.a.Marketwatch has some great free data.

 

Thanks SP, I was looking for a way to compare, for example selected co's within a sector, by comparing their financials (debt, cash flow, etc). Investing.com looks great and certainly has all this info. (and oodles more besides), although I admit I don't see which debt figure is the most relevant figure to use, i.e. on the site Vodaphone 'total liabilities' is 80billion Euros of debt, but the press talk of 28billion Euros so am bit confused which figure to use. The 'stock screener' looks very useful to help filter interesting co's - do you use that tool at all?  

 

[Harley]

22 minutes ago, Castlevania said:

Ah you mean just buying a portfolio of dividend paying blue chips as an alternative to buying an annuity? That’s what I’d do based on where interest rates and annuity yields currently are.

Sort of yes.  I'm looking for a range of set-ups along the risk/reward spectrum from annuities upwards.  I'm looking for a spread to support my floor and upside requirements.  Such an approach might be good for an upside fund.

[janch]

On 18/08/2019 at 00:14, DurhamBorn said:

Going to blow my own trumpet here.

When this thread started one of the key themes was how well US treasuries would do,especially for sterling investors.I didnt see any other calls out there for that to be part of someones portfolio.

We have spent a lot of time on gold and the miners lately,rightly so as they have made fantastic profits,and a lot of work was put into that.

However

https://www.hl.co.uk/shares/shares-search-results/i/ishares-iv-plc-usd-treasury-bond-20-year

Thats a fantastic return.Remember when the call to buy was made almost everyone was saying the bond bull was over and and they would collapse.

 

Now so far we have done very well,profits have far exceeded losses as we slowly enter inflation shares.BUT the next year is going to be very very dangerous,.The job now is to ensure families wealth isnt wiped out.There is nothing clever about losing our money last,that just means we join the end of the queue at the soup kitchen.

 

I wish I'd bought some !

I was just starting out on investing after sitting on the sidelines for the past 10+ years so started with company shares in blue-chip reflation stocks which I understood.  I also started reading around the subject and learning as much as I could from this site and all the info here plus other recommended stuff and also watching quite a bit on Max Keiser too.

He did a brilliant programme last Saturday about the exponential rise in bonds and how it would all end in tears.  If I were invested I think I would be selling now as when things turn a lot of people's paper profits will likely be wiped out as there will be no-one to sell to.

I think I mentioned on here that what put me off investing was the money I lost in Marconi shares when they plummeted to zero.  I'd only bought them in the first place on a MSM tip because my father had worked in Plessey (which turned into Marconi).  I had no idea about structuring a portfolio.  I had no understanding of anything macro which thanks to this site and to watching the economy for years I now have a little knowledge of.  It's a horrible feeling when you watch something plunging.  I was working a the time and looked at shares on Ceefax when I got home from work.  Those were the days

[Sasquatch]

21 minutes ago, janch said:

I wish I'd bought some !

I was just starting out on investing after sitting on the sidelines for the past 10+ years so started with company shares in blue-chip reflation stocks which I understood.  I also started reading around the subject and learning as much as I could from this site and all the info here plus other recommended stuff and also watching quite a bit on Max Keiser too.

He did a brilliant programme last Saturday about the exponential rise in bonds and how it would all end in tears.  If I were invested I think I would be selling now as when things turn a lot of people's paper profits will likely be wiped out as there will be no-one to sell to.

I think I mentioned on here that what put me off investing was the money I lost in Marconi shares when they plummeted to zero.  I'd only bought them in the first place on a MSM tip because my father had worked in Plessey (which turned into Marconi).  I had no idea about structuring a portfolio.  I had no understanding of anything macro which thanks to this site and to watching the economy for years I now have a little knowledge of.  It's a horrible feeling when you watch something plunging.  I was working a the time and looked at shares on Ceefax when I got home from work.  Those were the days

That's bringing back memories! Bought some lastminute.com and stepstone shares in the dotcom bubble. Luckily only about £500 in each. Think I got about £50 back at the end! Couple of others in my office did the same and it proved to be classic water cooler chat....Put me off shares for a long time and in hindsight was a good lesson in not following the advice of the MSM.

[Harley]

@JMD and @sancho panza just had a look at investing.com and a lot to like over Morningstar.  Thanks.  One thing I like about Morningstar however is it ages a company's borrowings.  I'll try using investing.com as my first point of call however, especially the screener.  On that, are the screening options any better with the paid option?  No that they are any better on Morningstar.  Or does paying just get you ad free (and faster)?

PS: Whoops, problems with the completeness of the screener!

[janch]

13 hours ago, Sugarlips said:

...........keep owning their current mortgaged home through this next cycle do they go for the cheapest longest fixed rate they can find now (and dig out a basement for the silver stash) or will this take 3-5 years before it starts to run?

I love the idea of a basement for the silver  No good for me I live in a 2nd floor flat and my stash is tiny.

I would definitely do a fixed low rate for as long as possibe if I were looking for a mortgage..........

[Harley]

39 minutes ago, janch said:

I'd only bought them in the first place on a MSM tip because my father had worked in Plessey (which turned into Marconi). 

Funny, I had a downer on them ever since my Dad visited them and laughed how they still had keys to the executive bathroom, he being a fellow no good maverick like me!

[janch]

9 hours ago, Barnsey said:

..............you see news articles every day now about negative rate mortgages in Denmark and near zero elsewhere in EZ.

Max Keiser was talking about this last Saturday and stated he thinks Denmark will be the new Iceland, comparing the situation to the Icelandic banks which collapsed..........

[Harley]

2 minutes ago, janch said:

I love the idea of a basement for the silver  No good for me I live in a 2nd floor flat and my stash is tiny.

Be careful y'all.  We moved rented houses and I'm still worried I left a stash of £20's behind somewhere!  Especially as I found out the guy buying it had put in a new bathroom!

[JMD]

On ‎17‎/‎08‎/‎2019 at 22:07, sancho panza said:

I don't know about you,but these days when people at works ask me what I think,I jsut tell thm I don't have a view or it could go up/down or down/up. The explanations to non believers are painful and slow on the whole and that's before you get onto fractional reserve lending and why a debt deflation is inevitable.

 

SP, I guess it is important for people to maintain their belief or faith in the economic experts. However the so called educated media class don't help - Michael Gove was pilloried for suggesting (macro) experts pretend to know more than they actually do know. 'Pillory' being an apt word/device here because historically the general populace have usually reacted negatively against new ideas - but then again the tragic and precarious social position of the masses usually has required them to be ultra cautious and suspicious of 'the new'... I suppose human nature doesn't change, indeed the inscrutable Chinese will tell you that there is no such thing as progress - only cycles that repeat.

I also suspect that the type of questions you are typically asked frequently confuse symptoms with causes. Again, the self serving media don't help - for example Donald Trump is portrayed as being some form of terrible aberration and stain to the status quo. However, for me Trump is a sort of broken, sad book-end (unlike the media I don't see any drama to the man, he just being the type of bogey man figure Adam Smith would have detested) - and merely marking the end-game of this particular phase of capitalism and politics. Surely the much more interesting question is who and what type of politics will follow Trump? 

[DurhamBorn]

9 hours ago, Barnsey said:

There are some absolutely incredible finds over in Germany for the reflation trade, but perhaps a bit early yet, let's see what happens when the DAX gets hit hard and GBPEUR reverses course. Must admit I'm frothing at the mouth to start averaging in to some ideas but think the next few months is going to be very treacherous so holding still. Look forward to further discussion on this.

Iv got a few reall value plays for the next cycle,some real good stuff in Germany,i need to get to work once i get sorted on a few things.

[Harley]

GBP might be strengthening here so that'll help any foreign stock hunts if so!

[DurhamBorn]

6 hours ago, spygirl said:

Holiday lets will are going to get taxed high. At mo, they are basically untaxed.

There are few holiday lets in scabby. Theres a few long running holiday rentals n all but tgey are more flats apartments than ye olde captain rest.

Brid is more flophouses n caravans.

Its whitby where the dumb money has flowed in. Id reckon 50% of last 15 years transaction have been people buying holiday lets  - We missed out on btl, lets not miss holiday lets....

Holiday lets have been very heavily sold. Its an idiots market at current prices.

However....

You cant make money if youve any finance on them. You only get 10-15 weeks let. And you need a reliable cleaner for each changeover. 

Its just dumb eomen, taking out equity or redundo or inheritance or all 3, putting down 50% cash to buy a place, so they can indulge seaside decorating.

My guess is there will be an unholy exit of whitby as the tax are changed - pribably 2x c tax or apply business rates.

 

I was shocked at the difference in price from Whitby to Brid,double in a lot of cases.I actually think Brid is decent value.No good for locals of course as no decent jobs,but for a holiday home it wouldnt take much of a fall to make it look good.Like you say if i was doing it il look for around 10 weeks a year let out,that would cover the costs.Not sure how people find cleaners for Bay etc.