Credit deflation and the reflation cycle to come.

[No Duff (troll)]

On 10/07/2018 at 23:17, No Duff said:

TBH no. 

My floor and upside funds are invested for the long term.  The floor to maintain purchasing power to fund basic retirement expenses (capital protection) and the upside further along the risk curve to generate income to fund any projected deficit in the floor fund and, upon retirement, to provide additional income for a "nicer" retirement (income generation).

In that context, taking profits is not relevant and I'm slow to realise losses (where I then use subjective criteria).  I do however ensure no one holding exceeds 5% of the fund value and also hold ETFs from a number of providers to further mitigate risk.  Same for the various accounts themselves that make up the two funds.  The Permenant Portfolio underlying the floor fund requires annual rebalancing to the 25% asset class allocations so that also clears out profits and losses.

Your question is more relevant for my trading fund.  I use technicals to time entries and exits so no need for any other profit taking rule save the money management rule that no trade to exceed 2% of the trading fund value.  Note, I'm too old and maybe wise to day trade so go for trades of typically a few weeks so things are more gentlemanly!

Just me, many ways to approach this, DYOR, etc.  Main thing is to ensure profit and loss taking is part of an overall trading strategy, including money management, etc.

Best thing I ever did trading wise was to sit down with pad, pen and coin and work out what percentage trade sizes would keep me relatively safely in the game.

 

Per my earlier post, you can research all this on the web such as Monevator.  A book that has been widely referenced at least on TOS is WICOs one.  Good on the concepts of floor and upside if I recall correctly.  All requires a bit if a steep learning curve but worth it.  Alternatives are ignorant luck or a financiall advisor.  But as I said today Agent, I doubt anyone knowing Dr Bubb is that much of a beginner!

[DurhamBorn]

5 hours ago, Agent ZigZag said:

I was reviewing the global dollar index over a ten year period and the peak and troughs and sideways trading remarkably shadows the prime Central London residential housing market. The recent uptick in the dollar index over the last 3 months could help explain improved residential and commercial activity that was struggling in the first quarter.The dollar appears to be at an inflection point again and at a guess if it turns down to 86 could take 8months. To reach the 2008 levels at 76ish would take a lot longer or require a fast and deep decent to get there. So my question is to Durham Born as to whether he has done any further and more recent macro cross checks in this field as a lot of the stars would now be lining up.

Yes,iv actually been looking at the dollar a lot mainly due to the mining complex.Iv now deployed all capital into that sector that is going in.I do see down to 86 likely,but i also see a picture of the dollar falling to the 74 area in late 2019.Thats not a given at all,but i am going to keep a close eye on things as it will have a huge affect on if/when i sell my PM miners.94% bulls on the dollar last week,7% bulls on silver.Commercial net short on gold below 100k contracts.An inflection point should be very close as those sorts of numbers are at extremes.

 

[No Duff (troll)]

5 hours ago, MrXxx said:

And if none of this makes any sense to you (no offense intended...just in case ;~) ), then I can recommend this book that I have just read (Lustig, Y. 2016. Saving & investing for retirement. Pearson. ISBN:9781292129297)...not just for the olduns, and now I can understand what you are all talking about...only problem now is that I have to go back and reread all 68 pages of this folder again! :-)

 

It certainly scores well with the reviewers.  There are many books out there but usually each one gives one great idea so the more you read the better.  For me the big take away from say WICOs book was the floor/upside idea but I had to read a lot more to better cover my needs, such as which asset allocation models to use.  Your suggested book sounds like it may provide a good intro.

I like the book's apparent idea of talking about life objectives first.  So many people just seek to maximise retirement wealth but it is just a means to an end, so define the end(s) first.  Like a business, a business plan does not start with a financing plan.  The financing plan supports the objectives.

This is really key because you need to know what you want (including detailed estimates of expenditures) in order to work out how much you need, in order to know how much risk to take getting there.

For example, if you work out your retirement objectives require a £500k pot in year 1 of retirement and you essentially have that now, you do not need to be very far along the risk curve, especially given sequential risk.  And there are many risk/reward ratios from that down to a new worker with no pot.

Just one example of the complexity of the subject and the need to read and think.  For example, I used discounted cash flow techniques on my (various) retirement budgets and in doing so know the required rates of return and inflation to validate if I'm on track.

Each to their own but there is some commonality in approach or at least checklist.

[MrXxx]

4 hours ago, Barnsey said:

Never did I think I'd see the Daily Mail featuring a story at the top of their financial website championing the need for a 30% average fall in house prices rather than "freezing" as suggested the other day by the IPPR, focusing in on the UK house price to earnings ratio. My how the tables have turned vs a couple years ago! Comments aren't too happy about it though 

http://www.thisismoney.co.uk/money/mortgageshome/article-5942931/House-prices-need-fall-30-reach-fair-value-not-freeze-5-years.html

Additional signs that banks are becoming increasingly careful of what's ahead, got a Lloyds Banking Group amended T&Cs for my credit card today, noticeable changes from September:

- If in persistent debt (or at risk of falling into), we can increase your minimum payment to help reduce your credit card balance (help indeed )

- Notice period of such changes reducing to 30 days

- If you make an additional payment before your direct debit is due, your DD will no longer be reduced

- You can still add another cardholder, but they will no longer be able to give us instructions about your account

Fact: a home is not a premium product (like a iphone), its an essential, and the housebuilders know it.Alongside this as social housing has declined its status has been exacerbated. 

Fact: as housebuilders only need to put in footings to maintain their planning status there is no cost (& many benefits) to landbanking.

Fact: the 30 year average of 4.2 average income is meaningless as now days both partners work fulltime whereas before it was only one...i predict a new average will become set between 4.2 to 8.4 average local salary.

[Agent ZigZag]

18 minutes ago, DurhamBorn said:

  PM miners.94% bulls on the dollar last week,7% bulls on silver.Commercial net short on gold below 100k contracts.An inflection point should be very close as those sorts of numbers are at extremes.

 

Holding the miners at present is certainly not for the faint hearted as they are taking a bit of a hiding although I must add holding within a reasonable range. First Majestic Silver however is against that trend and doing rather well

[Yellow_Reduced_Sticker]

14 minutes ago, MrXxx said:

Fact: a home is not a premium product (like a iphone), its an essential, and the housebuilders know it.Alongside this as social housing has declined its status has been exacerbated. 

Fact: as housebuilders only need to put in footings to maintain their planning status there is no cost (& many benefits) to landbanking.

Fact: the 30 year average of 4.2 average income is meaningless as now days both partners work fulltime whereas before it was only one...i predict a new average will become set between 4.2 to 8.4 average local salary.

I bloody well HOPE NOT!

[MrXxx]

31 minutes ago, No Duff said:

It certainly scores well with the reviewers.  There are many books out there but usually each one gives one great idea so the more you read the better.  For me the big take away from say WICOs book was the floor/upside idea but I had to read a lot more to better cover my needs, such as which asset allocation models to use.  Your suggested book sounds like it may provide a good intro.

I like the book's apparent idea of talking about life objectives first.  So many people just seek to maximise retirement wealth but it is just a means to an end, so define the end(s) first.  Like a business, a business plan does not start with a financing plan.  The financing plan supports the objectives.

This is really key because you need to know what you want (including detailed estimates of expenditures) in order to work out how much you need, in order to know how much risk to take getting there.

For example, if you work out your retirement objectives require a £500k pot in year 1 of retirement and you essentially have that now, you do not need to be very far along the risk curve, especially given sequential risk.  And there are many risk/reward ratios from that down to a new worker with no pot.

Just one example of the complexity of the subject and the need to read and think.  For example, I used discounted cash flow techniques on my (various) retirement budgets and in doing so know the required rates of return and inflation to validate if I'm on track.

Each to their own but there is some commonality in approach or at least checklist.

I think the first step and take home message of this book (and WICAOs approach) is formulate a two tiered plan based on essential costs and luxury cost making sure your design is 100% likely to meet the former, and then decide on approach (active/passive) depending on your understanding and desired involvement to dictate the level of the latter....either way is good I.e. no right way, just make sure you make provision.

[MrXxx]

4 minutes ago, Yellow_Reduced_Sticker said:

I bloody well HOPE NOT!

You and me both my friend, but I think ( like in other aspects of economics) that the market/theory is about to reset itself...of course, I could be talking a load of old boll@cks and there would be no one more pleased than to have all of you on here remind me of this for the next 10 years! :-)

[No Duff (troll)]

2 hours ago, Agent ZigZag said:

Holding the miners at present is certainly not for the faint hearted as they are taking a bit of a hiding although I must add holding within a reasonable range. First Majestic Silver however is against that trend and doing rather well

Maybe all your buying is working!  Bob Hoye sounding positive, if not for USD gold itself.  Others joining in too.  Maybe time to dabble to pay off me hols.

[No Duff (troll)]

2 hours ago, MrXxx said:

I think the first step and take home message of this book (and WICAOs approach) is formulate a two tiered plan based on essential costs and luxury cost making sure your design is 100% likely to meet the former, and then decide on approach (active/passive) depending on your understanding and desired involvement to dictate the level of the latter....either way is good I.e. no right way, just make sure you make provision.

Yep, that's why I liked the Permenant Portfolio for the floor (essential) fund.   

The historic drawdown, etc is second only to one other allocation model. 

https://portfoliocharts.com/portfolio/permanent-portfolio/

Also a fire and forget so I can concentrate on the upside (luxury) fund using my high div payers. 

Other asset allocation models available!

The trading fund stops me being silly with the two other funds. It lets me vent my animal spirits!  I used to be a decent part time trader but want a bit more of a quieter and fuller life now.

It really helps to know what each fund is for, required risk profile, etc.  No confusion, just ring fencing.  The three funds form a pyramid, inverted to start but gradually flipping as you approach retirement and the floor fund forms the wide base.

And I was really bowled over doing the detailed number crunching.  It told me, subject to some sane assumptions, I should be OK but also I could afford to average in to the required positions over quiet a long period of time, having stupidly been in cash too much but worried now might not be the best time to rush in.  Removed a lot of guesswork. 

Typical though, do this sort of stuff professionally but not at home - doctor heal thyself!  I probably have saved/made more money doing this than any investing.  A bit like in so many areas - the big bucks are with the strategy, not the tactics.

All quiet empowering and a million light years away from a so-so financial planner with the old "bonds according to your age" type mantras and "I have just the funds for you" nonsense.

 

[Bricks & Mortar]

3 hours ago, Yellow_Reduced_Sticker said:

30 year average of 4.2 average income is meaningless as now days both partners work fulltime whereas before it was only one...i predict a new average will become set between 4.2 to 8.4 average local salary.

I don't think so.  30 years is roughly the period where most homes were sold to 2 wage couples.  If you want couples buying houses for one to stay home and keep house, you need to go back to the 70's and earlier. 
I'd say 4.2 IS the average of a house sold to a couple with 2 wage earners.   I haven't figures in front of me, but I think I recall averages between 2.8 and 3.5 for the period before 1979, depending on just how many years you took in.  And, it wouldn't double for 2 wage earners.  You'd have to deduct for an extra car, childcare, missing out on the reduced gear at Waitrose, and darning your own socks in-house.

 

[Funn3r]

1 hour ago, Bricks & Mortar said:

 I haven't figures in front of me, but I think I recall averages between 2.8 and 3.5 for the period before 1979, depending on just how many years you took in.  
 

Yes anecdotally I remember it being at the time all over the news when it finally went over 4 and everyone omg won't end well

[MrXxx]

27 minutes ago, Funn3r said:

Yes anecdotally I remember it being at the time all over the news when it finally went over 4 and everyone omg won't end well

Yes, I think you are right (B&M) about the times factors...I was trying to remember when I wrote the last post. As for the couple's vs single salary, 30 yrs ago was early days for the majority of women and their careers (and equal pay!), I think the next 30 will be a different story. Also, overheads/living expenses are lower for a couple so why not 3.5 times salary times two?...I do hope you are right and I am wrong though!

[Bricks & Mortar]

1 hour ago, MrXxx said:

overheads/living expenses are lower for a couple so why not 3.5 times salary times two?

3.5 was the multiple for a couple when one stayed home.  Overheads/living expenses are MUCH lower for a couple when one stays home.  Can paint the house.  Shop for bargains.  Cook meals.  Mind kids... All tax free.

If a couple were buying a house on 3.5 times, and one was staying home... then to do it with both working would mean twice income, less all the savings that come from one partner making the home their job.


 

[MrXxx]

Yes 3.5 joint where the wife/mother had a poorly paid, unskilled, part time job earning pin money. Do you think it is really that much cheaper now for one person to stay at home with all the financial distractions such as Amazon et al or to have the opportunity of doing a full-time job earning the same (and often more) than her partner...I think the system will reset to maximum affordability whilst a home is an essential (& alternatives are limited/restricted) OR the majority come to their senses and refuse to pay half a mil (3 bed in my neck of the woods) or a lifetimes earnings for a pile of bricks...the latter now reflects my line of thinking.

[DurhamBorn]

17 hours ago, Agent ZigZag said:

Holding the miners at present is certainly not for the faint hearted as they are taking a bit of a hiding although I must add holding within a reasonable range. First Majestic Silver however is against that trend and doing rather well

Some are doing ok.I buy from two lists,one list is stocks with good technicals where the shares have been outperforming.The other list i call my rubber band list.Those are miners that have suffered the biggest falls.Given the indicators i use are at extreme's i have now deployed all the capital i am going to in certain miners.I gave a list of most of them higher in the thread.Probability is in my favour,not certainty.Everyone (well 93%) are bearish on gold,but i see maybe $1450-$1570.

The PM sector is a very different animal to most and not for anyone who cant stomach seeing stocks sitting in the red for long periods.

[Lavalas]

Here’s a map based website detailing some PM fundamentals. Click on any location to see details of the mine, drilling results etc...

http://intel.rscmme.com/

[Funn3r]

21 hours ago, MrXxx said:

Fact: a home is not a premium product (like a iphone), its an essential, and the housebuilders know it.Alongside this as social housing has declined its status has been exacerbated. 

Fact: as housebuilders only need to put in footings to maintain their planning status there is no cost (& many benefits) to landbanking.

Fact: the 30 year average of 4.2 average income is meaningless as now days both partners work fulltime whereas before it was only one...i predict a new average will become set between 4.2 to 8.4 average local salary.

Have to disagree with that last one at least anecdotally. I reckon bloke working while wifey stayed at home ironing was finished by end of the 1950s. At least I don't recall families where only one worked. Maybe just because I grew up in poor area and everyone had to pitch in. 

[sancho panza]

40 minutes ago, Funn3r said:

Have to disagree with that last one at least anecdotally. I reckon bloke working while wifey stayed at home ironing was finished by end of the 1950s. At least I don't recall families where only one worked. Maybe just because I grew up in poor area and everyone had to pitch in. 

I grew up in 3 bed semi land in Leicester.A lot of my mate's mums didn't work but lots of us were culturally used to Mum being at home.

[sancho panza]

14 hours ago, Bricks & Mortar said:

3.5 was the multiple for a couple when one stayed home.  Overheads/living expenses are MUCH lower for a couple when one stays home.  Can paint the house.  Shop for bargains.  Cook meals.  Mind kids... All tax free.

If a couple were buying a house on 3.5 times, and one was staying home... then to do it with both working would mean twice income, less all the savings that come from one partner making the home their job.


 

The costs of the second working parent are huge.It surprises when people bother even though the maths says'no'

4 hours ago, DurhamBorn said:

Some are doing ok.I buy from two lists,one list is stocks with good technicals where the shares have been outperforming.The other list i call my rubber band list.Those are miners that have suffered the biggest falls.Given the indicators i use are at extreme's i have now deployed all the capital i am going to in certain miners.I gave a list of most of them higher in the thread.Probability is in my favour,not certainty.Everyone (well 93%) are bearish on gold,but i see maybe $1450-$1570.

The PM sector is a very different animal to most and not for anyone who cant stomach seeing stocks sitting in the red for long periods.

Great advice.I'll remember that and quote it to myself when times are tough.

4 hours ago, Lavalas said:

Here’s a map based website detailing some PM fundamentals. Click on any location to see details of the mine, drilling results etc...

http://intel.rscmme.com/

Super resource Lav,many thanks

[spygirl]

19 hours ago, Bricks & Mortar said:

I don't think so.  30 years is roughly the period where most homes were sold to 2 wage couples.  If you want couples buying houses for one to stay home and keep house, you need to go back to the 70's and earlier. 
I'd say 4.2 IS the average of a house sold to a couple with 2 wage earners.   I haven't figures in front of me, but I think I recall averages between 2.8 and 3.5 for the period before 1979, depending on just how many years you took in.  And, it wouldn't double for 2 wage earners.  You'd have to deduct for an extra car, childcare, missing out on the reduced gear at Waitrose, and darning your own socks in-house.

 

No.

Up til the late 80s, the max mortgage was 3x main earner + 1x other wage.

The banks + BS abused the whole earning multiples to shit from mid 90s.

Stupid really.

No point lending to at 4x household income to Mr +Mrs NoKidsYet.

As soon as the kids start popping out then youve a huge gap in the earnings to be replaced.

Unless the household income can afford a nanny - and youd need to pay a nanny ~30k/y, so need to earn, after tax, ~50k, just for the nanny.

95% of people will be getting by on 1 salary whilst kids the are preschool. So Mr + Mrs  average 2 kids, 2 years between kids, will have a 10 year gap. And even then the lower earner is slightly constrained by school kids - making their tea, etc.

BoE MMR rules to recognise this.

Mr n Mrs MedianWage is looking at a mortgage of ~100k .

 

 

[Lavalas]

7 hours ago, DurhamBorn said:

Some are doing ok.I buy from two lists,one list is stocks with good technicals where the shares have been outperforming.The other list i call my rubber band list.Those are miners that have suffered the biggest falls.Given the indicators i use are at extreme's i have now deployed all the capital i am going to in certain miners.I gave a list of most of them higher in the thread.Probability is in my favour,not certainty.Everyone (well 93%) are bearish on gold,but i see maybe $1450-$1570.

The PM sector is a very different animal to most and not for anyone who cant stomach seeing stocks sitting in the red for long periods.

Some of my PMs are getting a little battered at the minute but perversely I’m really ok with it. My first two PM investments were/are very successful, up +40% each in a matter of months. A small amount of skill, maybe, a huge amount of luck, definitely. Now I’m being taught patience, and to not watch the tape, and to really think about how to pick, when to hold or sell etc. 

As ever, thanks everybody for their help.

[Band]

4 hours ago, spygirl said:

No.

Up til the late 80s, the max mortgage was 3x main earner + 1x other wage.

The banks + BS abused the whole earning multiples to shit from mid 90s.

Stupid really.

No point lending to at 4x household income to Mr +Mrs NoKidsYet.

As soon as the kids start popping out then youve a huge gap in the earnings to be replaced.

Unless the household income can afford a nanny - and youd need to pay a nanny ~30k/y, so need to earn, after tax, ~50k, just for the nanny.

95% of people will be getting by on 1 salary whilst kids the are preschool. So Mr + Mrs  average 2 kids, 2 years between kids, will have a 10 year gap. And even then the lower earner is slightly constrained by school kids - making their tea, etc.

BoE MMR rules to recognise this.

Mr n Mrs MedianWage is looking at a mortgage of ~100k .

 

 

MMR was meant to have sorted the housing market a few years ago, more HPC bollocks.

 What about grandparents taking care of the kids after school which is the norm these days?

[spygirl]

51 minutes ago, Banned by HPC said:

MMR was meant to have sorted the housing market a few years ago, more HPC bollocks.

 What about grandparents taking care of the kids after school which is the norm these days?

Balls.

MMR came into play in April 2014 - years ago.

Put a massive stop on OO taking loon mortgages out.

The housing transaction carried on bumping along as IO BTL idiots were still buying /making themselves bankrupts with IO BTL mortgages.

Now IO BTL mortgages have skidded to a halt - the last 2 months - you are seeing the full effect.

The fulle ffect of MMR qnd S24 are now in play.

The situation fotr IO BTL is going to get worse and worse as the tax changes take place over the next 2 years.

 

[Band]

1 hour ago, spygirl said:

Balls.

MMR came into play in April 2014 - years ago.

Put a massive stop on OO taking loon mortgages out.

The housing transaction carried on bumping along as IO BTL idiots were still buying /making themselves bankrupts with IO BTL mortgages.

Now IO BTL mortgages have skidded to a halt - the last 2 months - you are seeing the full effect.

The fulle ffect of MMR qnd S24 are now in play.

The situation fotr IO BTL is going to get worse and worse as the tax changes take place over the next 2 years.

 

Only problem with these theories is prices on the ground are much more mental than even last year. And i do agree with you they should make a difference but they havent.