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The next financial crisis has already begun


One percent

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58 minutes ago, Admiral Pepe said:

Would love to see 60%, but the £ has lost so much value and will continue to do so, that I think we will see something closer to 30% drops on average across the country.

I read last month the Goldman are coming to town. Potentially launching a market beating rate. Not sure I would want to put my money with them though. Having read what they've done in the US on the personal market, will be interesting to see their loan rates here.

I didn’t they were lending to consumers? I assumed that they’re taking in deposits as a cheap way to fund their investment banking activities. Then again with bank ring fencing, I’m not sure if they can do what I just wrote. So maybe they are planning on lending to consumers.

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20 minutes ago, Castlevania said:

I didn’t they were lending to consumers? I assumed that they’re taking in deposits as a cheap way to fund their investment banking activities. Then again with bank ring fencing, I’m not sure if they can do what I just wrote. So maybe they are planning on lending to consumers.

Yes they are lending to consumers under the brand Marcus. Been out in the US for a while now, launched to staff last month in the UK and will be rolled out sometime this month apprently, but not much left of september. Not sure if their plan is lend in the UK immediately but I would imagine that's their goal.

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4 hours ago, spunko said:

Let's have some house price predictions for posterity. I'm going to go with -60% drops across the UK on average between now and 2021.

Using Leicester as an example ,average hosue in LE2 is £216,000

Leicester Average salary £23,000  which very much goes with my expereince.

Take away the £50bn plus fiscal deficit and most of the govt jobs-including mine-would get a haircut.So average might eventually get lower.

Anyway 3 times 23k is £69k 4 times £92k

60% of £216k  gives us £86k.Although i reckon that's best case scenario for the eventual bottom.

Last one bottomed at 2.5 times  or £58k

3 hours ago, Admiral Pepe said:

Would love to see 60%, but the £ has lost so much value and will continue to do so, that I think we will see something closer to 30% drops on average across the country.

I read last month the Goldman are coming to town. Potentially launching a market beating rate. Not sure I would want to put my money with them though. Having read what they've done in the US on the personal market, will be interesting to see their loan rates here.

If £ drops then you'll get substantial food/fuel  price inflation,meaning many won't have much spare for mortgage credit.

I can't see a way they won't tank and once it gets going the market will oversell imo long before it starts moving back up.

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2 hours ago, Admiral Pepe said:

Yes they are lending to consumers under the brand Marcus. Been out in the US for a while now, launched to staff last month in the UK and will be rolled out sometime this month apprently, but not much left of september. Not sure if their plan is lend in the UK immediately but I would imagine that's their goal.

Love it.This is like the credit market equivalent of Apple launching a new tablet...there'll be queues around the corner.

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2 minutes ago, UnconventionalWisdom said:

I would like to see this split out between btl and OO. Got to be a big reason for the increase since the trough

No figures.

Id guess a good 1/3 would be BTL and another 1/3 HTB.

Id guess there's about 20k/mortgages a month in the 'traditional' sense.

I keep saying - anyone 60+ trying to sell a house is more likely to leave in a box. And not a removal one.

 

 

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10 minutes ago, sancho panza said:

Love it.This is like the credit market equivalent of Apple launching a new tablet...there'll be queues around the corner.

https://www.bloomberg.com/news/articles/2018-06-29/why-goldman-sachs-is-lending-to-the-middle-class

Quote

“It’s not our role to be preachy, but it is also not our role to try and sell a drink at a bar to somebody who shouldn’t be having the next drink,” Talwar said at the conference.

Going by the article they're loaning money to people who are paralytic

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41 minutes ago, sancho panza said:

Using Leicester as an example ,average hosue in LE2 is £216,000

Leicester Average salary £23,000  which very much goes with my expereince.

Take away the £50bn plus fiscal deficit and most of the govt jobs-including mine-would get a haircut.So average might eventually get lower.

Anyway 3 times 23k is £69k 4 times £92k

60% of £216k  gives us £86k.Although i reckon that's best case scenario for the eventual bottom.

Last one bottomed at 2.5 times  or £58k

If £ drops then you'll get substantial food/fuel  price inflation,meaning many won't have much spare for mortgage credit.

I can't see a way they won't tank and once it gets going the market will oversell imo long before it starts moving back up.

This has already happened with the £ devaluation, the little cafe / greasy spoon I frequent has pushed up their prices by 20% in the last 18 months. It's not rent, rates or staffing costs that have done this, but wholesale food and energy costs.

A wholesale bakers I visited a couple of weeks ago was making a 6% net margin, which is dreadful for a small business. Turnover was static for the last 2/3 years but their energy costs are jumping by 18%'ish in October which will almost wipe out their margin completely.

They didn't think their customers would accept price rises so have to keep their prices at current levels otherwise they would move their business elsewhere. Vans, catering equipment, the unit itself are all pretty old, so this company is now boxed in to a death spiral as far as I can see. Selling £500k of bread and muffins per annum and can't make a profit, crazy.

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1 hour ago, sancho panza said:

Using Leicester as an example ,average hosue in LE2 is £216,000

Leicester Average salary £23,000  which very much goes with my expereince.

Take away the £50bn plus fiscal deficit and most of the govt jobs-including mine-would get a haircut.So average might eventually get lower.

Anyway 3 times 23k is £69k 4 times £92k

60% of £216k  gives us £86k.Although i reckon that's best case scenario for the eventual bottom.

Last one bottomed at 2.5 times  or £58k

If £ drops then you'll get substantial food/fuel  price inflation,meaning many won't have much spare for mortgage credit.

I can't see a way they won't tank and once it gets going the market will oversell imo long before it starts moving back up.

Well my point is more that £ has lost a lot of its value already particulary of late. It's a different world now. We're competing with joint salaries, props, immigration, worldwide investors etc.  imo, those days of basing a house worth of a single local salary are long gone. Will be interesting if we actually get a true price discovery, however, given the previous actions I'm assuming that won't be allowed.

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4 hours ago, azzuri82 said:

This has already happened with the £ devaluation, the little cafe / greasy spoon I frequent has pushed up their prices by 20% in the last 18 months. It's not rent, rates or staffing costs that have done this, but wholesale food and energy costs.

A wholesale bakers I visited a couple of weeks ago was making a 6% net margin, which is dreadful for a small business. Turnover was static for the last 2/3 years but their energy costs are jumping by 18%'ish in October which will almost wipe out their margin completely.

They didn't think their customers would accept price rises so have to keep their prices at current levels otherwise they would move their business elsewhere. Vans, catering equipment, the unit itself are all pretty old, so this company is now boxed in to a death spiral as far as I can see. Selling £500k of bread and muffins per annum and can't make a profit, crazy.

I think this demonstrates the difference between a business and a well run business...its profitability should have been monitored and alternative actions taken before it found itself in a corner...either changing its business model or getting out (and in to something else) whilst it was worth something.

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Talking Monkey
3 hours ago, Dogtania said:

Meanwhile the Wizards at JP Morgan apparently pencil in 2020 as showtime.  Won't be worse than recent previous corrections and sounds like US stocks weather the coming better then both PM and energy.

http://fortune.com/2018/09/13/jpmorgan-next-financial-crisis/

The 2020 date as when it kicks off has been written a few times here and there, do folks think the wheels will stay on until then or will we kick off sooner

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1 minute ago, Talking Monkey said:

The 2020 date as when it kicks off has been written a few times here and there, do folks think the wheels will stay on until then or will we kick off sooner

We all thought the wheels would fall off in 2008 but they managed to kick the can and keep kicking it. 

FWIW, my view is that they will blame brexit. “See what you all did.  We told you, we told you”. So, anytime after we leave. 

Guess it won’t happen then. xD

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5 hours ago, azzuri82 said:

This has already happened with the £ devaluation, the little cafe / greasy spoon I frequent has pushed up their prices by 20% in the last 18 months. It's not rent, rates or staffing costs that have done this, but wholesale food and energy costs.

A wholesale bakers I visited a couple of weeks ago was making a 6% net margin, which is dreadful for a small business. Turnover was static for the last 2/3 years but their energy costs are jumping by 18%'ish in October which will almost wipe out their margin completely.

They didn't think their customers would accept price rises so have to keep their prices at current levels otherwise they would move their business elsewhere. Vans, catering equipment, the unit itself are all pretty old, so this company is now boxed in to a death spiral as far as I can see. Selling £500k of bread and muffins per annum and can't make a profit, crazy.

I think margin compression will be  asignificant feature of the next few years.There are so many little shops/small businesses in the UK scratching by on wafer thin profits,that tiw on't tkae much to see a lot really struggling.Particularly as the internet is a huge force pushing price deflation.

Estate agents are a case in point,Letting fees income dissappearing, transactions down....................................office costs,utilities,staff costs rising.

 

 

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1 hour ago, MrXxx said:

I think this demonstrates the difference between a business and a well run business...its profitability should have been monitored and alternative actions taken before it found itself in a corner...either changing its business model or getting out (and in to something else) whilst it was worth something.

You're right. They didn't have an up-to-date set of accounts for the business so in reality it was impossible to value what had been happening to it for the last 18 months since March 2017.

They wanted £80k for the business, £30k goodwill and £50k for the ovens/freezers/equipment (which were valued at £40k in the accounts). When I asked whether these ovens & walk-in freezers could be moved elsewhere, I was told it'd be very difficult, perhaps impossible to do so. This said to me that despite the kit being top of the range when it was purchased in 2012, it was more or less worthless to anyone outside that particular business. 

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15 minutes ago, sancho panza said:

I think margin compression will be  asignificant feature of the next few years.There are so many little shops/small businesses in the UK scratching by on wafer thin profits,that tiw on't tkae much to see a lot really struggling.Particularly as the internet is a huge force pushing price deflation.

Estate agents are a case in point,Letting fees income dissappearing, transactions down....................................office costs,utilities,staff costs rising.

 

 

This is how I think you'll see a major crash in commercial property prices - a lot of people that keep the wheels turning in a small business for the benefit of a their employees will throw in the towel when it becomes impossible to make even the pittance they were previously.

Businesses will have to risk pushing up prices and perhaps lose volume, or keep prices stable and lose margin.

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1 minute ago, azzuri82 said:

This is how I think you'll see a major crash in commercial property prices - a lot of people that keep the wheels turning in a small business for the benefit of a their employees will throw in the towel when it becomes impossible to make even the pittance they were previously.

Businesses will have to risk pushing up prices and perhaps lose volume, or keep prices stable and lose margin.

I absolutely 100% agree with you on CRE.

I look at my local High st.Sandwich shop.Current sucker paying £12,000 rent and £6,000 in rates.Utilities say £3,000 (I'm guessing).Wage for the guy £20,000.Wage for a part time helper £10,000.All in costs circa £40,000.The two things he can cut back on easiest without affecting his family eating is his help and his rent.

So many of these LL's think they'll find someone else.There'll be a lot of squealing about it,but jsut like the big CRE players with Debenhams and HoF,their choice in reality is quite stark.Either take the hit or find someone to pay their desired rent.The latter is easier than the former.

CRE companies like HMSO/Land Sec/Intu rolled over sometime ago.The writing is on the wall for tehm.If John lewis can't make a profit on the anchor discount retns they get,then how is some small franchise flogging £10 burgers?

 

Decl-short Land Sec

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7 minutes ago, azzuri82 said:

This is how I think you'll see a major crash in commercial property prices - a lot of people that keep the wheels turning in a small business for the benefit of a their employees will throw in the towel when it becomes impossible to make even the pittance they were previously.

Businesses will have to risk pushing up prices and perhaps lose volume, or keep prices stable and lose margin.

I saw it close up in 2008-10. Friend who had just-viable quite large 60 ish employees business pushed into administration by the bank although that's another story. They were basically "keeping going" not really making a profit but could continue trading, until they suddenly couldn't. I remember a late night anguished phone call we can't make the payroll tomorrow :( 

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2 minutes ago, sancho panza said:

I absolutely 100% agree with you on CRE.

I look at my local High st.Sandwich shop.Current sucker paying £12,000 rent and £6,000 in rates.Utilities say £3,000 (I'm guessing).Wage for the guy £20,000.Wage for a part time helper £10,000.All in costs circa £40,000.The two things he can cut back on easiest without affecting his family eating is his help and his rent.

So many of these LL's think they'll find someone else.There'll be a lot of squealing about it,but jsut like the big CRE players with Debenhams and HoF,their choice in reality is quite stark.Either take the hit or find someone to pay their desired rent.The latter is easier than the former.

CRE companies like HMSO/Land Sec/Intu rolled over sometime ago.The writing is on the wall for tehm.If John lewis can't make a profit on the anchor discount retns they get,then how is some small franchise flogging £10 burgers?

 

Decl-short Land Sec

Landlords of smaller commercial properties in Scotland have been helped somewhat by the 'Small Business Bonus Scheme' - the SNP introduced this around 7 years ago and it means that if the rateable value of a property is less than circa £12k, you don't have to pay rates whatsoever - assuming you / your company has no other commercial properties (as it's the combined rateable value that's used for exemption).

I know that if this scheme weren't in place, we would never have taken on office space as we did in 2012 - it's helped foster a startup culture in the cities. A lot of the floors in bigger office blocks have been sub-divided into smaller 200-800 sq. feet offices that are exempt from paying rates - obviously the local councils hate it, and smaller commercial landlords love it.

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5 minutes ago, Funn3r said:

I saw it close up in 2008-10. Friend who had just-viable quite large 60 ish employees business pushed into administration by the bank although that's another story. They were basically "keeping going" not really making a profit but could continue trading, until they suddenly couldn't. I remember a late night anguished phone call we can't make the payroll tomorrow :( 

Sometimes growth isn't always good thing in business. A bunch of people I've spoken to have said that once their businesses got to the stage where there more more than 15-20'ish employees, it just became too much of a pain in the arse, was no longer 'fun' and you're then having to employ a bunch of middle-managers to do a shit job of running your business, whilst watching your margins disappear.

 

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Just now, azzuri82 said:

Sometimes growth isn't always good thing in business. A bunch of people I've spoken to have said that once their businesses got to the stage where there more more than 15-20'ish employees, it just became too much of a pain in the arse, was no longer 'fun' and you're then having to employ a bunch of middle-managers to do a shit job of running your business, whilst watching your margins disappear.

 

Yes that was exactly how it happened

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14 minutes ago, azzuri82 said:

Landlords of smaller commercial properties in Scotland have been helped somewhat by the 'Small Business Bonus Scheme' - the SNP introduced this around 7 years ago and it means that if the rateable value of a property is less than circa £12k, you don't have to pay rates whatsoever - assuming you / your company has no other commercial properties (as it's the combined rateable value that's used for exemption).

I know that if this scheme weren't in place, we would never have taken on office space as we did in 2012 - it's helped foster a startup culture in the cities. A lot of the floors in bigger office blocks have been sub-divided into smaller 200-800 sq. feet offices that are exempt from paying rates - obviously the local councils hate it, and smaller commercial landlords love it.

It also happens in London. A mate of mine had a small business (mini Holland killed it but that’s a different story) and the council decided that he didn’t have to pay rates in the last couple of years. 

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38 minutes ago, Funn3r said:

I saw it close up in 2008-10. Friend who had just-viable quite large 60 ish employees business pushed into administration by the bank although that's another story. They were basically "keeping going" not really making a profit but could continue trading, until they suddenly couldn't. I remember a late night anguished phone call we can't make the payroll tomorrow :( 

Cash flow is the issue in the bad times and this is where fractional reserve lending comes in.When banks are taking losses,they're incentivized to foreclose on the liquid as they have something to foreclose on.

Lookat Debenhams,what would the LL's sell off?Most of the assets are intangibles

34 minutes ago, azzuri82 said:

Landlords of smaller commercial properties in Scotland have been helped somewhat by the 'Small Business Bonus Scheme' - the SNP introduced this around 7 years ago and it means that if the rateable value of a property is less than circa £12k, you don't have to pay rates whatsoever - assuming you / your company has no other commercial properties (as it's the combined rateable value that's used for exemption).

I know that if this scheme weren't in place, we would never have taken on office space as we did in 2012 - it's helped foster a startup culture in the cities. A lot of the floors in bigger office blocks have been sub-divided into smaller 200-800 sq. feet offices that are exempt from paying rates - obviously the local councils hate it, and smaller commercial landlords love it.

https://www.gov.uk/apply-for-business-rate-relief/small-business-rate-relief

Think it's part of this scheme.No business rates if you're under £12k rateable value .Quite right.

Business rates are an appallingly counterproductive tax imo.

Still wouldn't help teh local sandwich bloke much.Just means that's 50 less sandwiches per week to break even

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2 minutes ago, sancho panza said:

 

https://www.gov.uk/apply-for-business-rate-relief/small-business-rate-relief

Think it's part of this scheme.No business rates if you're under £12k rateable value .Quite right.

Business rates are an appallingly counterproductive tax imo.

Still wouldn't help teh local sandwich bloke much.Just means that's 50 less sandwiches per week to break even

Didn't realise this was now UK-wide. Excellent initiative overall. 

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1 minute ago, azzuri82 said:

Didn't realise this was now UK-wide. Excellent initiative overall. 

I agree.The irony with business rates was that they're  locally collected and centrally spent.Bizarre.

It's also a massive disincentive to try and scale a business when you move from your garage you suddenly get hit with two huge bills.

I know a few soliticitors and accountants who now work from home.Work less hours to make the same moeny.Why not?

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