durhamborn

Deflationary collapse and the Reflation Cycle to Come.

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12 hours ago, StrugglingMillennial said:

Comments on the news today were about retail and the surplus of retail space. So many things keep falling into place, we all know its been wrong for a long time but its finally coming apart. 

Jim Puplava was saying the same thing about the US a few weeks back.  Also mentioned how all the retail junk bonds were coming due in the next few years and hard to refinance at such previously low rates.  Bang bang.

Edited by Fence

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11 minutes ago, Fence said:

Jim Puplava was saying the same thing about the US a few weeks back.  Also mentioned how all the retail junk bonds were coming due in the next few years and hard to refinance at such previously low rates.  Bang bang.

Yes, companies have loaded on debt like there's no tomorrow at rates they believed to be permanent. But instead of growing OUT of that debt, they doubled down. New Look with a ******ing billion pound debt. Jesus Fitzgerald Christ. Their whole inventory must be worth less than that. 

The cynic in me thinks that directors in these companies knew exactly what they were doing and planned their exit on a 24/36 month time horizon to leave with a bulging purse and a forsaken business. Mini private equity.

The other side of this situation is that companies like Shell borrow to pay dividend instead of investing in research and exploration. I made it a rule to not spend a penny on a company that does this (other than a startup whose finances are getting back in shape, but I don't see any).

 

 

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49 minutes ago, payoyo said:

I apologise for my use of words, it was rather tabloid-esque. I meant that some councils have been making some questionable purchases to chase income yield without due care for the longer term consequences.

 

For example in https://www.thetimes.co.uk/article/councils-spend-2-7bn-on-risky-assets-in-property-buying-frenzy-w7bn8l065 :

 

Of course, there is a New Look in this centre, as well as GAME, Card Factory etc...

emergency change of use to housing ?

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34 minutes ago, pmgdawau said:

Now the Council is the rates collector, landlord, and collecting domestic council tax from most of the workers at these properties.  They may be motivated to reduce the rents if the deflation bites. 

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1 hour ago, Bricks n' mortar said:

Now the Council is the rates collector, landlord, and collecting domestic council tax from most of the workers at these properties.  They may be motivated to reduce the rents if the deflation bites. 

There's a complicated conflict of interest. As I understand it they finance these purchases at around 2.5% using loans from the Public Works Loan Board, the rate is linked to Gilts. Presumably, the purchases are made at a yield of around 8%, which can quickly go bad if you have a lot of voids. It's like the council's own version of BTL.  :rolleyes:

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23 hours ago, Funn3r said:

I can't believe people still buy cards from shops. Now that everyone talks to everyone else 24x7 on the internet I think card-buying is definitely becoming less relevant. If I am wrong then also consider that surely all Card Factory needs are some graphic design artists, a computer, and a printer - surely that is a very low entry barrier for a competitor.

The opposite I think. 

Getting a card or a handwritten letter now counts for much more if it's someone you care about.

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1 hour ago, payoyo said:

There's a complicated conflict of interest. As I understand it they finance these purchases at around 2.5% using loans from the Public Works Loan Board, the rate is linked to Gilts. Presumably, the purchases are made at a yield of around 8%, which can quickly go bad if you have a lot of voids. It's like the council's own version of BTL.  :rolleyes:

Who pays the business rates if there's a void? I'd find it amusing if you had one part of the council chasing another part of the council for payment...

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3 hours ago, Errol said:

Self explanatory:

US-financial-stress-index-v-2-year-yield

Snap!  Its interesting that the current decline started about the same time Japan went to negative interest rates, i wonder if a return to a positive Japanese interest rate would have the opposite effect?

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18 hours ago, Slimline said:

Filled your car with fuel or insured it recently ?

My car insurance is cheaper today than it was 10 years ago.

Even with the advent of meerkats - get a quote off the comparison site, ring them up, ask for another 20% off that to get my business or I'll go elsewhere.  I got 15% last time.

They need the cashflow and when things are tight you sort out the things that are real right now not the things that might happen. 

I wouldn't be surprised to see news reports of increased numbers of uninsured drivers - that might be a canary in the coal mine.

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13 hours ago, pmgdawau said:

emergency change of use to housing ?

Hah, I was going to say something similiar but thought I was being too far fetched!  Or for some other emergency purpose?

Edited by Fence

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4 hours ago, Lord D'arcy Pew said:

Followed by an emergency change back to retail?

That's going to need a lot of plasterboard!

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9 hours ago, stuckmojo said:

Yes, companies have loaded on debt like there's no tomorrow at rates they believed to be permanent. But instead of growing OUT of that debt, they doubled down. New Look with a ******ing billion pound debt. Jesus Fitzgerald Christ. Their whole inventory must be worth less than that. 

The cynic in me thinks that directors in these companies knew exactly what they were doing and planned their exit on a 24/36 month time horizon to leave with a bulging purse and a forsaken business. Mini private equity.

The other side of this situation is that companies like Shell borrow to pay dividend instead of investing in research and exploration. I made it a rule to not spend a penny on a company that does this (other than a startup whose finances are getting back in shape, but I don't see any).

 

 

(Can I just say I haven't stopped smiling thinking about this one word used so well.

Fitzgerald. )

Pure Magic stuckmojo.

And I also agree.

 

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9 hours ago, stuckmojo said:

Yes, companies have loaded on debt like there's no tomorrow at rates they believed to be permanent. But instead of growing OUT of that debt, they doubled down. New Look with a ******ing billion pound debt. Jesus Fitzgerald Christ. Their whole inventory must be worth less than that. 

The cynic in me thinks that directors in these companies knew exactly what they were doing and planned their exit on a 24/36 month time horizon to leave with a bulging purse and a forsaken business. Mini private equity.

The other side of this situation is that companies like Shell borrow to pay dividend instead of investing in research and exploration. I made it a rule to not spend a penny on a company that does this (other than a startup whose finances are getting back in shape, but I don't see any).

 

 

the directors don't think of this themselves, they'll have used the same firms for advice that will then come in as administrators or business change/recovery, if they're lucky

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On 11/01/2018 at 8:57 PM, StarsEnd said:

Gold has now made up the lost ground, just took its time but it always gets there in the end.

1980 to 2000 we had positive real interest rates. You could keep up with or exceed inflation by sticking your money in a savings account.

 

RPI index was 100 in 1987 so 1980 would have been lower. Currently 275.

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/chaw/mm23

Yellow stuff was $850 in 1980, currently $1320 or so.

That's Shedlocks point.

9 hours ago, Castlevania said:

Who pays the business rates if there's a void? I'd find it amusing if you had one part of the council chasing another part of the council for payment...

If property is empty then the LL.Normally commercial LL's get round this by getting fake charities to rent it and claim the exemption.

Worth noting business rates are collected by council but given to Treasury.

So council taxpayers getting lined up to be hosed.

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4 minutes ago, pmgdawau said:

Karl Denninger seeing a repeat of 2007 online advertising and also divergence in high yield credit (don't understand that bit, if someone could explain)

https://market-ticker.org/akcs-www?post=232779

Nice to see Denninger writing again.He stopped a while back and I got out of the habit of checking.

He was pretty spot on before and during 08 particularly in his link ups with the likes of MArk hanson aka Mr Mortgage who called Lehman a long time before they went pop.

 

Thanks for posting

 

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2 minutes ago, Sancho Panza said:

Nice to see Denninger writing again.He stopped a while back and I got out of the habit of checking.

He was pretty spot on before and during 08 particularly in his link ups with the likes of MArk hanson aka Mr Mortgage who called Lehman a long time before they went pop.

 

Thanks for posting

 

yes, he was the first I saw saying TLT was the best preservation of wealth when it all comes crashing down.

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On 11/01/2018 at 2:47 PM, Dogtanian said:

Regarding picking shares for longer term something that sticks in the back of my mind going forward is pensions and any overhead that these companies are required to honour.

Pension deficits make companies behave in strange ways.  From BBC:  Engineering giant GKN rejects £7bn takeover bid

Quote

[GKN] also announced plans to split its aerospace and automotive divisions into separate companies, although the timing has not been confirmed.

Nicholas Hyett, an analyst at Hargreaves Lansdown, said the split had been "on the cards for years" because there was little crossover between the two businesses.

"Historically, the pension deficit has held the group together, but with the sprawling footprint likely to have contributed to recent profit warnings, the reasons for divorce now seem to outweigh the costs of splitting," he said.

My emphasis.  Reflation would presumably be good for an engineering firm like GKN, but not if the pension deficit sinks the company!

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Personally i think its a risky time to be investing in any company, we all know that tesco seemed to be doing ok a few years back and then someone happened to find a £250m accounting error!

I suspect that alot of companies have loaded up on debt thanks to the low interest rates, carrilions filled its boots apparently and racked up a cool £1.5bn in debt according to the papers, i would have loved to have been at their christmas party.

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