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saderic

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About saderic

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  1. Agree the density argument is simplistic. In central Stockholm there may be a shortage argument but the key point is that the Swedish bubble stretches across the country. I'm from a less than popular part of the south and house prices have more than doubled in the last 5-10 years. Land is not that expensive in my parts and some of the more savy people I know have self built at a reasonable cost. But the majority is drawn to fancy developments, bit of a prestige thing, and renting from the bank is cheaper than ever so who cares about the ticket price. I think there are some good lessons to be learnt here, especially if the recent falls are sustained. Keep in mind that Sweden is mostly free from the disgrace of BTL / property hoarding, and interest rates remain at rock bottom (for now) so any change is surely down to enforced changes to lending conditions. Fans of monetary policy should also study the Swedish experience. We infamously tried hiking already in 2010, despite deflationary pressure on the CPI measure. This was supposedly motivated by concerns around blowing up housing bubbles (the last one still just about in memory of policymakers). When Sweden slipped into negative CPI territory, this approach was naturally ridiculed by the global establishment, economists and central banksters. To avoid being outcasts we've now had a complete policy reversal with Riksbanken more dovish than most, blowing up the mother of all bubbles in the process. The latest set of lending restrictions is definitely an attempt to defuse the bubble without the embarrassment of negative CPI (things getting cheaper, oh the horror).
  2. Hi, Swedish person here. The telegraph article is dodgy and this was discussed at the time. It's all about banning interest-only and making 'partial repayment' mortgages mandatory. Some quack went for a headline based on an obscure average repayment time. Positive news that falls are finally being noticed - as we know on this forum it is all about lending. The same lack of housing supply nonsense was being spouted back home. Not sure if you've noticed but Sweden is hardly the densest populated country in the world...
  3. Just had an email about a new 1.29% five year fix. So someone is betting against sterling... or banks are taking losses on mortgage lending in order to keep the bubble alive. The broker also kindly pointed out that 'now is a good time to buy as house prices actually fell last month'. And proceeded to give a numerical example of how repayments were unnecessary if house prices rise another 30% in the next four years.
  4. Also reported in today's City AM. Once again they rotate out a potential hawk and will no doubt replace with another money printer to nod along with Carney. Same happened when David Miles started making noises and was replaced by that clueless Dutch fella. And of course they got rid of the only true hawk in Martin Weale. Luckily Ian McAfferty has fallen back in line otherwise he would be a goner too. One theory is that they are all spineless creatures and like King and Sentance only become outspoken critics of the prevailing policy once they have safely pocketed their salaries and left. But Weale, Miles and to some extent Forbes all appear to actually disagree with Marky Mark at their meetings. So the other theory is that he simply boots them out for more yes men, 8-1 is not good enough for the vile little public school boy bully. Either way it stinks.
  5. I stand corrected... They've weaseled out and the white paper will be the usual smoke and mirror promises. http://www.cityam.com/258554/green-belt-reform-drops-off-agenda-ministers-issue-long
  6. It will be baby steps as they will struggle getting it past nimby MPs but I think it's a move in the right direction. They won't have the balls or brains to do anything truly impactful... like changing the BoE remit (eg away from bank stability and toward something like preserving purchasing power of the population).
  7. Heard that the white paper will outline supply-side solutions like relaxing planning restrictions and freeing up some of the green belt for building.
  8. It sounds like some people here think Bitcoin can replace fiat. I'm not an 'expert' but I see some obvious obstacles which makes me think this is extremely unlikely. Please feel free to point out flaws in my arguments, have not had time to research any of this in detail. Fundamental view: Like it or not, but most people believe in government as their ultimate authority. Anti-establishment sentiment has a long way to go before it becomes anti-government. I'm sure anarchy appeals to some but it has proven quite difficult to run a successful society that way. I'm therefore not going to try to adress the relevance of BTC in a world without governments (although I would rather invest in guns and bullets). Obstacle 1: Governments won't like BTC, for obvious reasons, but at least in theory they have to answer to the people. For BTC, the question then becomes whether the 99% will be supportive of a currency already held by 1%? And, based on current trends, a mostly Chinese 1% at that. I find it very hard to believe Joe Plumber decide to endorse a system where some spotty workshy teenager all of the sudden has become one of the richest people in the country. Leads into the next one... Obstacle 2: Tax and Legal. Surprised this is not discussed. If a government wants to kill Bitcoin then it can try to ban it (with varying degrees of success). They can definitely tax it - and demand payment in fiat or some other currency of their choice. For instance, a BTC holding/wealth tax could require conversion to fiat for payment, also incurring CGT equivalent. This will likely be a popular way to raise tax revenue / redistribute your (supposedly) enormous BTC wealth. Assuming you don't want to go to prison or spend your life on the run with unusable electronic funds hidden in some dark corner of the web, your wealth could quickly be reduced (at almost no political or administrative cost to the state). But I imagine the currency will collapse long before you run out of BTC. Don't make the mistake of thinking Bitcoin is anonymous, transactions are perfectly traceable and addresses on the already existing 'rich list' will eventuality be mapped to people. Obstacle 3: If BTC protocol could be changed or transferred into supposedly anonymous alternatives (Monero, ZCash), then it is tempting to think governments could not come after you. But it would mean a closed system, with no means of wealth redistribution or ensuring sufficient currency remain in circulation for the economy to function. Back to obstacle 1. Obstacle 4: Governments will - and have started to - create their own digital currencies, possibly improving on the BTC protocol. Not sure the BTC first mover advantage will hold up against the might of government... At best, I see a future where BTC remains relevant as a dark market currency, but easily exchanged with government-backed fiat or crypto alternatives. It may be in governments interest to keep the currency alive in an apparent show of free market and democratic openness. But the market cap would certainly not be in the stratosphere and quite possibly significantly lower than today. Just my thoughts people! At the end of it, I like the cryptocurrency ideas and think BTC has been a tremendously successful experiment.
  9. Let me then try to explain why I see linkers as a bad idea in the context of an actual index-linked bond. In today's City AM there was a note (don't think I can post links yet) explaining that the latest linker issue by the Treasury was at a record negative rate, yielding -1.77%. Sold for 870m, it will return investors an inflation-protected 855m in 2052 (these linkers tend to have extreme durations, not sure how short you can find them for a realistic 'holding to maturity' strategy). Let's assume we made this investment and look at the possible scenarios of how the world will turn out, to see whether the linker indeed offers something useful. Low Yield, Low Inflation (say 0% real yield): Current situation remains. Clearly better off with Cash. High Yield, Low Inflation: Don't think anyone believes this will happen. But if it does, you would face realising a huge loss trying to sell the linker. Maintaining it to maturity (all 36 years) means foregoing a large potential return in other classes, so presumably there is a price where you would still sell and take the loss. Opportunity cost. Clearly would have been better off with Cash. High Yield, High Inflation: Plausible scenario but not one where linkers will shine. The extremely high valuation we have today and the extreme sensitivity to yield movements for such long dated investments means the inflation protection benefit would not compensate. You would be better off with sensibly invested Cash or even very short dated Bonds. Or Equities in sectors such as banks and insurance companies (the potential 'unicorns' I've mentioned upthread). Low Yield, High Inflation: You win! Right? Not so fast. This is to a reasonable extent already priced in (hence why the issue is at negative yield). Also for how long can this actually persist in the real world before markets demand compensation and push up the yield curve (resulting in the previous scenario). Don't rely on the central bank to be able to control that, despite their shiny toolbox of monetary fraud. And don't forget that Equities and even Property (schhh say it quietly) have proven quite effective inflation protectors. And then there's that shiniest of shiny artefacts, which would be worth its weight in gold. All of which you hold (assuming your portfolio resembles the one WICAO has so kindly shared with us). So what was the point of the allocation to UK linkers again? Surely not diversification. A gamble on helicopter money? Not a very passive investment strategy... and any gains from rampant inflation would be illusory as the sterling debasement means you could/should have just bought some foreign currency or metal. All intended to stimulate thought and shared with the best intentions (DYOR). I do like to 'over-think', although personally I don't find that a bad thing!
  10. Your portfolio seems balanced by conventional standards and has clearly done you very well (congrats on FI by the way, hoping to get there soon too). Personally I question the rationale for any form of fixed income investment, when 'risk free' cash essentially yields the same, but perhaps I'm missing a trick. More interestingly, how do you think your portfolio will perform if we see gradually increasing yields over the next few years, across all major economies? Some of your equities may hold up (perhaps financials such as insurers) but generally my guess is that it would be red across the board. Would you look to exit the market or still attempt to stay in and rebalance by selling the best performing class and buying more of the worst performing? That would take some balls. I'm not trying to criticise your portfolio, after all mine isn't very different, but just trying to highlight why I believe we aren't as diversified as some say. That's why I'm on the hunt for a reliable asset class that gives me that negative correlation (probably not a very popular one as it would have been on some losing streak over the last few years!). I mentioned insurers above and, for the longer term, I guess banks would also benefit (I've been avoiding them like the plague so far). Other than that my only insurance policy at present is my job and a good old fashioned pile of cash.
  11. Thank you for the link by the way. Sadly this is exactly the kind of analysis I question the validity of in our extreme low yield environment. Rising inflation expectations would hit the yield curve and destroy linkers, so I find that a very poor recommendation. In the past bond prices would survive yields going from 4 to 5% but what happens when they go from 0.nothing to 1%? Isn't that just maths? Inflation protection won't be much consolation when new investors are buying the index at a fraction of what you did.
  12. I take your point that portfolios measured in other currencies have not seen quite as dramatic of a rise. Still, the basic argument I'm making is that the asset classes listed all show uncomfortably high correlation as of late. If Janet emerged from her Jackson Hole (pun intended) and surprised markets with a rate rise, Equity/Bond/Property/Gold indices would all fall. The permanent portfolio does not look like such a good bet then. When I say that portfolios look 'unbalanced' I mean they are highly exposed to systematic risk. Sure, trackers can remove specific risk, you don't need many share holdings to effectively achieve that. But I think people are fooling themselves if they believe that by spreading equity investments into US/GB/EU markets they are materially reducing their systematic risk. I'm too young to say for sure that it has not always been this way. But when CBs have manipulated the world economy to such an extent that, at a macro level, bad news becomes good news, then I believe we are entering a new paradigm.
  13. Hi WICAO and others, Thought I would dip into this thread as I've started to take more of an active interest in passive investments. I've skimmed through a lot of your blog as well as Monevator etc but one thing that strikes me is that very few seem to have a genuinely balanced/diversified portfolio, reflecting the extreme low yield environment we are in. I think the YTD investment performance says it all - a balanced portfolio isn't meant to grow at such ferocious pace. As background, I have a strong view that the low yield environment is here to stay, partly because of market forces (hat tip to forum member Skepticus for helping me develop my understanding in this area) and partly because of the central banker obsession to reduce the cost of debt to next to nothing. However, I also believe in "diversification of opinion" and always consider the possibility I may be wrong. This investment principle extends as far as holding assets that I personally believe will underperform. The next question then is how can I hedge my position, i.e. what would be a good passive investment strategy if yields and the cost of debt started a rapid turnaround? Bonds and leveraged investments like Property are obviously out, which is why I don't hold them in my trackers. Most Equity indices are also likely to suffer, especially given the recent boom appears to be almost entirely due to yield curve manipulation. Despite generally being a hedge against market chaos, my guess is that even Gold would take a big hit from fiat strength (same for Silver, which is my preference at the moment). So given that I am a passive investor at heart - and not interested in shorting strategies or "exotic" investments such as derivaties/swaps - what can I add to bring genuine balance to my tracker portfolio? Not really counting Cash, which of course I do hold, as I'm really looking for something negatively correlated that could off-set losses rather than avoid losses. Very interested in hearing any ideas!
  14. Thank you for calling my post 'problematic', it has given me the impetus to respond. No, I don't think anyone is saying that. But I agree with Skepticus that the problem at its root is the monetary system and that we are witnessing the tragic consequences of banks (and others) trying to operate within that system. I'm merely pointing out that if we cannot get to the bottom of how we got here, we will struggle to see where we are going and how to best change that. Having said that, I am not infinitely patient, and would be all for fundamental reform, be it of the monetary or banking system. If I had a vote and you were a politician, I would vote for you. But you are not a politician, this is not yet up for a vote, so I'm happy that we keep critically challenging the narrative (both that of the establishment and that which is currently prevailing on HPC).
  15. Many thanks for the very interesting discussion, to all involved. This is why I lurk on this forum. For what it's worth, what skepticus says makes an awful lot of sense to me. I've yet to hear a convincing argument on why he/she is wrong on why rates are the way they are, which after all was the topic of this thread. Let's leave idealism out of this one thread and focus on understanding the world as it is. Surely it's only then one can have a sensible debate on how to fix it?
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