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Sonic the Hedge Fund

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Posts posted by Sonic the Hedge Fund

  1. On 6/11/2017 at 9:49 AM, jiltedjen said:

    the main parties now know the young have a gun to their head, no longer is HPI the golden ticket


    We are already well past the point where ever higher house prices became a political liability.

    The Tory attack on BTL is arguably a political calculation - priced out & tenants outnumber landlords by a large margin, so there are simply more potential votes by favoring the former.

    The election result can only push all of the main parties even further in that direction.

  2. The single person's allowance was slashed from 1 Jan for those in the 25-35 age bracket. Previously you could get HB for a flat or house, now you just get it for a room in a shared house.

    Thanks for that FH - this one change totaly tips the supply/demand balance in certain sectors:

    25-35 age will be motivated to stay at home; or co-habit so they can get their 'own' place together - reduces demand for single ocupier homes

    Landlords will be motivated to convert larger houses to HMO (because rents for larger houses have been squeezed most by 30th percentile rule, while demand for single rooms for 25-35 will grow) - this very quickly increases supply of housing units because one house can become 3 or 4 homes in just a few weeks

    Incidently having seen a number of homes ocupied by 25-35 year old LHA claiments (think 8 tiny deathtrap flats jammed into a 3 story town house with absolutley no regard for safety, sanitation or buliding regs) I would say many would be better off in a properly regulated HMO! Of course their existing scumlords are now screwed....couldn't happen to a nicer bunch :)

  3. Just noticed on Rightmove rents in my area have PLUMETED since new year (been checking recently cos LL is pushing for an increase)

    Before Christmas could find no decent 3 beds in my area on for under £1200PCM, but now they start at £825, even very nice four bedders on for just a grand....loads of big reductions and cheap new listings showing on the Bee

    So what's happened since yesterday? LHA was cut! In my area the LHA cut on 3&4 bedders seems to amount to about 20% in cash terms.

    Wishing my Landlord a happy new year, and good luck with that rent hike.... :)

  4. I'd say, as a general rule, when you look at the cause behind significant price rises of goods, particularly those with a large degree of hand finishing, wages are at the root of it.

    Don't forget, in this country, businesses have to make their own employer's NI contributions.

    With retail it's all about price points. If my FOB cost is <30p and it's a volume line it'll be a 99p line. Pushes over 30p and it's a £1.29 line and likely a £1.49 line if the till data doesn't suggest any significant drop in volume.

    Fair points - but these are western retailer domestic business issues not producer inputs

    As per you last point the selling price is what the market will bear; more influenced by the state of domestic demand than offshore production costs.

    What's likely given recent trends is that the step rise in cost of essential commodities (driven by Chinese inflation) will squeeze discretionary spending and hence retailers will have pressures from both ends of the equation. The far east margin multiplier is coming to an end it seems.

    For a country with an economy based on Housing and Shopping I guess we are looking pretty f*cked

  5. It's even simpler than that. They are cherry picking the low/zero risk customers because they only have a tiny amount to lend out. It's a sellers market for mortgages (aka banks market).

    I agree

    People seem to have forgotten about the enormous post-securitisation funding gap that was temporarily filled by SLS that cannot now be renewed due to rising inflation

    The BoE have painted themselves into a corner

  6. There is constant upward price pressure on imported Chinese goods and it's driven far more by wage increases over there at the moment rather than commodity prices.

    Surely the impact should be minimal, since the producer's wage cost is such a minuscule input to the retail price in a western shop?

    I guess the figures vary, but for example a 10% rise in a 10% price component (producer wages) is a mere 1% on the overall price, and TBH I would be surprised if the producer's wages were as much as 10% of that

  7. Mortgage lending at nine-year low (BBC Link)

    "December is always a quiet month but this was a quieter December than usual," said Paul Sabbato, a director of broker First 4 Bridging.

    "There is no doubt that many people who may have been considering buying a couple of months ago have shelved their plans until there is more clarity on when, and by how much, rates will rise.

    If this is the impact of mere expectation of rate rises, just imagine the carnage an actual rate rise will bring.....

    ....proof, if it's needed that ultra low rates have propped up an unsustainable market.

  8. No one wants to train anyone these days, manufacturing in this country has been running on a shoestring for a few years now and companys have not been able to take on as many aprenticeships as some would like,a lot of the older end of the workforce have not been able to pass on their skills, i think another problem is the pay for skilled personel, there is not the differential as there used to be, eg a unskilled can almost get the same as a skilled person if they start a family with tax credit etc, were as a skilled person starting a family would just be on the pay threshold for any credits and would not get anything in credits, this is one reason a lot of youngsters are not interested in engineering or a skill anymore.

    The problem is welfare not pay levels

    A welfare system that started out as a 'safety net' based on humanitarian goals has become 'net equality' based on socialist ideals

    Welfare equalisation has removed much of the incentive to train and work hard; those who prosper in this new world do so for the most part by trampling on others (e.g. bankers).

    Developing economies such as China and India don't have this problem (because they don't have any welfare) hence they are building a hugely skilled and motivated workforce.

    This book explains the problem rather well.

  9. Also heard today that the CML reported that December had the lowest level of mortgage approvals for any month on record!

    The wheels are slowly starting to turn.

    IIRC mortgage approvals are offers, not completions, so I wonder how many previously agreed sales will fall through as a result of withdrawn mortgage deals? e.g. buyer has to pull out because they can no longer get the mortgage deal they expected

    Lowest ever approvals minus plenty of deals falling through must equal the worst possible conditions on record for the property market

  10. I can't go into further details as it would allow some kind of identification, but I promise you the family life is not settled or admirable, there are severe emotional compromises within the whole situation as a result of having an overwhelming financial commitment, which have effected their only child (can't afford another one) in a very negative way that will probably be lifelong. not much of a family.

    By contrast as renter scum we have thrice been able to move rapidly to secure the schools of choice for our two children (primary and secondary)

    We live in a delightful location (scenic but very close to schools and all amenities) in a house at least twice the size of that we previously owned, with a spare room where previously the children had to share, not to mention spare cash for luxuries such as holidays.

    So I think it's fair to say that our accidental STR has significantly enhanced my offspring's childhood experience and future prospects

    Family and friends often comment on how comfortable a situation we have, then fail to see the irony in following this by asking when we will settle down by buying a house. You can't reason with such illogical bigots - my wife's friend recently asked why we were 'wasting money buying new carpets for our landlord'. I pointed out that we couldn't afford new carpets when we had a mortgage.

    I think people just confuse the relative utility of possession and ownership - many now see leasing a car as a smart option (against buying) but seem unable to extend this logic to housing

  11. Levi's used to cost me 45quid and last 3+ years. They are £70-80quid now and don't seem to last 10minutes.

    My wife is in Switzerland for the next few weeks as her business forges ahead with 2011 plans. She is a high level executive and is in board meetings right now and I could not believe what she told me (she plays corporate) a few days ago :

    They are dropping one their Chinese suppliers because the quality of the finished product is ....

    too good and does not fit in with the 'Product Cycle' and they are now going with another Chinese supplier of inferior products. I must emphasise there is no cost saving in the move.

    now it makes sense that the stuff from Chindia is S**T!!! it's because the corporates are asking for it to be this way. I kid you not, you heard it here first.

    Makes perfect sense for the retailer, note the phrase 'product cycle'

    King Gilette (inventor of the disposable razor) said (I paraprase) 'if you make a product that wears out quickly, then the customer has to buy another, and another'

  12. over a period of 20 years I am afraid

    can I suggest you consider an additional, compounding, mechanism? - persistent high western govt borrowing to fund boomers' retirement needs over the same time will lead to higher real interest rates as the markets demand a higher return for sovereign risk; by arbitrage this will lead to higher real mortgage rates; this will compound the long term occupancy ratio correction - ie these TWO secular bear trends will be synchronised and lead to severe decadal real house price falls

    I know...

    Whichever routes governments choose (Inflation, taxation or cuts) will disproportionately impact pensioners in real terms, making it harder to hang onto their oversized homes.

    Care costs are another issue rapidly rearing it's head - the state simply does not have the means to care for a rapidly rising elderly population. Radical solutions will be borne of necessity; however distasteful politicly.

  13. What is silly is that no one has mentioned some of the other factors that affect the need for new homes: birth rates, life expectancy, etc...

    Net migration is a factor, but it's hardly the only one*.

    Births V Deaths is much more significant, population alone does not correlate directly with household demand

    Births do not produce any significant instantaneous household demand because kids tend to live with their parents until at least their late teens.

    The most significant group for household formation is aged 25+, numbers for which are just at the top of small peak preceding a steep decline lasting over 10 years (i.e. there are about 25% less people in the UK aged 15 than age 25)

    Deaths do however reduce household demand, although at a rate somewhat less than 100% due to surviving partners.

    Crudely if we take 50% of the current 570k deaths P/A that's 285k less households per year; in reality the proportion will increase over time due to the increasing number of divorcees (already in single households) as we move down the age range

  14. it bemuses me when people in their 70 with their 3 and 4 bedroom houses all decorated upo to the nines bemoan the fact that their children are in their 30s and still haven't given them grandchildren

    they never make the connection between the skewed occupancy ratio and late childbirth

    I think this could qucikly become a social comment issue - with the older generation painted as pariahs blocking their children's future. We have heard a few rumblings of this already, and today's youth are mightily p1ssed off with their lack of prospects in just about everything.

    Bottom line the situation cannot persist indefinitely, at some point in the not too distant future the empty nesters will simply become too old or too poor to hang on to their homes.

  15. the overwhelming supply issue as far as I know - is hoarding of properdie by old couples living in large family houses, mostly containing collected tat, and possibly additionally housing benefits

    in the former case it is classic bubble behaviour - even as far as these elderly people living in poverty in order to hold onto a large house they don't need, and whose sale could enhance their retirement.

    Ah, my pet issue

    The easy way to spot areas with severe under occupation is to look for school closures, because empty nests don't have any kids left to educate; schools get paid per pupil so are not viable without sufficient numbers

    More than 1300 schools have been closed in the UK in the last 10 years, that's a shed load of under occupation.

  16. As far as I see, the problem is that we have too many universities. Huge numbers of [eople going there are not really up to it, hence Micky Mouse degrees.

    Just like with house prices few seem to see this elephant in the room

    Student debt is but a symptom of a system that has grown way beyond it's economic use.

    If people want to do Mickey Mouse degrees then that's up to them - just don't expect me (or other taxpayers) to pay for it.

  17. Don't understand the CML at all. Its not as if their members have any money to lend (speculatively) anyway, and neither has the Government. Presumably they just want the "wriggle room" to lend recklessly if they want to.

    What if the banks don't actualy want to lend?

    Perhaps CML fully expect another crash and are just looking for somone else to blame for the mortgage drought

    Remeber that before the ConDems came in the governement line was always 'if we can only get the banks to lend again' so it's not supprising that the CML are promoting an alternate scapegoat (FSA) for this time round.

  18. I think so too, and think some of the posts on this thread are a massive over reaction. Much better to squeeze down new claimants and a more gradual step change for existing ones. Crash On. Well more like a steady decline than a crash, but can't have everything.

    I'm inclined to think this may lead to a quicker second leg down

    Think about it:

    LHA is 40% of London rental market, so a rapid cut to 30th percentile guarantees that rents must fall, at least to the point where paying tenants can take up the slack.

    Not forgetting that for many inner city areas areas cut to 30th percentile will be a big drop in cash terms, due to the wide range between the cheapest and most expensive rentals in these areas i.e. the steepness of the curve

  19. More detail in the mirror:


    Hang on...isn't this a master stroke? Surely this is great news for everyone apart from landlords?

    Faster, deeper cuts to NEW claims will have an IMMEDIATE downward effect on achievable rents for new tenancies

    EXISTING tenants on LHA may then find that they are able to move somewhere better, for less rent. Even if they want to stay put after one year, they will undoubtedly be able to negotiate a big discount in a falling rental market.....

    But slum-lords will be screwed - unable to bail until their tenancies end, while the rental market crumbles....

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