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frozen_out

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Everything posted by frozen_out

  1. It's been explained a number of times already - the same story with oil and basic commodities. The last decade, particularly in China, saw an extraordinary cycle of investment in capacity. You don't need a collapse in demand, you just need normal demand and industries that have been in relative equilibrium for years, with value extraction at appropriate rates fall into total dissaray. This will take years to play out because we installed enough capacity for decades of growth in a few years. There was a stat a while ago that China used more concrete in the previous 3 years than the US used in a decade tells you everything you need to know.
  2. Yeah I know, perhaps my phrasing was ambiguous. My question is why aren't they cross checking the OFSTED register first and stopping the tax credits of everyone not registered or with an up to date inspection? That would weed out most of the pee takers for hardly any effort.
  3. Some of the wailing and gnashing of teeth in that story is unbelievable. Although there should be a much simpler way to check up as all childminders should be registered and checked by OFSTED. No Ofsted registration, no tax credits. No OFSTED inspection, no tax credits. There can't be many people minding their mates kids as a hobby who are also OFSTED registered, surely?
  4. Not quite true - Yahoo were a directory not a search engine. More like a propeller driven aeroplane compared to Google's jet plane.
  5. Valueless economy at work again. No value in shipping. The Chinese will do what they always do- subsidise the rest of the world's shipping out of existence. Eventually they'll realise they have an issue when they gut the value out of so much of the world's economy that no one can buy anything they make.
  6. The index measures the cost of shipping doesn't it? It's important to distinguish cost and value in this situation. Efficiency and investment in capacity work to drive costs down and value up, so there is no good reason why the cost of shipping over the last 30 years should increase in line with inflation. The 2001-2008 years were the abberation.
  7. Does anyone really need a 24 hour supermarket? The while idea is absurd. If you can't fit your shopping into 16 hour slot then you have a problem.
  8. This. Same story with oil. It's a reversion to mean, not a crash.
  9. The world 'survived' for years at $10-15. Low prices for oil and steel should mean that capex investment is off the scale right now. Low energy costs can't possibly be fundamentally bad for the economy, so something else is going on. I would argue that the economy is so fundamentally FUBAR after what happened in 2001-2010 that what we are seeing here is not an industry unable to get enough value from low prices, but an industry unable to extract enough value from normal prices. IMO what we need is for no one to blink and just keep pumping until the petrochems oversupply and the pain of normal oil prices washes through the economy and 'normal' is reestablished at ca. $30. It will probably take 5-10 years. So strap yourself in.
  10. The valueless economy still at work. Every little makes no difference.
  11. The Chinese economy ain't all it's cracked up to be. Many of the world's economic ills can be traced back to the fact that the Chinese demi-gods created a valueless economy.
  12. This time IS different to 2008. Just before the last bust all commodities were trading at record highs. Now we're at record lows. What kind of economy can't cope with either low or high prices? What I can't understand is if oil is cheap and steel is cheap why is capex falling? The 3 components of capex: steel, energy and labour should be at rock bottom prices. Instead of a tidal wave of job losses the world should be booming off the scale on the back of this. What the hell is going on? One of our analysts is of the opinion that the aim of sustaining a glut of cheap oil is to attempt to prevent a catastrophic failure of the Chinese economy. Sounds feasible
  13. I agree with this. Due to the tax changes the BTL volume will be stripped out of the market going forward, this will cause prices to fall. The question is if this is a simple tax grab by the government or a means of bringing about a HPC. I can't see it being the latter.There is a view espoused on here that the banks have been stress tested and are now in a position to see out a HPC. This doesn't quite square with the view on this thread that the banks have mispriced their BTL risk, the fact that they might have mispriced their risk does make them vulnerable (and if it doesn't, what's the issue with them mispricing the risk in the first place?) IMO there will have to be some attempt somewhere to allow underwater BTLers to exit the market in an orderly way. Regardless of the banks' ability to weather a significant HPC a disorderly, panicked housing market is not good for the wider economy. History teaches us this much.
  14. The great thing about boomers is that they think they acquired it all through hard work. Anyway, back on topic... The problem with a lot of developments is that associated local infrastructure doesn't get upgraded at the same time, meaning that the new houses do lead to a noticeable decline in local quality of life. Rather than protesting against against the houses what they should be saying is 'build the new houses, and whilst you're at it upgrade the roads, junctions and roundabouts, build us a new school, and put us a park in with some astroturf playing pitches and floodlights. Ta.'
  15. The volumes over the period you're talking about drove the biggest bubble in history. It's difficult to advocate a return to those levels. The volumes now are coming off the biggest crash ever at the back end of 2008, I'm surprised they're within touching distance of 100k a month (that second chart is way out of date BTW) I didn't think we see that for at least a generation after 2008. We never bottomed out at sub 20k either, which was my prediction at the time. The fact remains that the most consistent leading indicator of HPI is volume. Until that consistently increasing rise in volume post 2009 starts to reverse there's nothing to get excited about HPC wise. Which leaves the other questions. Assuming we could double volumes and halve prices how does that help the banks make more money? It would make for a more robust market long term, but there'd be a serious bit of pain during the transition. I'm not even sure the transition could be managed properly as it would involve crashing the volume to reset prices, then allowing the volume to increase to bubble levels without creating a bubble. Theoretically a great outcome, my kids would love it.
  16. If I understand your argument Venger, what you're saying is that a fall in house prices will be (is being?) precipitated to enable banks to increase the mortgage volume so they can make more money? If I am understanding you, how do you square that with: a) volumes being pretty healthy right now volume historically being the most consistent leading indicator of HPI c) all things being equal, lending on 3 houses at 150k makes the bank no more money than lending on one house at 450k What would be interesting is if the government/banks could look at ways to break the link between volume and HPI. Not sure if it's even possible.
  17. Agreed. Which leads to further questions - what is value and can fair value ever be known? Or are we all just pissing in the wind of an insane fantasy and winning or losing at any particular moment in time? As an example, I work in an industry where value is pretty much dictated by legislation (in fact many industries are like this, directly or indirectly). We're always looking for value growth above GDP and it seems that it is almost always created artificially. When we run out of levers to pull to 'create' this value what then? How many levers are available and when will they stop being pulled?
  18. As an aside... prior to the 2008 crash pretty much all commodities were trading at record highs, after 7 years of 'recovery' they're all at lows (not record, but they're all seriously down on 2008) the $64M question (or $64 trn question) is why? Where has all the value gone?
  19. For some reason I can't quote on this forum (another Win8 bug I can't fix) but the Coventry are talking about the valueless economy I've mentioned once or twice. What they're saying (I think) is that they have nothing worthwhile to invest savings in. They can't get a return on your capital other than by lending it on property and propping up house prices. The yield on BTL may be low (about to get lower), but it's something. Another recent example of this is the crisis in UK steel due to Chinese steel dumping. There is no value in steelmaking because the Chinese have outrageous capacity and will sell at a loss to keep their factories open. Europe can't compete with this, and the same is true of chemicals, mining and oil extraction. There is almost no value in the activities that should be most value creating. I can't see how this is unwound without at least a generation of pain globally.
  20. I'm convinced this is related to maximising the items of clothing per unit of fabric. It's why there's such a trend for skinny fitting garments and the fact anyone with regular sized waist and thighs can't fit into anything from primark.I had some boxers from matalan, medium as per, and there was so little fabric in the gusset it felt like I was being garroted.
  21. It's the valueless economy. Metals have become so cheap it's barely worth digging it, oil has become so cheap it's barely worth drilling it, China has screwed basic commodity chemicals to the point where some basic feedstocks are more valuable than the products they make, production gas become so efficient that it's easier to make money on the loans that allow people to buy a car. At some point all of this will unwind, but how or when is anyone's guess.
  22. I think no. 5 is interesting. One interpretation of the tax on BTL is to raise the barrier to entry for new players and small players. It would be a paradigm shift in the UK and perhaps move us more in line with Europe and Scandinavia where BTL doesn't really exist. Subletting though does, and in a big way.My prediction is that residential housing purchases will fall back to about 70-80k/month as people expect a glut of BTL property into the market. The volumes will be low enough to cause prices to decline by ca. 25% over 18 months. The market will be seriously subdued but will not implode.
  23. As I said further up - the pricing algorithms are very sophisticated these days. I guess sales can be matched to inventory almost in real time and prices adjusted accordingly daily.
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