Jump to content
House Price Crash Forum

Optobear

Members
  • Posts

    2,108
  • Joined

  • Last visited

Posts posted by Optobear

  1. An update and a question.

    First off, the BoE has grown as usual, 

    3008.pdf

    Loan to asset purchase facility now at £527bn, 

    I do think it was meant to be limited at £435bn... 

    http://www.bankofengland.co.uk/markets/Pages/apf/default.aspx

    Maybe their bank manager is a bit more lenient than usual... I know if I went, £92,000,000,000 overspent my bank manager would be concerned.

    But more seriously, it does rather beg the question of just how much of the money being issued by the Government (via the Debt Management Office) is immediately bought up by the Asset Purchase Facility (part of the BoE and Treasury).

    Interesting link from BoE

    giltannouncement.pdf

    Suggests that they already hold over 70% of some of the bonds issued.

     

    Anyway, does anyone else find this all a bit weird? Also, why do people not seem to question this seemingly infinite ability to print money? If most of the bonds issued by one arm of government are bought by another arm of government that explains why the markets don't crash immediately... but it is all a bit fishy.

  2. Don't post here often - but some old timers might remember me. An update on my STR in 2010, is that I have now bought back in... at what may be near peak prices..

    In the years in between I have really enjoyed not doing DIY, and maybe now my DIY batteries are restored. Stayed in the same rented place all that time.

    I put the money that would have gone into the repayment part of a mortgage into a FTSE tracker every month. That paid off well. Made much more on that than I would of made had it been in bricks and mortar. What I didn't do was shove all the equity into the market... that would have paid handsomely. 

    Real house prices are higher now though than in 2010... I am not sure how much? But there has been a good deal of inflation too - a quick look suggests that average house price (corrected for inflation) went from £197k (when we sold ours) to £205k. In that time I have paid a yield of about 2.5% to my landlord... which barely covered inflation, and spent nothing on maintenance... so I am probably neutral.

    The house we rented was convenient for schools, but not somewhere I would want to own. The new house is more suitable for the long term, and I have just had the galling task of paying a vast cheque to the tax man for stamp duty. Well over a year of rent...

    I have now taken a big fixed rate mortgage for 5 years at 2.19% which is currently well below inflation (and that is generally a good place to be).

    In 2010 I would not have predicted that interest rates could stay so low, for so long... I would (and did say) that sterling would be destroyed if that continued... in 2010 £1 = $1.56.. so I was kind of right on that one... but didn't shift all my equity into dollars... oh well. 

    At one point serious floods threatened the rented house, and I was certainly glad that I didn't own it at that point. I am not sure whether, if our landlord chose to sell, that the house price has been affected. Certainly pictures online of the surrounding streets looking like Venice might have knocked a few £10ks of the value. I am glad the landlord took that risk and not me.

    So, in summary, it was probably financially neutral. I ended up making some good decisions but failed to follow the strength of my convictions (e.g. on sterling vs dollar). I recommend renting, but the kicker is the tax system and the low yields. The UK system is heavily skewed to owning in retirement rather than having a cash pile and a rented property, even if the imputed rent is equal.

    Interesting question as to whether I now want a house price crash? I think the answer is yes. My kids are screwed by the current system, but obviously I don't want to see it happen too fast. My prediction... (well I found getting a mortgage was much tougher than before, that, and landlords are disappearing) so we will likely see stagnant actual prices, and therefore inflation reducing the real prices... I have deliberately set myself up for that scenario, by hoping the inflation will erode my debt... and I will get to live in a really nice part of a town that is very high on the UK standard of living indices.

    Final observation, I would not have been able to secure the house we just bought without being in rented. Three offers the same day (first day it was advertised) at the same price (if you can believe the agent). So being in rented paid off in that we got a house we wanted...

    Optobear

  3. Are we all misjudging Theresa's political skills?

    Here is a scenario:

    Let's imagine that she is in favour of remain. She achieves leadership of the Tory party by pretending to have changed her spots, however, it is all a clever ruse. She then wins over lots of support by championing Brexit, but then pulls an amazing stunt by calling for an election. Instead of the ostensible reason for the election, i.e. having an increased majority, she actually intends to totally **** up the whole process, and end up in coalition? To this end, she writes the most unpopular manifesto, comes up with a way of taking the housing wealth from her core voters, aims to introduce grammar schools, and even steals food from school children.

    Not content with a manifesto that is designed to wind up her supporters, she then makes a total hash of public appearances, and then refuses, in a cowardly way, to debate with the other party leaders.

    This way she enters a Lib-Dem coalition, and Brexit is averted, and better still it isn't even her fault. It isn't as if there is any precedent for a Tory leader calling for a public vote and then finding they don't get the result they 'wanted'. How could she have known?

    Well played Mrs May.

    ----

    Someone remind me about Occam's razor... is it that the simplest explanation, that fits all the available facts, is probably correct?

    Optobear

     

     

  4. On 12/11/2016 at 4:58 PM, Ah-so said:

    The reasoning behind the restarting of the APF must be the condition of the credit markets in 2014 resulting in general gloominess particularly since the referendum. 

    There has been a lack of liquidity in the sterling bond market and this can be a vicious circle - if you are not sure that you will be able to sell your bond you are less likely to buy it and if you are unwilling to buy then companies will find it more difficult to issue debt in the first place. The consequence of this is that they will be unable to invest in new projects. 

    The APF is more than just QE but I don't like the fact that it will make the BOE one of the largest players in the sterling bond market over the next year. 

    The latest figures are out... wait for it, a drum roll please, and more applause for Mr Mark Carney ladies and gentlemen.. last week he grew the Bank of England by a paltry £2.5bn, while this week, wait for it...

    the new total is 

    £415,204m 

    That's right he has grown the value of our bank by £3.7bn in just one week.

    We're rich I tell you.

    And lest you think that is easy for Mr Carney - let me just convert that to a number we can comprehend. So we can really appreciate Mr Carney's genius.

    That works out as £314k per minute. 

    That is right the equivalent of one new house per minute for a whole week. Mr Carney is working 24/7 for that gain.

    I am so glad that Economics makes sense.

     

     

     

     

  5. Increased to £411,488

     

    grew by a stonking £2.5bn in a week!!

    well done Mr Carney - you run the fastest growing business in Britain. In five years time the Bank of England will be the biggest business in the world, eclipsing Apple.

    I fully expect that within 20 years the Bank of England will be so vast and so valuable that no British Citizen will ever have to work again. 

    I can do nothing but cheer for Mark, surely the finest Canadian of all time. £2.5bn in a week. What a guy. 

  6. 54 minutes ago, LondonBound said:

    Firstly it's the Federal Reserve and not Trump who sets the overnight Fed Funds rate. He has no direct control. 

    And then the Fed (without further QE which is unlikely for many reasons) has no control on longer-term rates. That is down to the bond market... and it looks like the bond market vigilantes, sniffing reflation/inflation, are back!

    Rates are quickly going to go (dangerously?) higher whatever Trump/Fed/BoE wants. 

    Now plug that into whatever scenario you want to create.... This particular genie is coming out of the bottle as we watch today. 

    This sounds very likely.

    the market picks the 10 year rate, and while I guess central banks can choose the maturity of their market prop up operations, there must be still a strong market element. 

    As you say, this genie is coming out, and it will see mortgages changing very rapidly. And the prices of the houses in a road are set only by the most recent transaction. And for sure, long term cheap money has propped up this corpse of a housing market.

     

     

     

  7. 18 hours ago, LondonBound said:

    Higher mortgage rates globally...

    US 10 year yield now risen above 2% reflecting Trump's budget deficit funding gap. UK swap rates (and hence mortgage rates) already being pulled up with it. UK 10yr already up to 1.25% (from sub 0.8% post brexit) and could go to 2%.

    3%++ mortgages by next year anyone?

    LondonBound

    This will be the big effect. Since 2008 all governments have pretended to have financial prudence (while discreetly printing money), but Trump is going further. He is actively intending to go for a huge chunk of Keynesian fiscal stimulus. 

    By being explicit it will push base rates up ( perhaps he actually understands how toxic the actions of central banks have been?).

    If US base rates go up, then UK follows within hours.

    And the 10 year fixed rates are all about the swap rates. 

    So this could start an unpleasant pulling of long term deals, and that will surely hurt the market... and what's more, I don't think the UK government can do anything about it!

  8. Thanks Will!

    So the number has increased to £408,690m  from £406,998m a week ago.

    So the Bank of England's assets have increased by  £1.7bn in just one week. That sounds excellent.

    But they have lent that money to their own subsidiary, and then that subsidiary has bought bonds in the market, and now owes an even greater amount to the Bank of England... hmmm.... 

    I did once work for an accountancy firm, so I have some limited understanding of finance, ... and I'm sort of struggling to see how this a good thing? 

    I do remember a man called Robert Maxwell, he came to a bad end, but I think he perhaps would have made a useful advisor to the Bank of England today? But his debts were only £400m, which barely compares. 

    Perhaps there should be a campaign to pardon Mr Maxwell, given that his actions in defrauding pensioners seems to be very much in the spirit of modern central banking?

     

  9. In 2014 the Bank of England stopped reporting data that had been required since 1844, due to concerns that it might reveal Bank Operations and reduce the ability of the Old Lady to intervene to save the markets. That the decision to recommend that was made by three ex-BoE employees, is irrelevant.

    Anyway

    The BoE reports this now

    http://www.bankofengland.co.uk/publications/Documents/weeklyreport/2016/2610.pdf

    The new weekly report.

    It has a thing called "Loan to Asset Purchase Facility"

    That seems to increase by something like £2bn to £2.5bn each week. Or at least that is what is has done over recent weeks.

    Now since £2.6bn represents £41 per person per week in UK, or £2,166 per year per person. I wonder what it is? For my family of 5 that represents the BoE increasing its Loan to Asset Purchase by a rate equivalent to about £12k/annum. That sounds a disturbingly huge amount?

    Does anyone know what this is?

     

  10. The Guardian is reporting salaries by profession from ONS data

    https://www.theguardian.com/money/2016/oct/31/highest-paid-jobs-2016-ons-annual-survey-hours-earnings

    Take doctors, Median is £75k, 90th percentiles is £132k

    It is the 8th highest paid profession. The top is for financial traders / brokers - but too few reported to allow proper statistics. They had an average of £132k.

    The BoE are looking at mortgages multiples of 4.5 times...

    So median doctor can borrow £337k, top paid 10% of doctors can borrow £594k

    So how can house prices be where they are? 

    Either mortgages are all much bigger than let on, or most people are committing tax fraud?

     

  11. Not sure if this appeared when first published in Oct 2015?

    http://webarchive.nationalarchives.gov.uk/20160105160709/http://www.ons.gov.uk/ons/dcp171766_419024.pdf

    Key graphs are page 20 - showing the distribution of mortgages vs how much of monthly income is spent on mortgages (and it has increased)

    And page 22 which show average rate paid vs % of monthly income

    Two things are surprising, one is that there is so much variation in rate paid and the second how much some pay

  12. First post in a long while...

    But very relevant to how the markets will react and what that will do to the debate.

    The Government issues debt and a calendar of all the planned issuance dates can be found here

    http://www.dmo.gov.uk/reportView.aspx?rptCode=D5D&rptName=fa29db60-825e-4dc9-93a1-0ec538b00338||GILT%20MARKET%20(10)&reportpage=Issuance_Calendar

    It shows the next planned debt issuance by the DMO will be on tuesday 5th July.

    At that point the market will start to tell the government what it thinks. At the moment HMG is proposing to borrow at 1.5% for 5 years. Whether there will be takers is a key question?

    Now set aside that they could borrow the money from HSBC more cheaply...

    Whether Mr Carney will have to use his £250bn to buy them is another question... and before changes to the Bank Return we would have known within a week... now it is hidden from the people. More on that topic here:

    http://www.housepricecrash.co.uk/forum/index.php?/topic/204683-do-posts-on-hpc-make-a-difference-i-think-so-and-here-is-an-example/?p=1102719084

    So we won't know who buys but we will know how easily the government can get the debt away.

    So look for some nerves in the market (and some brown trouser moments in government) in the days running up to the 5th July. If liquidity becomes a real problem then we might even see the issuance cancelled... (apologies for the scatological metaphor).

    If the market isn't keen to buy UK Government debt then I think we'll see the pound in all sorts of pressure, we may need that emergency budget that Mr Osborne has gone quiet about, and perhaps, we'll see some mortgage deals withdrawn, and the first signs of winter for anyone with big mortgages.

    Optobear

  13. I guess it is like saying in Court you'll tell, "the truth, the whole truth, and nothing but the truth, erhh, actually about 90% of the truth, leaving out that 10% of the truth that is awkward"

    If they (the Bank of England) want us to have confidence in money then they need to be transparent, 100% of the time, and particularly when things start to go wrong in the financial system.

    Otherwise we're in a situation equivalent to someone saying "trust me, I never lie, except in situations where you really need me not to lie, then I'll probably lie".

  14. Many, many years ago, back when Northern Rock was imploding there was a lot of discussion here about what the Bank of England were doing, and it showed up through a historical report that Bank of England had been reporting since 1844 called the Bank Return.

    When I was looking to update an old thread on the size of the Bank of England (= amount of fictitious money printed), here

    http://www.housepricecrash.co.uk/forum/index.php?/topic/66763-time-to-celebrate-bank-of-england-got-bigger-again/?p=909399373

    I found that the Bank of England have stopped publishing this data because it is viewed as too risky to the financial system:

    http://www.bankofengland.co.uk/publications/Pages/bankreturn/default.aspx

    To quote

    "The 2009 Banking Act removed the legal requirement for the Bank to continue publishing the Bank Return. In 2012, Ian Plenderleith completed a review of the Bank’s provision of Emergency Liquidity Assistance (ELA) to RBS and HBOS in 2008-09. Regarding the future publication of the (non-statutory) Bank Return, the review recommended that the Bank ‘should consider ceasing to do so at an appropriate time, in order to improve its ability to provide covert liquidity assistance in future."

    It is a bit shocking that the Bank would stop publishing this after 170 years, but maybe is a good example of where posts on site like HPC can have real impact in the financial world. There was little in the media about the "Bank return", so I think that perhaps my posts, and those of others (Freetrader, BLOO LOO and others), might really have made a concrete difference to the actions of the Old Lady of Threadneedle St.

    I rather hope that any journalists (or MPs) reading this might choose to poke around a bit more, find out who made the recommendation to stop publishing, and maybe raise the question of whether it is really in the public interest for the Bank to have stopped publishing important data that underpins our confidence in our financial system after such a long time?

    Optobear

  15. Lots of coverage in the last few days, Carney, Cameron, Clegg, Cable with concerns over possible effects of rising interest rates.

    I can't help wondering if the Government are afraid that a UKIP landslide on thursday will unnerve the financial markets? If UKIP's showing puts them as the largest vote winner then foreign investors might start to doubt the status of Gilts, especially if UKIP would unpick the relationship with Europe.

    Is this talk reflecting a real fear that Britain might need to raise interest rates soon (as soon as friday) to keep the debt financed?

    Optobear (for the first time in ages!)

  16. Looks as though the government want me to stop posting on this thread:

    http://www.telegraph.co.uk/finance/newsbys...nk-secrecy.html

    Total assets now at £203bn, down from before.

    Long time since I posted at all, and an even longer time since I posted this thread

    You'll all be pleased to know that the Bank of England is richer than ever, the latest Bank return shows total assets now at £402bn up from £203bn in 2009.

    http://www.bankofengland.co.uk/publications/Documents/bankreturn/2013/130925cs.pdf

    That is some going - since 2009 the Bank of England has grown by approaching 100%... better than the interest rate I'm getting down at Nationwide - double yer money in just 4 years! Surely cause for great celebration?

    Optobear

  17. Does this thread have the highest average number of posts per poster of all threads ever? So far, 9 individuals have posted, with a mean post per poster number of 5180 posts, and a total post number of 46628 for the nine contributors. Impressive contributions everyone, and I feel as though I'm justified in saying this because I'm way down compared to some of those here who done the "heavy lifting" in terms of getting the average posts per poster number up (thanks especially to winkie and Zanu) !

    Optobear

  18. Sorry, did not read your post. However, can see you are an old member of this site. Did you not read any of the many perpetual fractional reserve banking threads that we had on this site a few years ago until the financial crisis really got going?

    Ah, the good old days, although to quote my earlier posting (which in truth I can't remember having made in any details!)

    If that were the case, then there would be a shortage of money (deposits) to offset the debts. It would look as though banks were refusing to lend (or asking for significant premiums above treasury), but in fact would represent the "evaporation" of fractional reserve money. It is a very odd thought. All banks would tend to think it is just them that are short of cash, and that others have lots of cash they are not prepared to lend, and central bankers would make liquidity injections to "stabilise" rates. But in fact the cash would be just evaporating away, a bit like early morning mist.

    I was surprised to see that it had come true...

  19. http://www.telegraph.co.uk/finance/debt-crisis-live/8929982/Debt-crisis-live.html

    Amazing how quickly the markets turn, a rumour of a IMF bailout, through in a few more happy clappy stories and suddenly everything is fixed...

    Volatility is certainly in the market.

    Ummm, didn't they annouce that central banks were going to flood the financial system with dollars? That will cause the stock market to rise by the following argument.

    So, a fixed number of Shell Oil shares exist, more money brought into existance, therefore you need to pay more money for a Shell share? Simple. The trick is to not see it as the FTSE rising, rather than realise that it is the value of money falling. In my example, the owner of a Shell share wants more of the money for the share simply because more money exists.,

    Taken to absurdity, if the amount of money was doubled over night, the prices of all shares would double immediately too.

  20. Personally I'm sitting with cash, renting and patiently waiting (well, desperate to move, but not desperate enough to buy at today's prices).

    And that my friend is why it won't crash. Until everyone is convinced that houses are simply financial millstones that are best avoided at all costs we won't see significant falls.

    You are probably a million times more cynical than the ordinary joe about current prices (else you wouldn't be posting here), but you still want to own.

    Sorry

    B)

  21. So if I understand this correctly, we're going to yet AGAIN channel more leveraged tax payers money through the banks, hoping it pops back out again at the other end. Sure... lol!

    This is all smoke screen. The money is to rescue the banks.

    You can see the scenario.

    Setting No 10 Downing Street.

    Chancellor - "Prime-minister, we have a major problem, the international money markets don't want to fund the UK banks, they can see the economy is heading down the toillet, and we'll have to fund the banks directly from the treasury.

    Prime-minister - "We can't do that, there will be riots. No one will stomach giving more money to the banks."

    Chancellor - "If we don't give money to the banks they are finished. They will have to pay back their existing bonds, refinance their existing mortgages, and that will be impossible, so we'll have another Northern Rock"

    Prime-minister - "I can't see what we can do, we could underwrite the banks by offering to underwrite all their commercial loans, but everyone would see that would be equivalent to writing a very large cheque with taxpayers' money straight to the bankers."

    Sir Humphrey - "May I make a suggestion Prime Minister? Why don't we annouce we're stepping in to save small businesses, and in so doing we'll underwrite the banks. No one in the press, or even on that pesky House-price-crash, will even realise that this is simply a smoke-screen... it is just like housing benefit, that is £20bn of taxpayers' money that goes to landlords, and no one stops to question that..,"

    Chancellor - "Do you think it could work, would no one realise that this is direct evidence that our banks are bankrupt?"

    Prime-minister "No politician ever got fired for helping businesses, and we can always claim that is what we were doing, can't we Sir Humphrey"

    Sir Humphrey - "Yes, Prime-minister"

    ___________

    With apologies to the finest political comedy of all time,

    Optobear

×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.