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http://money.cnn.com/1998/11/06/economy/japan_bank/

As a cash and bond bear i agree, we are in for negative returns on paper/cash/wages. But thats the link bonds, cash, wages are all interlinked..............If we are in/heading for a long period of negative interest rates, then we are in for a long period of negative returns on cash, negative returns on bonds, and negative returns on wage settlements. We are going to get poorer..............simple.

So asset prices cannot go anywhere, less disposable income, but yes you can take advantage of negative interest rates, pay down debt if you have debt. I have no debt, so will spend capital.................So in ten years of negative interest rates, similar to Japan, we will a fall of in excess of 50% in house prices, and in excess of a fall of 50% in the purchasing power of your money, this could be either your wages or your savings. But you will lose purchasing power.

But i would rather lose purchasing power of something i have, rather than lose capital value of something i do not own.

We are in for wealth deflation whether you own assets or liquid cash, they will all fall in value i am afraid. Fighting the tied will be very tiresome.

It is all panning out too far similar to Japan.

Deflation.Oky Doky. Credit Deflation.

Credit Contraction.

Loss of Wealth.

Work harder for less?

Savings deminishing.

Loss of spending power to pensions.

House prices falling.

More suicides, more divorces..................Rabit Hutch stly living..............

P

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Comparison with Japan are somewhat inaccurate for the UK.

Japan was a massive producing nation and a massive saving nation when their assets collapsed.

The yen went from 600/dollar to 90/dollar over the course of the past 30 years.

These fundamentals produced Japan's deflation.

The UK is a net importer, no saving nation, non producer. Hence Inflation will likely be our outcome with small bouts of deflation along the way.

Edited by ringledman

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doh, cut the first reply.

I was saying large mega cap 'quality' or 'defensive' stocks are the place to be next decade IMO. These are cheap, have great fundamentals, high dividend payer (better than any cash/bond account), and will perform well in any deflation/inflation environment (against other assets at least).

Jeremy Grantham's view -

http://www.gurufocus.com/news.php?id=100609

Well worth the read.

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doh, cut the first reply.

I was saying large mega cap 'quality' or 'defensive' stocks are the place to be next decade IMO. These are cheap, have great fundamentals, high dividend payer (better than any cash/bond account), and will perform well in any deflation/inflation environment (against other assets at least).

Jeremy Grantham's view -

http://www.gurufocus...s.php?id=100609

Well worth the read.

Nope this type of stock got slaughtered in the high inflation 70s. Grantham's predicted asset returns are useful and have been quite accurate compared to the market timing and technical analysis sorcerors out there, but he is predicating them on some sort of return to a normality that may not occur.

Really, what are the chances that earnings growth will continue at the same pace when profits are already at an all time high as a percent of the economy. And his bearishness on bonds won't play out if deflation is the new normal.

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Nope this type of stock got slaughtered in the high inflation 70s. Grantham's predicted asset returns are useful and have been quite accurate compared to the market timing and technical analysis sorcerors out there, but he is predicating them on some sort of return to a normality that may not occur.

Really, what are the chances that earnings growth will continue at the same pace when profits are already at an all time high as a percent of the economy. And his bearishness on bonds won't play out if deflation is the new normal.

Of all the asset classes equities offer the best risk/return trade off.

Property - Very Overvalued. Low upside. High downside (but most likely will crash through inflation than huge nominal falls in a negative interest rate world). Property is illiquid and falls over years. Hence in a decade will be 40-50% cheaper in real terms, perhaps not nominally.

Bonds - Very overvalued. Low upside. High potential downside. We are at the end of a 30 year bull market in bond yields. Potential to get wiped out for those fixed in at 3 years plus.

Cash - Ok for the short term but long term negative rates will wipe you out. Even Government spun (through hudonic adjustments) CPI and RPI are both positive. Unless they go to a negative number then cash will continue to be erroded.

Equities - 10 years into a bear market. Typically last 15-18 years. Regression to the mean on P/E's. Decent value as regression to the mean can come from earnings increases. Big nominal falls came after the 2000 bubble crashed. Value had in large caps, high yielders.

Commodities - 10 years into their bull market that typically last 20 year cycles.

Equities and commodities offer the best value. They may not keep up with inflation in a high inflation environment but will do much better than cash and bonds that will be destroyed.

Deflation over the long term is unlikely in the UK. Fundamentals dont support it.

Edited by ringledman

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Of all the asset classes equities offer the best risk/return trade off.

Property - Very Overvalued. Low upside. High downside (but most likely will crash through inflation than huge nominal falls in a negative interest rate world). Property is illiquid and falls over years. Hence in a decade will be 40-50% cheaper in real terms, perhaps not nominally.

Bonds - Very overvalued. Low upside. High potential downside. We are at the end of a 30 year bull market in bond yields. Potential to get wiped out for those fixed in at 3 years plus.

Cash - Ok for the short term but long term negative rates will wipe you out. Even Government spun (through hudonic adjustments) CPI and RPI are both positive. Unless they go to a negative number then cash will continue to be erroded.

Equities - 10 years into a bear market. Typically last 15-18 years. Regression to the mean on P/E's. Decent value as regression to the mean can come from earnings increases. Big nominal falls came after the 2000 bubble crashed. Value had in large caps, high yielders.

Commodities - 10 years into their bull market that typically last 20 year cycles.

Equities and commodities offer the best value. They may not keep up withy inflation in a high inflation environment but will do much better than cash and bonds that will be destroyed.

Deflation for a long time unlikely in the UK. Fundamentals dont support it.

What about investing a part of it in diverse emerging economies?

I know they are risky, individually, but with good diversification the individual risks are reduced.

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What about investing a part of it in diverse emerging economies?

I know they are risky, individually, but with good diversification the individual risks are reduced.

I am at least 50% invested in emerging markets with my pension and ISAs. I take the 30 year view and as Faber says, be 50% EM as the EM's now represent 50% of global GDP.

The problem is many EMs have got ahead of themselves interms of valuations (P/Es and Price to Book). Western markets are generally cheaper at present (although US market is quite expensive).

Western high yielding, cash rich firms wilth a large presence in EMs offer good value IMO.

I also love Japan for the longer term. A 30 year bear market leaving price to book at 1.

Edited by ringledman

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Of all the asset classes equities offer the best risk/return trade off.

Property - Very Overvalued. Low upside. High downside (but most likely will crash through inflation than huge nominal falls in a negative interest rate world). Property is illiquid and falls over years. Hence in a decade will be 40-50% cheaper in real terms, perhaps not nominally.

Bonds - Very overvalued. Low upside. High potential downside. We are at the end of a 30 year bull market in bond yields. Potential to get wiped out for those fixed in at 3 years plus.

Cash - Ok for the short term but long term negative rates will wipe you out. Even Government spun (through hudonic adjustments) CPI and RPI are both positive. Unless they go to a negative number then cash will continue to be erroded.

Equities - 10 years into a bear market. Typically last 15-18 years. Regression to the mean on P/E's. Decent value as regression to the mean can come from earnings increases. Big nominal falls came after the 2000 bubble crashed. Value had in large caps, high yielders.

Commodities - 10 years into their bull market that typically last 20 year cycles.

Equities and commodities offer the best value. They may not keep up withy inflation in a high inflation environment but will do much better than cash and bonds that will be destroyed.

Deflation for a long time unlikely in the UK. Fundamentals dont support it.

You seem confident about that. Frankly, I have no idea which is why I own some bonds.

As for property there are some potential opportunities in emerging markets which have very good yields but the problem is you have to pay some steep management fees to access them.

Equities outside the US and maybe China offer decent enough value. It may seem with a 4% yield that you would be get at least that real return even without earnings growth but companies have a habit of cutting the dividend and hoarding cash in hard times.

As for commodities who knows? I have some money in them for the same reason as I do in bonds. Well technically the opposite reason.

Diversification is boring, but only the very lucky gamblers will make a mint over the next 10 years. The rest of us need to accept that returns will be low and that the days of 10% real returns are long gone.

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"On average, European countries will also be better than the U.S. at rationing health costs, which of course in the end must be done. The U.K. may have exceptional credit problems, relatively low productivity, and a vulnerable and bloated financial sector, but it does start with huge advantages in this area. It has promised less to retirees and is more advanced in the reasonable rationing of health costs – not that its population likes either development".

Promised less to retirees? Has he not heard of gold plated public sector pensions then?

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I also love Japan for the longer term. A 30 year bear market leaving price to book at 1.

If you know the price to book values of markets around the world, I have a feeling you are going to do much better than the average investor.

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You seem confident about that. Frankly, I have no idea which is why I own some bonds.

As for property there are some potential opportunities in emerging markets which have very good yields but the problem is you have to pay some steep management fees to access them.

Equities outside the US and maybe China offer decent enough value. It may seem with a 4% yield that you would be get at least that real return even without earnings growth but companies have a habit of cutting the dividend and hoarding cash in hard times.

As for commodities who knows? I have some money in them for the same reason as I do in bonds. Well technically the opposite reason.

Diversification is boring, but only the very lucky gamblers will make a mint over the next 10 years. The rest of us need to accept that returns will be low and that the days of 10% real returns are long gone.

Nobody knows the future so I agree on diversification.

I just have a problem with people on here comparing us to Japan and their deflation when the situation or the fundamentals supporting Japan then and the UK now are so different.

Apart from Japan and the USA in the 19th century, the world has mostly been run on inflation. I don't see this changing for the following reasons -

- China currency to rise.

- Massive printing by central banks.

- Kondratieff cycle pushing up commodity prices.

- Bond yields surely bottoming after their 30 year bull market.

- 3 Billion more people to feed, cloth, run vehicles the next 30 years.

- 3 Billion current Emerging Market citizens wanting a Western Lifestyle - thus pushing up demand for staples and goods.

- Negative trade gap for UK.

If I was to invest in bonds or cash I would be looking at the Asian bond funds or Asian currencies that will likely continue to rise v the indebted West.

http://www.moneyweek.com/investments/stock-markets/moneyweek-asia-economy-rebound-01703.aspx

Edited by ringledman

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What to do with the other 50%? A sizeable position in gold coins as Dr Marc Faber prescribes?

This is a good article on asset allocation and diversification with an Asian slant -

http://www.moneyweek.com/investment-advice/how-to-invest/moneyweek-asia-inflation-deflation-02902.aspx

I dont mind bonds, property, cash providing it is of countries with real fundamentals supporting them - Most of Asia, Canada, Norway, Australia. Not of the indebted West.

Edited by ringledman

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http://dailyreckoning.com/credit-deflation-lands-in-britain/

Credit Deflation Lands in Britain - Falling yields and falling asset prices...........................?

Deflation in credit but inflation in prices? With the fastest GDP growth in four years coming in at 1.1% at market (i.e. unadjusted) prices across the quarter? Economists from Mervyn “monetarist” King to Paul “Keynes re-born” Krugman say this confluence of pain can never happen. So best wheel out the Bank of England’s printing press yet again, just to get reality back on track with theory.

We are going to get poorer, either collapse asset prices, to raise yields, or support asset prices to maintain such absurd yields on cash and property.

Just where is the wage inflation going to come from, suppressed demand, credit contraction, so credit deflation, so the contraction of the money supply, so the opposite to inflation the increase in the money supply, so deflation.

I'll stick with cash, pay off debt, take on no new debt, when its all gone, go to the state, the lender/feeder of last resort.

P

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  • 238 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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