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Penny Drops On Credit, Asset Markets And Yield

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http://www.cnbc.com/id/38739845

Jump to 5 minutes 45 seconds in and listen to the end (another 4 minutes).

He starts talking about the amount of new debt issuance by the world as a whole in 2011.

Watch and listen to the reaction by the presenters - very obviously everyone realises the game is up.

Edited by AvidFan

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http://www.cnbc.com/id/38739845

Jump to 5 minutes 45 seconds in and listen to the end (another 4 minutes).

He starts talking about the amount of new debt issuance by the world as a whole in 2011.

Watch and listen to the reaction by the presenters - very obviously everyone realises the game is up.

That's priceless.

Cheers. :)

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printy printy? :D

I think his argument is that the Fed is done.

Now what?

It's crunch time. Which way will they go?

It's sounds like this guy is buying into the possibility of return of capital being a good thing, given the rest of the world is investing for the old 8%+ YoY.

It's going to end in disaster.

More huge losses over the next few years by investors wrong-footed into assets, followed by huge money printing to fix the problems later on. Just a lurch from one huge mess to the next. Get ready.

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That looked liked three non economists struggling with economics. :lol:

And yet the premise is basically sound - $4.5 trillion in new debt and that for central banks to issue that kind of funny money is just way too suspect. It actually leads to the logical conclusion of monetary contraction - which no-one on HPC or in that clip actually believes or wants to believe.

Edited by AvidFan

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I think his argument is that the Fed is done.

Now what?

It's crunch time. Which way will they go?

It's sounds like this guy is buying into the possibility of return of capital being a good thing, given the rest of the world is investing for the old 8%+ YoY.

It's going to end in disaster.

More huge losses over the next few years by investors wrong-footed into assets, followed by huge money printing to fix the problems later on. Just a lurch from one huge mess to the next. Get ready.

yes exactly, the lesson of the 70s was to pick up assets, the 70s which is part of the same much longer credit cycle (this is important) will have done its job perfectly by teaching people to get into asssets, thus allowing the market to inflict maximum damage as the problems and results are going to be diametric to the 70s results which were not peak credit cycle, the 70s and their result were in fact necessary to create the peak credit of the noughties or something like that

Ive been in this camp for a while, massive asset price depreciation (90% stock markets / 70%+ property) and the massive inflation to try to technically fix the problem that causes for contractual pensions, i see no reason over the last decade to change from this view and the massive 20 year H&S has been forming perfectly on the DOW the whole time as a result of every action taken.

Edited by Tamara De Lempicka

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And yet the premise is basically sound - $4.5 trillion in new debt and that for central banks to issue that kind of funny money is just way too suspect. It actually leads to the logical conclusion of monetary contraction - which no-one on HPC or in that clip actually believes or wants to believe.

Is that right? The BoE has printed 200 billion pounds directly.

If that goes through the banking system which has about 5 percent fractional reserve you get a multiplier of 20. Is that is about 4 trillion pounds by the BoE alone?

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And yet the premise is basically sound - $4.5 trillion in new debt and that for central banks to issue that kind of funny money is just way too suspect. It actually leads to the logical conclusion of monetary contraction - which no-one on HPC or in that clip actually believes or wants to believe.

He must have been reading my posts from a year and a half ago - or independently came to the same number as me by doing the calculations. Where I was saying the US central bank would have to print $4.5 trillion a year to fill the gap of monetary expansion that is not happening.

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He must have been reading my posts from a year and a half ago - or independently came to the same number as me by doing the calculations. Where I was saying the US central bank would have to print $4.5 trillion a year to fill the gap of monetary expansion that is not happening.

Well, I think he's alluding to the fact the whole world is out of pocket by that amount YoY. I understand the real budget deficit in the US is around 14%, half of which is structural. The one presenter is suprised when he thinks the implication is that the US needs to restructure - and yet a couple of trillion of that $4.5 trillion is their problem.

Edited by AvidFan

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Interesting... basically, the US will have to do what the UK is doing... stop printing and enter an age of austerity...

There was an interesting article in The Times yesterday saying that the only parts of the UK now booming are the areas based on military spending and/or around military bases. Bascially, the US needs war to keep the economy going.

I find the thoughts expressed in this video worrying though. Cash is not even a safe place and, as I have said numerous times in recent weeks, I think many HPCers with sieable savings need to keep an eye on house prices and gauge a point when they hsould jump in.

Yes, if the above video is right then houses are just another asset destined to fall, but if your cash is being eroded then at least many will have a home to live in.

The video was good in explaining why the DOW is rising - basically pension funds trying to get a return in order to fulfill their pension obligations by buying stocks. If and when these firms stop then surely the DOW will collapse?

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If it is trade deficit - then someone has a trade surplus.

If it is a budget deficit - then the mirror image (wealth) is in the private sector.

(NOTE: not strictly 100% but good enough (because they interact)).

Yes. I should have said the world's governments, G20 or G30...

Could get interesting as the machine jams. Asset valuations and so on. Private wealth isn't really cash is it... I mean - there's $6 trillion in cash globally supposedly... A fair chunk of it is in loan deposits or outright deposits on assets that need to be bought and sold to be valued at anywhere near their original prices... negative equity, paper losses and all that... it's a subtle interplay of rising economic prospects that would mean the $6 trillion "spent" or traded would raise enough tax revenues, etc, etc...

It ain't gonna happen. It might not even be a banking or credit system failure this time - just asset price "failure"...

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The video was good in explaining why the DOW is rising - basically pension funds trying to get a return in order to fulfill their pension obligations by buying stocks. If and when these firms stop then surely the DOW will collapse?

Who knows with the US? The Dow could trade at around 8K if the Fed "rescues" the US again, but it wouldn't mean much given what the dollar will be doing... 8K is more like 4K in my book if they debase the dollar further, i.e. I think we're going back to the dark ages on credit one decade at a time. Look forward to the 90s again.

Sterling I think will be strictly middle of the roads. But when this all plays out, if it plays out in a orderly fashion (!!!) I expect sterling to be higher on average against the dollar than it is today and has been for the last decade or two.

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More huge losses over the next few years by investors wrong-footed into assets, followed by huge money printing to fix the problems later on. Just a lurch from one huge mess to the next. Get ready.

By doing what?

Ive been in this camp for a while, massive asset price depreciation (90% stock markets / 70%+ property) and the massive inflation to try to technically fix the problem that causes for contractual pensions, i see no reason over the last decade to change from this view and the massive 20 year H&S has been forming perfectly on the DOW the whole time as a result of every action taken.

So can I be clear on this - you see massive declines in nominal asset prices for the next few years (2010-2013 say), but then massive increases in them due to money printing over the years subsequent to that?

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Who knows with the US? The Dow could trade at around 8K if the Fed "rescues" the US again, but it wouldn't mean much given what the dollar will be doing... 8K is more like 4K in my book if they debase the dollar further, i.e. I think we're going back to the dark ages on credit one decade at a time. Look forward to the 90s again.

Sterling I think will be strictly middle of the roads. But when this all plays out, if it plays out in a orderly fashion (!!!) I expect sterling to be higher on average against the dollar than it is today and has been for the last decade or two.

no need to be shy and mess about with piddly falls 1000 Dow,600 FTSE,1500 Niknak looks about right to me, but those numbers are still a good 3 years away :D

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So can I be clear on this - you see massive declines in nominal asset prices for the next few years (2010-2013 say), but then massive increases in them due to money printing over the years subsequent to that?

Very, very difficult to measure these losses given that it appears assets are also reacting to national currency fluctuations now, which have been in excess of 50% over the last few years.

I've always said the biggest drops in UK house prices will be seen by someone in a foreign currency, bought at peak sterling valuation in 2007, and used in a way that provides maximum additional gains - say high yielding bonds, etc. Converted back to sterling by 2013 will see a 70% gain WRT UK houses, yes.

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By doing what?

So can I be clear on this - you see massive declines in nominal asset prices for the next few years (2010-2013 say), but then massive increases in them due to money printing over the years subsequent to that?

yep, pretty much although id extend the declines out to about 2015 for some sort of bottom and i dont think the declines will get going full steam again until end of this year,start of next year in asset prices

Edited by Tamara De Lempicka

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Very, very difficult to measure these losses given that it appears assets are also reacting to national currency fluctuations now, which have been in excess of 50% over the last few years.

I've always said the biggest drops in UK house prices will be seen by someone in a foreign currency, bought at peak sterling valuation in 2007, and used in a way that provides maximum additional gains - say high yielding bonds, etc. Converted back to sterling by 2013 will see a 70% gain WRT UK houses, yes.

Have to add - I'm probably up 15% in sterling cash terms over the last 3 years purely by staying in money market funds, cash savings and index-linked bonds. Combined with 12% house prices falls since 2007, I'm up 27%. I did make some money on gold, so I'm probably up 30%. If I'd bought US treasuries in 2007 with my savings at the time, I could be up nearer to 50%...

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Very, very difficult to measure these losses given that it appears assets are also reacting to national currency fluctuations now, which have been in excess of 50% over the last few years.

I've always said the biggest drops in UK house prices will be seen by someone in a foreign currency, bought at peak sterling valuation in 2007, and used in a way that provides maximum additional gains - say high yielding bonds, etc. Converted back to sterling by 2013 will see a 70% gain WRT UK houses, yes.

But you pay tax on any Sterling gains... between the tax you pay and the fees for moving money into foreign currencies... and moving it back again... and then there is the risk...

In 2007 at the height of Sterling buying Euros seemed the way to go. If you had converted into Euros back then, paid the various fees, etc, you most likely would have lost money?

If you were lucky to spot Norweigan Krona - who was - then you would be ahead but just how many currencies would you be ahead on now? Not many I guess.

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But you pay tax on any Sterling gains... between the tax you pay and the fees for moving money into foreign currencies... and moving it back again... and then there is the risk...

In 2007 at the height of Sterling buying Euros seemed the way to go. If you had converted into Euros back then, paid the various fees, etc, you most likely would have lost money?

If you were lucky to spot Norweigan Krona - who was - then you would be ahead but just how many currencies would you be ahead on now? Not many I guess.

It is all very difficult, I agree. Maximise yield with minimum risk and maximise all your allowances with every penny you own. With cash, I run regular savings accounts and all sorts - used to have a CITRA too... 6.2% tax free for 5 years was a good deal in my book.

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But you pay tax on any Sterling gains... between the tax you pay and the fees for moving money into foreign currencies... and moving it back again... and then there is the risk...

In 2007 at the height of Sterling buying Euros seemed the way to go. If you had converted into Euros back then, paid the various fees, etc, you most likely would have lost money?

If you were lucky to spot Norweigan Krona - who was - then you would be ahead but just how many currencies would you be ahead on now? Not many I guess.

the chf 2.40 3-4 years ago,currently 1.60, thats nearly 35% in the timeframe without taking into acount the actual houseprice falls, youd also have done well in the dollar and i massively favour the dollar over the next 2-3 years to any european currency, including the chf and nok (although i might be completely wrong on that)

Edited by Tamara De Lempicka

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the chf 2.40 3-4 years ago,currently 1.60, thats nearly 35% in the timeframe without taking into acount the actual houseprice falls, youd also have done well in the dollar and i massively favour the dollar over the next 2-3 years to any european currency, including the chf and nok (although i might be completely wrong on that)

Yes, that would be a nice earner... but it is a risky game is it not. The Swiss Franc could have collapsed with all of Obama's investigations into Swiss banks.

Yes, you can make a lot from currency but it appears to be, to me, a risky game with huge elements of luck.

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the chf 2.40 3-4 years ago,currently 1.60, thats nearly 35% in the timeframe without taking into acount the actual houseprice falls, youd also have done well in the dollar and i massively favour the dollar over the next 2-3 years to any european currency, including the chf and nok (although i might be completely wrong on that)

You could also look at managed currency funds - i.e. let someone else worry about the mix and yields...

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Yes, that would be a nice earner... but it is a risky game is it not. The Swiss Franc could have collapsed with all of Obama's investigations into Swiss banks.

Did look at the CHF - it was a good bet - but at the time, UBS looked very dodgy - and with a balance sheet several times the country's GDP - as well as $65 billion Swiss central bank swaps to the Fed... I just couldn't do it. The Yen is ripe for a huge fall too. It's balancing the unwinding of the carry trade with what you know is the eventual conclusion...

Edited: and all those Hungarian mortgages written in CHF... You knew the CHF would rocket, provided the solvency of all those debtors held. Problem is, in 2008 - it was full on, panic mode. Quite why I thought the pound would offer any more protection overall than any other currency, I have no idea.

Certainly, when peak oil flow realy, really starts to bite, you want to be in sterling.

Edited by AvidFan

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  • 150 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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