Deflationary collapse and the Reflation Cycle to Come.

[Cosmic Apple]

4 minutes ago, Fence said:

Catching up on my emails and see brokers telling me they can now hold my cash on deposit for up to 90 rather than 30 days so there could be a delay in me getting it back, indeed not even getting it back (they then start talking about the deposit guarantee scheme).  I've been watching a gradual agenda be played out here - reckon this is all preparation for a crisis and bank bail-ins.  The latest change is a tough one to avoid.  All this does however suggest those with access to cash in a crisis could do well in buying bargains, as well as wealth protection.

I shifted all my cash in to NS&I last month, was in Santander 123 accounts but given their changes a while ago it wasn't worth the risk or being in a potentially shonky bank (yes I was a bit slow to do it, been very lazy for a few years on the looking after my money front while I was engaged in other hobbies). Also got the GF to move hers in to NS&I. She won't do anything but cash savings which can be frustrating but it does mean I'll need to hold a little less cash come fun time as I can lean on her for liquidity if needs be

Edit: All i need to do is stave off the GFs desire for a bigger house, that's probably the biggest risk to my cash now especially since I showed some of my hand to her recently so she knows my "can't afford it" line is more BS than I was letting on

Edited January 13, 2018 by Northern Welsh Midlander

[durhamborn]

9 minutes ago, Funn3r said:

Sorry if you already explained this DB but to buy treasuries, how are you getting round the HL ban on TLT, is there another one which they haven't banned yet? 

IBTL is pretty much the same and is quoted in London so you can buy it.

[durhamborn]

13 minutes ago, Fence said:

Catching up on my emails and see brokers telling me they can now hold my cash on deposit for up to 90 rather than 30 days so there could be a delay in me getting it back, indeed not even getting it back (they then start talking about the deposit guarantee scheme).  I've been watching a gradual agenda be played out here - reckon this is all preparation for a crisis and bank bail-ins.  The latest change is a tough one to avoid.  All this does however suggest those with access to cash in a crisis could do well in buying bargains, as well as wealth protection.

Im not 100% sure if this sell off will take the banks down,not the retail banks anyway.I think the equity and junk bond markets will take the hit.CBs will flood the system with liquidity pretty sharp.There might be some equity going to zero and senior bond holders wiped out,but deposits i dont think so.In a debt deflation of the scale i thinks ahead the CBs will have the room to print huge amounts,and they will.

 

[Majorpain]

5 minutes ago, durhamborn said:

Im not 100% sure if this sell off will take the banks down,not the retail banks anyway.I think the equity and junk bond markets will take the hit.CBs will flood the system with liquidity pretty sharp.There might be some equity going to zero and senior bond holders wiped out,but deposits i dont think so.In a debt deflation of the scale i thinks ahead the CBs will have the room to print huge amounts,and they will.

I agree, on a rare visit to the bank dropping off a check this morning there was an obvious label on the glass with "your money is protected by the FSCS up to £85k".  All banks along the high street had the same sticker, so people are unlikely to do a Northern Rock and queue outside trying to get their money out.

Whats the Bank of England Bank stress test planning for?

•  World GDP falls by 2.4%.
•  UK GDP falls by 4.7%.
•  UK unemployment rises to 9.5%.
•  UK residential property prices fall by 33%.
• UK commercial real estate prices fall by 40%.
• UK Bank Rate rises and peaks at 4%

So a pretty severe hit, and thats without any extra money being ploughed in.  2008 was a problem because the liquidity dried up as they didnt know who had the toxic bonds, when the US goverment stepped in things got better fast.

The only flys in the ointment are Deutsche banks damn derivatives and who is going to have the fun of defusing that $47T financial bomb, as well as those Italian banks which refuse to die.  And China, i love China!

[Fence]

1 hour ago, durhamborn said:

Im not 100% sure

39 minutes ago, Majorpain said:

I agree

Time to place our bets then.

BTW, pretty sure, subject to a black swan, the crisis will be in the Euro zone as bond rates rise (and they have negative rates!) and bank capital gets wiped out (government debt holdings are deemed zero risk for the reserve calc!).  But the response will be global, to a point, especially because of the global banks, counterparties, etc are often domiciled in......the UK!

You all sure where the brokers etc are putting your money?  II says it may (do?) use European banks.  What kind of money will you get after three months?  Three months long enough to come up with a government plan like partial cash for bonds and the like.  What about your money above £85k, per institution, and you may have holdings you may not know about.  And how long before you see the £85k?  And will all the £85k be in cash?  Remember how they locked those German property funds?  Cyprus 1.0?  Cyprus 2.0?  India?  Poland?  Recent increase in UK banknote changes (trial runs?).  Different protections for the cash and investment components of each of trading, ISA, and SIPP accounts.

Many more such issues once you start looking and thinking about it, without being too dramatic.  Plus now, more than ever, is time to think the unthinkable.  Invest with good title (housing?!X!) or put the cash somewhere safe, if you can find anywhere.  This could be more than just deflation.  Just "being in cash" may not be enough.

Edited January 13, 2018 by Fence

[Fence]

43 minutes ago, Majorpain said:

Whats the Bank of England Bank stress test planning for?

•  World GDP falls by 2.4%.
•  UK GDP falls by 4.7%.
•  UK unemployment rises to 9.5%.
•  UK residential property prices fall by 33%.
• UK commercial real estate prices fall by 40%.
• UK Bank Rate rises and peaks at 4%

So a pretty severe hit,

Not very, and depends what they do with these assumptions in their analysis.  The stress tests are largely smoke, other than a way for the government to have a closer look at the books.

Edited January 13, 2018 by Fence

[Fence]

6 minutes ago, Fence said:

Not very, and depends what they do with these assumptions in their analysis.  The stress tests are largely smoke, other than a way for the government to have a closer look at the books.

More reasonable to me, as the upper of one of three scenarios to be worked:

• World GDP falls by 5%
• UK GDP falls by 12%
• UK unemployment rises to 21%
• UK residential property prices fall by 55%
• UK commercial real estate prices fall by 70%
• UK Bank Rate rises and peaks at 15%

Edited January 13, 2018 by Fence

[Majorpain]

2 minutes ago, Fence said:

More reasonable to me, as the upper of one of three scenarios to be worked:

• World GDP falls by 5%
• UK GDP falls by 12%
• UK unemployment rises to 21%
• UK residential property prices fall by 55%
• UK commercial real estate prices fall by 70%
• UK Bank Rate rises and peaks at 15%

The problem with forecasting is i dont have a crystal ball as to exactly what is going to happen!  Those figures may well be plausible, but my aim of putting up the stress test figures was to show that the powers that be are showing "a scenario" of what may happen.  I would be surprised if there wasnt a spreadsheet marked top secret in the BOE that shows which banks would be in trouble with numbers like that.  They will not publicise it though!

Im firmly of the opinion that the last 10 years have been purely to give the banks enough time to recapitalise, so when the plug gets pulled on asset prices, they dont all start falling over.

[wish I could afford one]

On 11/01/2018 at 12:29 PM, Sancho Panza said:

I would post my returns but I wouldn't have the first clue how to work them out as we've used some of the income to live.In a closed loop savings account, it's easy enough to work out.For people shunting money in and out it's harder.

I also think worrying about annualized returns can lead you into some of the more eye watering losses that occur infrequently.

The questions I ask my self( and remind myself on regular basis)

are we up over ten years?

are we up over twenty years.

They're the timelines I fret about.

Another issue is your final denominator-for most of us sterling, for others ounces of gold etc

Which alludes to how subjective measuring returns can be.

Having said that 5.8% is an excellent return annually and way better than most fund managers.

...

You can easily calculate an annualised return, including accounting for ins and outs, by using the XIRR function in Excel.

I've just rolled up my 2017 performance for my total mechanical portfolio and the annualised nominal return ended up at 8.0%.  Nothing compared to the S&P 500's 21.1% but when viewed as a portfolio that contains 100% of the cash for a home purchase and which is designed around worst case historical drawdown sequence of returns I'm happy with a real 4.1% after all investment expenses and withholding taxes.

[StarsEnd]

2 hours ago, Fence said:

Time to place our bets then.

BTW, pretty sure, subject to a black swan, the crisis will be in the Euro zone as bond rates rise (and they have negative rates!) and bank capital gets wiped out (government debt holdings are deemed zero risk for the reserve calc!).  But the response will be global, to a point, especially because of the global banks, counterparties, etc are often domiciled in......the UK!

You all sure where the brokers etc are putting your money?  II says it may (do?) use European banks.  What kind of money will you get after three months?  Three months long enough to come up with a government plan like partial cash for bonds and the like.  What about your money above £85k, per institution, and you may have holdings you may not know about.  And how long before you see the £85k?  And will all the £85k be in cash?  Remember how they locked those German property funds?  Cyprus 1.0?  Cyprus 2.0?  India?  Poland?  Recent increase in UK banknote changes (trial runs?).  Different protections for the cash and investment components of each of trading, ISA, and SIPP accounts.

Many more such issues once you start looking and thinking about it, without being too dramatic.  Plus now, more than ever, is time to think the unthinkable.  Invest with good title (housing?!X!) or put the cash somewhere safe, if you can find anywhere.  This could be more than just deflation.  Just "being in cash" may not be enough.

My concern as well; having my lifetimes savings stolen by some thieving banker/politician. I know DB has stated that he doesn't think it likely but I can't help worrying about it. The argument goes that the BoE will just print money to cover losses but why didn't the European Central Bank just print euros to bail out the Cypriot banks? Why will it be different in the UK?

I'm mostly in cash, US treasuries, premium bonds and gold/silver bullion. The moment things go t1ts up and we get a decent fall in the stock markets I'm planning on moving my money into certain stocks fast - before the ******* have time to steal it.

Mad to have to be planning your life like this. I wonder if the politicians/bankers have any real idea as to how much they've f*rked everything up. I've even given up working ten years early as it's no longer worth the hassle.

[Fence]

3 hours ago, Majorpain said:

I'm firmly of the opinion that the last 10 years have been purely to give the banks enough time to recapitalise, so when the plug gets pulled on asset prices, they dont all start falling over.

Absolutely.

[Fence]

2 hours ago, wish I could afford one said:

Nothing compared to the S&P 500's 21.1%

Note that's partially in falling USD.

[Fence]

1 hour ago, StarsEnd said:

've even given up working ten years early as it's no longer worth the hassle.

Me too, sort of (saving doing my own building projects) but plan to go back contracting on a "pay per screw" me basis!

[Fence]

4 hours ago, Fence said:

More reasonable to me, as the upper of one of three scenarios to be worked:

• World GDP falls by 5%
• UK GDP falls by 12%
• UK unemployment rises to 21%
• UK residential property prices fall by 55%
• UK commercial real estate prices fall by 70%
• UK Bank Rate rises and peaks at 15%

Walked the dog and decided I was being too optimistic when looking at Spain, Ireland, Cyprus, etc.  This data set would seem more the middle of three scenarios.  Point being, the official metrics being officially used are, by design, a joke.

[StarsEnd]

6 minutes ago, Fence said:

Me too, sort of (saving doing my own building projects) but plan to go back contracting on a "pay per screw" me basis!

I now limit any work I do to 12k a year or £17k at a push (12k + 5k tax free divi). This is a couple of months work a year max. Wish I'd done it years ago rather than spending hours a day commuting and sitting in a dull office to support a host of parasites.

[Fence]

2 hours ago, wish I could afford one said:

You can easily calculate an annualised return, including accounting for ins and outs, by using the XIRR function in Excel.

I've just rolled up my 2017 performance for my total mechanical portfolio and the annualised nominal return ended up at 8.0%.  Nothing compared to the S&P 500's 21.1% but when viewed as a portfolio that contains 100% of the cash for a home purchase and which is designed around worst case historical drawdown sequence of returns I'm happy with a real 4.1% after all investment expenses and withholding taxes.

Is that 8% capital and income returns combined?  If so mine is similar, as an income only portfolio.  That said, I would probably have been even more conservative if it was my house fund.  Mine is in a tax wrapper - you seem to be paying a lot of tax and expenses.

[Fence]

3 minutes ago, StarsEnd said:

I now limit any work I do to 12k a year or £17k at a push (12k + 5k tax free divi). This is a couple of months work a year max. Wish I'd done it years ago rather than spending hours a day commuting and sitting in a dull office to support a host of parasites.

Are you gainfully employed for the remaining 10 months, "gainfully" of course having a unique meaning!  I would certainly work only until I get into the red zone.  Would love to work more but I'm an old fashioned and lonely capitalist!

[wish I could afford one]

7 minutes ago, Fence said:

Is that 8% capital and income returns combined?  If so mine is similar, as an income only portfolio.  That said, I would probably have been even more conservative if it was my house fund.  Mine is in a tax wrapper - you seem to be paying a lot of tax and expenses.

Yes that's total return so is capital + investment income.  Both the 8.0% and the 4.1% include expenses and taxes - the difference is the first is nominal and the second is real.  Expenses which include buy/sell costs, spreads, product charges and wrapper charges are currently at 0.23% per annum.

[wish I could afford one]

26 minutes ago, Fence said:

Note that's partially in falling USD.

Agreed.  In £'s my US investments had capital gains of 'only' 9.0% after expenses.  Add say 1.6% for dividends and even in the toilet paper that is £'s returns are down to 10.6%.

[StarsEnd]

17 minutes ago, Fence said:

Are you gainfully employed for the remaining 10 months, "gainfully" of course having a unique meaning!  I would certainly work only until I get into the red zone.  Would love to work more but I'm an old fashioned and lonely capitalist!

Used to be a contractor for over twenty years with the Government on my back for almost all of it. Finally got fed up with it all so jacked it in. I would only contract for two months a year now and then leave mid-project if necessary rather than pay stupid levels of tax. I do have another business venture which is in its infancy. If that takes off then I'll put as much as possible in a SIPP or scale it back to minimise taxes. Not really worth going over the VAT threshold.

[Fence]

7 minutes ago, wish I could afford one said:

Agreed.  In £'s my US investments had capital gains of 'only' 9.0% after expenses.  Add say 1.6% for dividends and even in the toilet paper that is £'s returns are down to 10.6%.

Amazing this currency stuff.  But then worked for me in 2007.  My mainly US portfolio lost a lot but not so bad when converted into a collapsed GBP, and then that amount was used to offset future CGT gains. Took the sting out of it.

And this currency, or base unit of measure, stuff is hard in the UK because we have such an open, high import economy.  Easier for the Americans say, who tend to buy more of  what they produce.  Makes investing a "n" dimensional game.

[durhamborn]

8 minutes ago, StarsEnd said:

I now limit any work I do to 12k a year or £17k at a push (12k + 5k tax free divi). This is a couple of months work a year max. Wish I'd done it years ago rather than spending hours a day commuting and sitting in a dull office to support a host of parasites.

I have since i was 39,best thing i ever did.I earn the tax allowance + dividend income.Since then though (7 years) iv never yet needed to take any dividend income and iv re-invested it instead.This next year though i dont think il even make the tax allowance,probably around £6k,but thats fine,iv made the other £5k in the last few weeks on a few investments.My capital would last 24 years if i started to run it down without zero return on what i need.Id be pension age then with a small pension and state pension even if i spent all my capital,though i fully expect to grow it.

My time is much better spent now.I volunteer for wildlife trusts,provide free child care for my children and am able to look after and spend lots of time with my dad.Il never work again i doubt.

[Fence]

4 minutes ago, StarsEnd said:

Used to be a contractor for over twenty years with the Government on my back for almost all of it. Finally got fed up with it all so jacked it in. I would only contract for two months a year now and then leave mid-project if necessary rather than pay stupid levels of tax. I do have another business venture which is in its infancy. If that takes off then I'll put as much as possible in a SIPP or scale it back to minimise taxes. Not really worth going over the VAT threshold.

Sounds like my plan, plus a van (per the "wheels" thread) for long periods in the warmth when resting.  Nice to know it's possible.  Contracted once and loved it - felt more secure than a permie in a perverse way 'cause I had voluntarily taken the King's schilling.  Plus would love to create my own business.  It's amazing how different things look once you disengage from the web that so easily entangles us.

[durhamborn]

8 minutes ago, Fence said:

Amazing this currency stuff.  But then worked for me in 2007.  My mainly US portfolio lost a lot but not so bad when converted into a collapsed GBP, and then that amount was used to offset future CGT gains. Took the sting out of it.

And this currency, or base unit of measure, stuff is hard in the UK because we have such an open, high import economy.  Easier for the Americans say, who tend to buy more of  what they produce.  Makes investing a "n" dimensional game.

I see sterling crashing as probably the biggest threat to UK savers.I ignore people with lots of leverage,they are smoked anyway.

When i did a lot of work on the currencies November last year part of the dollar call from 102 to 88 (now i see 86 maybe) was sterling up from $1.22 to $1.39.We are nearly there.I see the £ going to $1.10 probably $0.90 in a debt deflation.I also then see inflation running way higher than rates throughout the next cycle.Welfare spending in the Uk is far higher than what the productive economy can pay.The crash and next cycle will destroy that.Its one of the reasons the government will have to increase the productive capacity of the economy with massive investment and direct money away from welfare into investment.

[StarsEnd]

10 minutes ago, durhamborn said:

I have since i was 39,best thing i ever did.I earn the tax allowance + dividend income.Since then though (7 years) iv never yet needed to take any dividend income and iv re-invested it instead.This next year though i dont think il even make the tax allowance,probably around £6k,but thats fine,iv made the other £5k in the last few weeks on a few investments.My capital would last 24 years if i started to run it down without zero return on what i need.Id be pension age then with a small pension and state pension even if i spent all my capital,though i fully expect to grow it.

My time is much better spent now.I volunteer for wildlife trusts,provide free child care for my children and am able to look after and spend lots of time with my dad.Il never work again i doubt.

Since I jacked it all in last year I've been logging every penny I spend in a spreadsheet. When you're kids are grown and you have no housing costs it's amazing how little you live a very good life on. Thousand pounds a month for me on average and I can live very well. I can see why the Government are so desperate to keep us all at the grindstone with high house prices being how they do it.