Deflationary collapse and the Reflation Cycle to Come.

[StarsEnd]

2 minutes ago, durhamborn said:

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.

I know you've said before that you think the deflation will be short and sharp. If the Government respond quickly with massive printing will this not stop any big falls in housing very quickly?

[winkie]

57 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.

 

[Fence]

7 minutes ago, durhamborn said:

best thing i ever did

I recently did some research on this website and noted, I think Wikipedia, saying it's inhabited by doomsters or something like that.  Gotta smile.  Talk about missing the point.  If HPI can cause questioning people to question assumptions, supposed truths, etc and come up with alternatives, using this forum, then that's massive.  Only possible  spoiler is those who, understandably so, use the opportunity to merely attack boomers or whatever rather than seize the true opportunities being a member presents.  Maybe we are just at different points along a modified Kubler-Ross curve: Denial, Anger, Bargaining,.... but certainly not acceptance!

[Fence]

8 minutes ago, durhamborn said:

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.

I couldn't disagree even if I wanted to, although not so sure yet about massive spending but give me time.  Human nature precludes people from realistically thinking about how bad it could get.  I'm down South right now.  OK, not the best area but a true and almost scarey dump.  All I can think of is Detroit.  And that's not how bad it can get but more how it will look in the next five years or so.

[Fence]

15 minutes ago, StarsEnd said:

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.

Spot on.  I also maintain a spreadsheet on the basis you cannot control what you do not know.  After all, it's what I would do at work.  So easy to download bank and credit card statements, merge them, analyse them, and action the results.  One example was to see vehicle costs and to buy a newer lower cost car.  And energy and telecoms costs,  Just the process makes me spend less.

[Fence]

17 minutes ago, winkie said:

 

Thanks.  I was going to put a bell in my office to ring each time I get closer on my journey of enlightenment.  This will do nicely instead!  Well, a shorter version maybe!

[wish I could afford one]

25 minutes ago, StarsEnd said:

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.

I've done this for a long time now.  This is my latest view:

It's all about rent costs for me.  If I net off rent (have the cash to buy in a far off land) & work (don't plan on doing that for much longer) I'm at £1,071.  I'm planning on EUR15,000 before I bolt fun money into the equation post relocation and home purchase which includes 1% allocation for home repairs and assumes a 'new' car every 10 years.. 

[winkie]

16 minutes ago, Fence said:

Spot on.  I also maintain a spreadsheet on the basis you cannot control what you do not know.  After all, it's what I would do at work.  So easy to download bank and credit card statements, merge them, analyse them, and action the results.  One example was to see vehicle costs and to buy a newer lower cost car.  And energy and telecoms costs,  Just the process makes me spend less.

Cut out as many of the direct debits as possible, the rental payments......keep the credit card, but no credit longer than one month interest free.....reduce inflation by altering spending to reduce costs....do what you can, cook yourself and shop well, walk, cycle, improve your mental well being by appreciating nature and wildlife ......the best things in life are free.

 

[StrugglingMillennial]

Put the BBC news on, it would seem that even if your a building company that is deemed to big to fail theres a chance you might get bailed out.

Corporate socialism at its finest!

Looks increasing likely it will be the public that takes the hit in the downturn so that these companies can survive.

[Castlevania]

I second the spreadsheet expense thing. The dread of adding to it instantly curbs the thought of buying anything but essentials. Personal austerity as I like to call this sort of thing.

[Bricks n' mortar]

There better not be a bailout.  I'm a builder.  Nothing like the scale of Carillion, because I'm doing it without debt.  But if they go out the game, their work gets spread round more responsible contractors - which is how it should be. 
If I'm, (as a taxpayer), gonna have to bail out someone doing the same trade as me, just because they were crap at it - well, why should I go on working to pay those taxes?  Might as well emigrate.

 

[pmgdawau]

10 hours ago, durhamborn said:

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

Hi, assuming IBTL is for preservation of wealth, how certain are you that you would get your money back if things go as expected ?

[Thorn]

Addicted to this brilliant thread. Watching Carillion squirm and if they peg it with no bailout the panic and contagion could spread especially if their pension fund is screwed.

While watching all this play out, I am meanwhile still waiting for previous pension provider Nucleus to stop f***ing around and just bloody transfer my pension over to newly registered HL SIPP. Decided after reading this thread and checking out  all the options.

It’s been delay after request for more information after delay from Nucleus.

Their latest reason for delay is they are now telling HL they never received latest request. So HL are again on the case and let me know they have sent request by registered post and will let me know as soon as there’s an update.

So far very impressed with HL.

As I wait for the transfer, reading this thread and reading around it as much as I can, waiting to decide how to manage the SIPP once it gets funds. 

And its feeling eerily like the run up to the GFC out there I think.

 

 

 

Edited January 13, 2018 by Thorn

[StrugglingMillennial]

22 minutes ago, Bricks n' mortar said:

There better not be a bailout.  I'm a builder.  Nothing like the scale of Carillion, because I'm doing it without debt.  But if they go out the game, their work gets spread round more responsible contractors - which is how it should be. 
If I'm, (as a taxpayer), gonna have to bail out someone doing the same trade as me, just because they were crap at it - well, why should I go on working to pay those taxes?  Might as well emigrate.

 

Plenty of people already doing that but theres always a sucker that will take their place. 

[Arpeggio]

18 minutes ago, Bricks n' mortar said:

There better not be a bailout.  I'm a builder.  Nothing like the scale of Carillion, because I'm doing it without debt.  But if they go out the game, their work gets spread round more responsible contractors - which is how it should be. 
If I'm, (as a taxpayer), gonna have to bail out someone doing the same trade as me, just because they were crap at it - well, why should I go on working to pay those taxes?  Might as well emigrate.

That makes it even more annoying. I can't stand charlatans in my line of work even though I say to myself they are just con men like in any con man in any other line of work.

Positive noises from May and Cable so far regarding that. Perhaps they know what's politically expedient and what isn't http://www.mirror.co.uk/news/politics/theresa-resisting-taxpayer-bailout-building-11847118

When I invest money I learn of the risks and make my choices. Shame that lot want to be coddled.

[durhamborn]

56 minutes ago, pmgdawau said:

Hi, assuming IBTL is for preservation of wealth, how certain are you that you would get your money back if things go as expected ?

Pretty certain as long as the US dont default,and they wont.

[durhamborn]

1 hour ago, Bricks n' mortar said:

There better not be a bailout.  I'm a builder.  Nothing like the scale of Carillion, because I'm doing it without debt.  But if they go out the game, their work gets spread round more responsible contractors - which is how it should be. 
If I'm, (as a taxpayer), gonna have to bail out someone doing the same trade as me, just because they were crap at it - well, why should I go on working to pay those taxes?  Might as well emigrate.

 

Exactly.The economy is stuffed with companies who have borrowed massive amounts and in doing so put out of business others who built capital over time.The government need to keep their nose out.Bond holders and banks should take the hit.They all need a lesson in the  most important thing in capitalism,the cost of money.First of many to go under as this debt deflation takes hold.

Edited January 13, 2018 by durhamborn

[Sancho Panza]

14 hours ago, Majorpain said:

They are still being spoon fed easy money by the BOE, i doubt that anything will appear in any charts whilst QE is flowing through the economy.  That will however just make any inevitable crash much worse IMO.

http://www.telegraph.co.uk/business/2017/01/30/bank-england-pumps-5bn-firms-20bn-banks-keep-interest-rates/

The drop off in demand is what this i all about and then all hell will break loose on bank balance sheets as they take losses and have to rein credit creation in which in turn will  force more losses on the banks

Also see below re Mish

12 hours ago, durhamborn said:

 

The talk of inflation is getting the markets drunk,but liquidity is about to go negative,and the CBs will tighten a hugely leveraged system into a disaster.A credit deflation is about to hit and very few see it coming,thats one reason the falls will be so epic.

Mish outlines the situation below.Does this make it more likely that velocity wil go up.....or down?

https://www.themaven.net/mishtalk/economics/median-family-net-worth-under-1989-level-debt-to-money-worst-since-62-cwXTp9wGcEutEtpQXgNd0A

'As the stock market soars to new highs, here's some sobering statistics to consider.

The stock market is at an all-time high but Americans Owe More, Save Less, and are Poorer Than in Decades.

Sobering Stats

1. A greater share of Americans have more debt than money in the bank than at any point since 1962, according to Deutsche Bank economist Torsten Slok.
2. 30.4% of US families have negative net worth despite the recovery in housing and the stock market.
3. Median net worth is below where it was in 1989.
4. Inflation adjusted, net worth may be the worst in history. $78,000 is not worth what it was in 1989, to say the least.'

 

Edited January 13, 2018 by Sancho Panza

[Sancho Panza]

 

10 hours ago, Majorpain said:

 

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.

I think the big banks have spent the last ten offloading as much of the high risk loans as they could. RBS particularly, have struggled but I think that relates the quality of  lending pre 07-no profits in ten years despite unprecendeted levesl of front door and back door support

I expect the next round of blood letting to feature Nationwide and a host of small BS's like the Cov ,  Hinckley & Rugby. I could be wrong.

[Thorn]

3 minutes ago, Sancho Panza said:

 

I think the big banks have spent the last ten offloading as much of the high risk loans as they could. RBS particularly, have struggled but I think that relates the quality of  lending pre 07-no profits in ten years despite unprecendeted levesl of front door and back door support

I expect the next round of blood letting to feature Nationwide and a host of small BS's like the Cov ,  Hinckley & Rugby. I could be wrong.

Given the Bank Guarantee Scheme to reassure depositors but their shameful exposure to BTL, I wonder what might a 2018 crisis at Nationwide look like...

[Sancho Panza]

9 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.

 

Which explains why I haven't.

5 hours ago, durhamborn said:

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

 

Been waiting for the Yen to crash for two decades. Having said that,we're moving over to dollar stocks or UK based stocks which are $ plays

[pmgdawau]

41 minutes ago, durhamborn said:

Pretty certain as long as the US dont default,and they wont.

ok, thanks, shall investigate further

[Sancho Panza]

5 hours ago, Fence said:

I'm down South right now.  OK, not the best area but a true and almost scarey dump.  All I can think of is Detroit.  And that's not how bad it can get but more how it will look in the next five years or so.

I was out with two of the young Panzas in Leicester today.Walking down Granby st into the centre made me think of Detroit-I jest ye not.Increasing amount of rotting and empty CRE on what was once a bustling shopping street. There's one section of 100m withou an open shop on it.

If govt spending ever shrinks( and it will) Leicesters 6 biggest employers will hurt,big time. And family members wonder why I steer them away from resi and CRE 

Detroit is a lesson for us all.

1 hour ago, Bricks n' mortar said:

There better not be a bailout.  I'm a builder.  Nothing like the scale of Carillion, because I'm doing it without debt.  But if they go out the game, their work gets spread round more responsible contractors - which is how it should be. 
If I'm, (as a taxpayer), gonna have to bail out someone doing the same trade as me, just because they were crap at it - well, why should I go on working to pay those taxes?  Might as well emigrate.

 

They're on the verge of destroying capitalism for a long time.

[Sancho Panza]

15 minutes ago, Thorn said:

Given the Bank Guarantee Scheme to reassure depositors but their shameful exposure to BTL, I wonder what might a 2018 crisis at Nationwide look like...

You've got to consider who the patsy is here.

Possibilities

1) BS bond holders-I'm not sure where they sit in the default chain but lots of small punters have bought what apear to be higher yielding BS bonds.I'm pretty sure these are not covered by the FSCS guarantee

2) UK taxpayer:.Bailing your local BS out is more palatable than bailing RBS

 

I do however, think the big retail banks will be affected but secondary to the BS's.

Hinckley & Rugby's net interest margin is minimal.Just saying.

[Sancho Panza]

Paul Hodges opens for business 2018

http://www.icis.com/blogs/chemicals-and-the-economy/2018/01/return-volatility-key-market-risk-2018/

'We are living in a strange world. As in 2007 – 2008, financial news continues to be euphoric, yet the general news is increasingly gloomy. As Nobel Prizewinner Richard Thaler, has warned, “We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping.” Both views can’t continue to exist alongside each other for ever. Whichever scenario comes out on top in 2018 will have major implications for investors and companies.

Unfortunately, oil price volatility is not the only risk facing us in 2018. As the chart shows, the potential for a debt crisis triggered by rising interest rates cannot be ignored, given that the current $34tn total of central bank debt is approaching half of global GDP. Most media attention has been on the US Federal Reserve, which is finally moving to raise rates and “normalise” monetary policy. But the real action has been taking place in the emerging markets. 10-year benchmark bond rates have risen by a third in China over the past year to 4%, whilst rates are now at 6% in India, 7.5% in Russia and 10% in Brazil.

An “inflation surprise” could well prove the catalyst for such a reappraisal of market fundamentals. In the past, I have argued that deflation is the likely default outcome for the global economy, given its long-term demographic and demand deficits. But markets tend not to move in straight lines, and 2018 may well bring a temporary inflation spike,

But, of course, transitions can be a dangerous time, as China’s central bank chief, Zhou Xiaochuan, highlighted at the 5-yearly Party Congress in October, when warning that China risks a “Minsky Moment“, where lenders and investors suddenly realise they have overpaid for their assets, and all rush together for the exits – as in 2008 in the west.

At such moments, as in 2008, commentators rush to argue that “nobody could have seen this coming“. But, of course, this is nonsense. What they actually mean is that “nobody wanted to see this coming“. Nobody wanted to be focusing on contingency plans when everybody else seemed to be laughing all the way to the bank.'