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Deflationary collapse and the Reflation Cycle to Come.


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12 hours ago, Sancho Panza said:

I'd watch out in terms of where you're placed with regard to your capital shoudl Close Bros be subject to a bail in.

If you're money is in a normalsavings a/c you'rre covered by the FSCS guarantee for 80k I think.If you've bought a bond with them,I'd check whether you're being paid a premium for a risk that you're unaware of.

Must state I'm not a financial adviser and that you should get some advice from someone in the know.

 

Thanks guys that posted in regards to my question...
 
However apologies as my post caused some confusion !
 
the close brothers 2 year bond paying 4.25% IS in fact a Premium Gold Fixed Term Account and has long gone ...as it was a pro i expect?
 
@SP
 
Thanks for you reply, the acc that i thinking about opening is:  Retail Fixed Term Deposit
 
for 1 year paying 1.8%
 
I never posted the link b4 cos i thought it was against HPC rules  (mods plz delete if that is the case) the link:
 
https://www.closesavings.co.uk/fixed-term-deposits
 
I filled out the enquiry form online and got all the buff within 2 days, and YES the FSCS guarantee does cover this up to £85K.
 
my choice is either close brothers or shawbrook bank, what do you guys reckon ?
 
CHEERS!
 
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Rather than put my thoughts in other threads about how i see the end of this cycle playing out i thought a thread dedicated to this would be a much better idea.Many other posters here have some great

How convenient.

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5 minutes ago, Yellow_Reduced_Sticker said:

 

Thanks guys that posted in regards to my question...
 
However apologies as my post caused some confusion !
 
the close brothers 2 year bond paying 4.25% IS in fact a Premium Gold Fixed Term Account and has long gone ...as it was a pro i expect?
 
@SP
 
Thanks for you reply, the acc that i thinking about opening is:  Retail Fixed Term Deposit
 
for 1 year paying 1.8%
 
I never posted the link b4 cos i thought it was against HPC rules  (mods plz delete if that is the case) the link:
 
 
I filled out the enquiry form online and got all the buff within 2 days, and YES the FSCS guarantee does cover this up to £85K.
 
my choice is either close brothers or shawbrook bank, what do you guys reckon ?
 
CHEERS!
 

As someone who had 70k in Icelandic banks and had several months of worry when they collapsed... think hard and look at the banks in depth before you save with them! (I was young and they were all over MSE etc. To be fair, the FSCS protection worked and I didn't lose anything but at the time it was pretty scary!)

I'd chose NS&I at present, to be safe.

Edited by Cosmic Apple
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58 minutes ago, Majorpain said:

http://www.constructionenquirer.com/2018/06/01/civils-contractor-crummock-collapses/

Been articles like this for the last two months, £68 million turnover has gone out of business since Thursday with knock on effects to creditors who at best will get there money eventually or worst lose the lot.

Construction Companies are starting to run out of cash as the massive oversupply, minimum wage increases and reduction of work is biting hard.

"Crummock is a long-established construction business which, like many in the industry, has suffered from reduced margins in recent times.

“In recent months it has also encountered cashflow difficulties due to high retention levels, the tight margins within the sector and business specific issues.”

“Unfortunately, the business was unable to raise the capital to enable it to overcome the current financial challenges it faces and we are now dealing with creditors’ claims.”

Exactly the theme of this thread.Input inflation kills margins.Debt means companies stay in business even on negative cash flow.Margins keep falling for everyone else.In the end it comes down to no margins and the ones to survive are the ones with the least debt/biggest access to equity,not debt.Creditors lose their dosh,debt deflation in action.Government down the road kicks in a big building boom to use fiscal policy to counter the debt deflation,less companies around to do the work,inflation gains hold.

You are going to see this in retail soon.Courier costs etc are going up and the likes of Amazon are running on negative margins,their bond holders and equity holders are funding consumers.Not for much longer.

During the following months and years people will wake up to needing inflation assets to protect wealth and avoid financial pain.

In noticed in my partners pension today as well (final salary) that accrual from 2008 is limited to 2.5% a year for deferred pensions.That will get an inflation wipe out,lucky she only had two years in that part,but it shows whats going to happen.

Does the civil service/local government schemes have similar set ups i wonder?

 

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49 minutes ago, Cosmic Apple said:

As someone who had 70k in Icelandic banks and had several months of worry when they collapsed... think hard and look at the banks in depth before you save with them! (I was young and they were all over MSE etc. To be fair, the FSCS protection worked and I didn't lose anything but at the time it was pretty scary!)

I'd chose NS&I at present, to be safe.

 
Cosmic Apple, Blimey I would of gone through double my loo roll budget for for several months if that happened to me ...AND you never get yellow reduced stickers on loo roll :o
 
BTW, I don't rate the MSE site, don't like that martin guy...
 
 

is paying 1.5% fixed for 1 year - even though its a BOND - I take it its 100% SAFE?

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19 minutes ago, Yellow_Reduced_Sticker said:
 
Cosmic Apple, Blimey I would of gone through double my loo roll budget for for several months if that happened to me ...AND you never get yellow reduced stickers on loo roll :o
 
BTW, I don't rate the MSE site, don't like that martin guy...
 
 

is paying 1.5% fixed for 1 year - even though its a BOND - I take it its 100% SAFE?

NS&I are about as safe as you'll get for cash savings, they don't have an investment/casio arm. I'd still stick to the 85k limit though, as even though they'd just print money to bail NS&I savers, they'd probably haircut at 85k just to be bastards.

Edited by Cosmic Apple
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After reading this

Surplus Energy Economics:  SEEDS and the Russian economic riddle

I decided to use my Lifetime ISA bonus to buy some Polymetal shares.  A precious and industrial metal miner (so positioned for both stagflation and reflation) with a share price currently depressed by US sanctions in an emerging market that looks more robust than many in the face of the coming collapse.  It's fallen a bit more since then, of course. 

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So government is getting involved in building nuclear power stations again after saying that sort of thing wasnt for them.

https://www.bbc.co.uk/news/business-44363366

Notice a reason given.

"The sheer cost of building new nuclear power stations means it makes sense for the government to help finance projects like this," he said.

"Governments can borrow much more cheaply that private companies and that lower cost of borrowing can drastically reduce the ultimate cost. Hinkley Point C would have been roughly half the cost if the government had been borrowing the money to build it at 2%, rather than EDF's cost of capital, which was 9%."

The next cycle is industrial,not consumer,and funded by QE at very low rates thanks to the CBs.This will be across the western world.

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Quote

at 7:08

Alarm bells ringing over inflation

dfdcdd26-47a1-4018-992d-d1220657c884.jpg

Kamal Ahmed

Economics editor

"Reports of the death of inflation may have been premature.

Today’s figures on the price of filling up the family car reveal that upward pressure on prices is still very much with us.

For consumers other prices are also rising – higher energy bills, for example, have just started biting.

And the sugar tax will add to the cost of many soft drinks.

Two economic indicators tend to weigh on the confidence of many consumers.

The price of fuel.

And the price of housing.

The first is going up.

And the second is coming down.

Which will raise a few alarm bells, not just among economists but among politicians as well."

 

Figures from the RAC show the average price of petrol went up by 6p a litre in May. That's the biggest monthly rise in 18 years.

 

jack those rates up

Edited by hurlerontheditch
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21 minutes ago, hurlerontheditch said:

 

Figures from the RAC show the average price of petrol went up by 6p a litre in May. That's the biggest monthly rise in 18 years.

 

jack those rates up

RAC fuel spokesman Simon Williams described May as "a hellish month for motorists".

The energy complex is where orthodox Keynesianism comes to die. B)

Brent crude's fallen back a bit in the past week or so (£56/bbl vs £59bbl) but we're still firmly in recession territory, I believe.

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On 04/06/2018 at 09:58, Cosmic Apple said:

As someone who had 70k in Icelandic banks and had several months of worry when they collapsed... think hard and look at the banks in depth before you save with them! (I was young and they were all over MSE etc. To be fair, the FSCS protection worked and I didn't lose anything but at the time it was pretty scary!)

I'd chose NS&I at present, to be safe.

I did my research and found some info from previous customers of 'close brothers savings' - they appear to be OK. My main concern is if your savings are safe, they are up to £85K. I even called them as had a couple of questions, seem very nice on the phone. So some funds will go here but the majority i will put into N S & I.
At the end of the day, NO one knows what bank will go under or some other **** up...
 
Which leads me to another question to you Cosmic Apple, if i may?
"As someone who had 70k in Icelandic banks"
 

Did they pay any interest that you were due?

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On 01/06/2018 at 12:56, durhamborn said:

 

The cost of money is the basis of all complex economies.The markets usually get it wrong because they dont understand the leads and lags.

Capital intensive companies that need expensive assets,power plants,grids,telcos,transport companies etc gain when the cost of money goes up,yet the market thinks interest rates going up are bad for them.Vodaphone has financed some of its new networks on bonds paying 2% fixed for decades.Once inflation moves higher rates follow,but that only affects NEW competition,and NEW investment and mostly new borrowing.The stuff already sat there is already depreciating at a rate,and the interest is borrowed at a set rate.The inflation increases flow straight to free cash flow.A property company whose managers i respect highly have moved half of their debt onto a 10 year fixed rate bond.A shrewd move given a lot of their rents are RPI linked.Of course its commods that gain the most,and very large areas of the economy struggle.The currency caused inflation retailers suffered here in the UK shows very clearly how tough it becomes when you main costs are inputs,not capital assets.

Now lets take a BTL.In an inflation rates go up and so the cost goes up to service the debt.Even if rents go up too there is no gain as at best they will cancel each other.However the cost of fixing the boiler,the roof,the voids increases.That means profits fall,and so any new entrants to the area will need lower prices to make investing worth it.The area suffers a distribution cycle.Property will (and is) falling in price and inflation adjusted will be down by large amounts by 2025.

Of course all of this has to be taken on the assumption that we understand where we are in the cycle.The CBs tampering with the short end of the yield curve has made that harder.Interesting times.

 

Nearly missed ya post anyway...

giphy.gif

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23 hours ago, durhamborn said:

So government is getting involved in building nuclear power stations again after saying that sort of thing wasnt for them.

https://www.bbc.co.uk/news/business-44363366

Notice a reason given.

"The sheer cost of building new nuclear power stations means it makes sense for the government to help finance projects like this," he said.

"Governments can borrow much more cheaply that private companies and that lower cost of borrowing can drastically reduce the ultimate cost. Hinkley Point C would have been roughly half the cost if the government had been borrowing the money to build it at 2%, rather than EDF's cost of capital, which was 9%."

The next cycle is industrial,not consumer,and funded by QE at very low rates thanks to the CBs.This will be across the western world.

Saw that story earlier and though of this thread. Gov dipping toe in water, with the limited options left... How quickly before we see more of this? 

Great thread thanks db and all contributors so far

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On 01/06/2018 at 00:40, durhamborn said:

I think the 5% cap on pension increases is the key point,and one most people forget.We did have a mention of this on another thread and it was a bit difficult to find out the schemes that had this cap (we were looking at public sector i think).If BT have a 5% uplift limit then like you say a few years of inflation at 12% would make a huge difference.Im also not sure if its just deferred pensions that come under the cap,or pensions in payment as well.

I did a bit more research of things I can find online (including member booklets)...

Deferred revaluation:

Section B: CPI. Unusually booklet refers straight to pension in payment increases section of itself, so I assume revaluation is the same as increases

Section C : CPI with compound cap of 5% (compound revaluation cap usually means it will never bite, as potential future above-5% increases will be offset by low past increases)

Pension increases:

Section B: CPI.  As I can't see any reference to 5% cap anywhere, and given 5.2% Apr 2012 increase, I suspect these increases are uncapped

Section C  : RPI (min 0%, max 5%)

So, good news are that pretty much everything is CPI-linked.  Bad news are that it's mostly uncapped.  

 

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1 hour ago, Queasing said:

Saw that story earlier and though of this thread. Gov dipping toe in water, with the limited options left... How quickly before we see more of this? 

Great thread thanks db and all contributors so far

I think we will see more and more,but it will explode if we see a debt deflation as CBs will be lending at 0.1% 20 year coupons probably.The fact government is now investing direct again after decades of saying they wouldnt is exactly what we expected.Telco will be another area.They might simply make planning easier here,or less red tape,but also likely allow higher returns on capital.Across the west governments know the consumer led economy is grinding down under debt.Governments turn to invest for an industrial driven cycle.

 

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  • 429 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% +
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      • up 5%



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