Sara_Racano_HardcoreUproar
02 Aug 2018
Re: TW & look what happened to TW post 2008!
malj1
31 Jul 2018
Re: TW Interesting move by TW on their dividend & special dividend. This increases the forward dy to 10%~11% net of basic tax. Essentially this is running off the excess cash &/or l/b. Nothing here that can’t be duplicated by BAR & some others. This implies running the business as a cash cow & forgoing increases in unit output for the moment. With this kind of return either before too long the sp trebles or the UK housing mkt has to utterly collapse. Hmmmmmmmm … tough one …
malj1
27 Jul 2018
A graph for contemplation Actually I was marginally unfair to Nick Boles. On reflection I think Grant Shapps was even thicker; mind you that took some doing …
malj1
27 Jul 2018
A graph for contemplation Yes & no. UK fertility rate rose ca 2000~2012 from ca 1.6 to almost 2 children per couple. So there’s a major increase in youth cohort (18+) to start feeding through. Correct there’s a lot more ‘silver tops.’ There’s at least ca 17m +65 yr olds in the UK. The aggregate supply of semi sheltered accommodation (the McCarthy Stone style proposition) is ca 170k units (so max 0.1% target market) & the annual supply run rate is ca 4k units pa. The latter will fall sharply due to the gov’t mishandling/scrapping of ground rents (rises). So whilst all focus is on h2b/first time buyers (& not enough of it) no one has noticed the comprehensive dearth of retirement home supply. This market is also being killed by the changes to SDLT. So utter unjoined up gov’t policy. But with 5 housing ministers in 3 years including complete braindeads like Nick Boles, one of the dimmest folk I’ve ever come across (if he’d had a braincell it would have died of loneliness, as the crack goes), why am I not surprised?! Rant, rant, rant … So this can is being well booted down the road. But the supply-demand imbalance is already greater than it was in 07/08. Which explains why hpi is not collapsing as the conventional wisdom expects. At some point there is an 09 moment again & hpi explodes …
frog_in_a_tree
27 Jul 2018
A graph for contemplation Malj …a good post from you there. On the UK demographics, our population may be growing but disproportionately the extra population is comprised of over-65s wherein lies a problem and specifically our need to import migrant labour. To some extent the equalisation and raising of the retirement ages is designed to mitigate the loss of workforce as well as to control pension expenditure. You can add South Korea to your list of demographic timebomb countries given the dramatic fall in its birthrate. Poses some interesting for the balance of power on the Korean peninsular. For those who are interested, BBC Radio 4 ran a useful programme on the public understanding of economics and the interface with the understanding of politics. Well worth listening to. Cheers, Frog in a tree
malj1
27 Jul 2018
A graph for contemplation Duh. This is standard banking/state practice for about the last 500~600 years. Hardly an insight. Yet we live in a ‘consumer’ economy. In order to consume we produce, in order to produce we employ. I know, great light bulb idea! Let’s cut consumption & then we can create way more unemployment. It’s a winner (not). Which is why it will never be policy. It would help if the doomsters understood economics (read some Keynes as a good start point), & for these bb’s how the new build industry works & how these companies work. But no sign of that. I know. Another great idea. We’ve got a growing population (which is really very little to do with Johnny Foreigner) plus a major multiplier of changing mix (the trend towards increased single living). Let’s cut new build supply & run our 21st century society with Victorian output. Political suicide. So that won’t be the agenda then. Economies go badly wrong when their population falls, the precursor to which is wildly unbalanced age cohort mix. This is the demographic time bomb. Playing out in Japan. China & Russia look v grim. As does the EU. Curiously best placed of developed economies, though by no means perfect, is the UK. So build co sp’s will oscillate as they always do. But eventually fundamentals reassert themselves as they did in 09. Which none of the doomster commentators saw coming & so spent a decade being wrong & thus not making money. Plus ca change c’est le meme chose …
wheelerstuart
25 Jul 2018
A graph for contemplation The sad truth is…banks create +95% of all the money in circulation as described above. The bigger question is…how on earth did the state relinquish this extra ordinary power to private interests…!!!
malj1
25 Jul 2018
A graph for contemplation Hard to argue the banks are creating a mortgage lending loan bubble with NML doing little more than bumping along the bottom at 2%-3%. The existing mortgage loan book repayments stream come in & the banks recycle that. That’s about all that’s going on. With remortgaging running at about +50% yoy it looks to me like the current low rates are being well & truly locked in.
wheelerstuart
25 Jul 2018
A graph for contemplation I’d leave out “to an extent†and leave it at TRUE. It is an extra ordinary power that commercial banks have and that no one else in a modern economy has…no one!! That is …the power to create money (out of thin air). You’re loan agreement is their ASSET the electronic demand deposit is their LIABILITY. 95% of the money in circulation has been created as a promise to pay i.e debt. credit/debt…boom/bust. Definitely in the DOOMER camp…it’s just a case of when the carnage comes…
Sara_Racano_HardcoreUproar
25 Jul 2018
A graph for contemplation "The banks theoretically have no limit to the amount of credit they can create all they need is a borrower with the required deposit." This is true to an extent, until you get defaults (which brought down many Spanish banks) & then you have loan/book accounting. If the assets are worth less than the loan, the financial becomes insolvent, this is why 100% mortgages can become seriously toxic. Since the 80´s real wages have fallen drastically, household debt levels increased, the only solution is to lower % rates to lessen the impact, % on savings is less than money saved with debt %. The graph is a clear illustration of how incredibly low % rates have distorted the housing market to such an extent then added to that you have things like help to buy just to keep the bubble. It´s a 23 year old bubble. Say % rates go back up to 3%-5%, it will be absolutely carnage.
wheelerstuart
25 Jul 2018
A graph for contemplation Foot note: The banks theoretically have no limit to the amount of credit they can create all they need is a borrower with the required deposit. How do you get the deposit? You can’t save on low wages…So the relaxation of pension funds which releases millions/ billions (everyone sees a buy to let property as the way to invest it), bank of mum and dad who are remortgaging to fund their children’s deposit to prop up the lower end of the market, releasing millions/billions. etc etc. It’s a house of cards and when everyone wipes their eyes and see’s exactly whats going on we might have the correct crash the housing market really needs.
wheelerstuart
25 Jul 2018
A graph for contemplation It’s from the 80’s, pre 80’s it’s pretty much flat lined due to credit controls. The inflections in the profile from the 80’s is really just the credit cycle as people gorge and max out on credit they eventually start to default, crash, the markets clears (except with QE), and the whole sorry story continues until we get to where we are now. The 99-01 inflection just coincided with low interest rates at the time which enabled every man and his dog to get a cheap mortgage creating the demand and big build of debt up to the 2008 crash when they eventually got found out. Very simple, very sad…
Sara_Racano_HardcoreUproar
24 Jul 2018
A graph for contemplation If you look at the graph closely, it´s from 99-01 where the gross distortion happened. The graph is showing income relative to average house prices. 93-95, was a very sevre recession, it shows since the mid 90´s when % rates were lowered how this has distorted the housing market so much. It always was the intention of the UK government from 1992, to get % rates as low as possible going into YK2, probably due to the debt build ups by the late 80´s.
wheelerstuart
24 Jul 2018
A graph for contemplation I would say there’s only one thing going on…bank credit…and as we all know the banks create the demand deposits for the mortgage out of thin air once you sign the mortgage contract which creates a promise to pay (i.e Money). No coincidence that the explosion starts after the the big bang deregulation in the 1980’s!!
malj1
24 Jul 2018
A graph for contemplation Yawn. Quite. You’d also want to show the collapse in UK inflation. Early 1970s up to ca +25% (yes really). Av late 60s ~ late 80’s = 12%/13%. Consequent interest rates (I recall ‘earning’ ca 10% on std savings accounts). Today inflation ca 2.5%, clearly interest rates far far lower, periodic flirtation with DEflation. No sign of core inflation (non food retail continues in outright deflation) with the only source being fuel costs which are a function £/brexit/exch rates. So I don’t see a reset to historic norms of either inflation or interest rates. You’d also want to think about the impact changes on BTL tax allowances etc & especially SDLT on upmarket properties (so mainly London/central London). The supply demand imbalance is greatest in London, so essentially you’re at best selling a static no. of houses to a shrinking % of the population, who are the wealthiest members of society. In short there’s a lot more going on than the displayed simplistic PE ratio. Usual doomster stuff. Nice try; no cigar.
