The engineered boom-bust of the UK - what strategy to adopt?

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The engineered boom-bust of the UK - what strategy to adopt?

Postby Does Commute Abit » Fri Sep 06, 2013 3:45 pm » Firefox 23.0 Firefox 23.0  Windows Seven 64 bits Windows Seven 64 bits  Screen Resolution: 1252 x 704 1252 x 704

Clearly, the UK Government is cynically and recklessly creating another debt and housing bubble in order to create the "feel good factor" (TM) needed for re-election. While widely regarded as a unsustainable 'bubble-on-bubble' here, as well as surprisingly in many recent mainstream media articles, the desperation of politicians to cling to power and its perks can never be underestimated. Even if it leads to a massive bust following the engineered boom.

What worries me is that the outcomes of this boom-bust are very extreme and the timescales impossible to gauge. None of us are getting any younger either - I've collected a wife in recent years, as well as a wish to settle down a bit, and children are on the horizon.

So the key question : What strategy is the best one to take for the average UK-based 24knews'er, with PMs and other savings, to take?

If your answer has any timescales, please try and elaborate on why you estimate this timing.
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Re: The engineered boom-bust of the UK - what strategy to ad

Postby Pixel8r » Fri Sep 06, 2013 3:53 pm » Safari 6.0.5 Safari 6.0.5  Mac OS X Mac OS X  Screen Resolution: 1920 x 1200 1920 x 1200

What strategy to adopt? For me it is simply a case of keeping on stacking until this madness ends. Can't really put a timescale on it as they seem to be finding whatever ways to extend and pretend, but saying that nothing goes on forever.

I kind of think the global crisis will hit home soon enough in the UK, probably before the help to buy scheme even comes into effect.
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Re: The engineered boom-bust of the UK - what strategy to ad

Postby Does Commute Abit » Fri Sep 06, 2013 4:03 pm » Firefox 23.0 Firefox 23.0  Windows Seven 64 bits Windows Seven 64 bits  Screen Resolution: 1252 x 704 1252 x 704

My answer is to ignore timescales - the boom could be longer than hoped (government schemes extended, widespread disillusion etc.) yet the transition to bust very quick, like Greece/Ireland. So I don't think timing any exit from one asset to another is going to be easy. Personally, I have family plans in the next couple of years, and so I need more stability, and this makes timing any asset swap very hard.

I've gone for a spread of resources that reflect my wish to settle down - bought a house at a sensible medium LTV (hopefully easy-ish to sell due to location, but who knows as commuter routes fell sharp in 2008), kept as much gold as I can, am re-skilling gradually in work to something less exciting but more transferable, and trying to live off the land more (as a partial hedge against rising commuting costs).

My game plan will be to up sticks to the Caribbean in about 10 years, where my wife is from and where we should be able to buy a house cash, provided we keep putting savings into the mortgage or into gold (hoping both gold and UK housing are mutually exclusive and dont both capitulate). I'm expecting high youth unemployment in the UK at the eventual bust a la Greece/Ireland and don't want kids growing up in that. Plus the Caribbean's crime problems will probably be less offputting then as its lower social classes start to benefit from free education and healthcare and the region experiences proper growth based on raw materials, food production and foreign rich tourists.
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Re: The engineered boom-bust of the UK - what strategy to ad

Postby Stun Lee and Win » Tue Sep 10, 2013 5:41 pm » Google Chrome 28.0.150 Google Chrome 28.0.150  Windows Seven 64 bits Windows Seven 64 bits  Screen Resolution: 1920 x 1080 1920 x 1080

Here we are seeing the power of the reinflation. Despite the very poor fundamentals, the effect of the increase in credit creation is now evident. All of the economic indicators are looking positive and this is causing the current strength of the pound (today making four year highs against the yen and near six month highs against the dollar and euro). This is despite the promise of near zero interest rates for the next three years made in July of this year. House prices are now rising at five perrcent a year, before the government schemes have even started. OF course, as house prices rise at a rate far higher than wage growth, then the government will be forced to increase the level of housing market subsidies to stop it all collapsing, the current mortgage guarantees and government deposit loans will be expanded, I expect that we will see mortgage payment tax relief re-introduced and so on. Increasing house prices leads to increasing credit creation in an example of reflexivity.

As the credit boom goes on, the financial markets, those experts in muddled short-term thinking will consider that Britain really is "recovery-ing" We could see the pound reach levels of over valuation similar to that seen in the mid 2000's, I can see the pound getting to 1.30 to the euro and maybe 1.70 to the dollar. The recovery is here and it is an entirely fake recovery built on the sands of zero-interest rates and ever increasing debt, but the imprortant thing is that people believe that it is here. Of course, there is yet another and bigger crash waiting which will this time take down the state.

Timing this is the impossible thing, since it requires the estimation of when a large number of idiotic short-term thinking investors with little to no understanding of economic reality see something that is blindingly obvious. I would estimate somewhere between three and ten years

For UK investors? Shiny, at or below the cost of production is of course a given. I would be looking at the current strength of the pound and then the weakness of a lot of the emerging markets (particularly India, Indonesia and Brazil). All of these are currently under attack from the financial markets but are far better positioned than many Western countries. For the financial markets, the old traditional roles of the US and UK being safe havens are far more important than economic reality.
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Re: The engineered boom-bust of the UK - what strategy to ad

Postby Stun Lee and Win » Wed Sep 11, 2013 9:33 am » Google Chrome 28.0.150 Google Chrome 28.0.150  Windows Seven 64 bits Windows Seven 64 bits  Screen Resolution: 1920 x 1080 1920 x 1080

Can't seem to edit my last post now, and I forgot an important point.

It will also appear that the all important debt to GDP ratio is increasing only at a very slow rate, or maybe even starting to decrease. Consider a time a couple of years in the future: total debt is at around 1.3 trillion and figures just released show that public debt has increased by about 60 billion pounds in the past fiscal year. This might seem implausible now but increasing credit creation will lead to an increase in economic activity and hence an increase in the tax take. Recently released GDP figures show that the economy is growing by about 4 percent a year (again remember the effect of the inflation, and the fact that they are using methods to calculate RPI that could charitably be described as dubious).

The Prime Minister goes to speak saying that Britain is paying down the deficit and that debt to GDP has increased by only 0.7% in the last year. No one in the mainstream media understands enough to be able to question this. The financial markets go wild on the news, pushing the pound up three cents against the dollar.
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Re: The engineered boom-bust of the UK - what strategy to ad

Postby Stun Lee and Win » Thu Mar 20, 2014 12:23 pm » Google Chrome 32.0.170 Google Chrome 32.0.170  Windows Seven 64 bits Windows Seven 64 bits  Screen Resolution: 1920 x 1080 1920 x 1080

I have to say that the latest pension moves came as a bit of a surprise, I hadn't even considered that the government would do something like this. Now in a country full of financially literate and prudent individuals who are sensibly looking to provide for their old age, this would be an extremely sensible and radical scheme allowing individuals to take much better control of their money and invest in high dividend and proven long-term investments, instead of the outrageous rip-offs of the annuity scheme. This is Britain however.

This is going to create an absolutely enormous BoomBust, far bigger then even I had thought (and I was previously very bullish on Britain in the short and medium term). The over-55s who have seen pwoperty pwices go up their whole lives are suddenly going to get tens, or even hundreds of thousands for deposits, backed up with another 20 percent from the government. House prices could start climbing by 15 to 20 percent or so a year. No-one is worried because the Governor of the Bank of England says that there are no problems, and he is the Governor of the Bank of England so he must be right.

GDP growth could well exceed 5 percent for the first couple of years of this scheme, the annual deficits, boosted by the increased tax takes as the boomers plss away their pension savings, decrease further, it is even possible that the debt to GDP decreases percentage ratio for a couple of years. They are probably not going to lose too much, the money would be worthless if they waited another 10 to 15 years to spend it. With GDP increasing rapidly and the debt apparently decreasing, the pound reacts enormously bullishly, heading towards 1.75 or higher against the dollar.

The Bust part of the BoomBust cycle, when it does come will be absolutely hideous, but no-one in Government understands this. The few people who do understand are dismissed as Cassandras and doom-mongers. We know the story, we have seen it all before.
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Re: The engineered boom-bust of the UK - what strategy to ad

Postby Stun Lee and Win » Wed Apr 30, 2014 3:22 pm » Google Chrome 33.0.175 Google Chrome 33.0.175  Windows Seven 64 bits Windows Seven 64 bits  Screen Resolution: 1920 x 1080 1920 x 1080

I'm talking to myself here, but I have noticed that the market now has a very bullish tone about the pound, I have seen newspaper articles calling for the pound to reach 2 dollars and a "Guru" calling for 1.35 against the Euro. Though there might still be a bit higher to go, and I still think the low to mid 1.70's against the dollar is a possibility, with the pound making a new 4.5 year high today, it might be sensible to start moving into dollars fairly soon. If we do ever get a crash again, then the dollar, even more so than shiny, is still the ultimate safe haven (at least for the next decade or two, see winter 2008 for the working).
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Re: The engineered boom-bust of the UK - what strategy to ad

Postby Pixel8r » Wed Apr 30, 2014 5:56 pm » Safari 7.0.3 Safari 7.0.3  Mac OS X Mac OS X  Screen Resolution: 1680 x 1050 1680 x 1050

Stun Lee and Win » Wed Apr 30, 2014 4:22 pm wrote:... it might be sensible to start moving into dollars fairly soon. If we do ever get a crash again, then the dollar, even more so than shiny, is still the ultimate safe haven (at least for the next decade or two, see winter 2008 for the working).

Sorry I am just not seeing that at all. This is how I see things;

The fiat currencies are in a global race to the bottom, seeing who can devalue their currency the quickest to gain an temporary advantage in the race. Governments globally are attempting to borrow themselves into a recovery, debt levels are increasing exponentially. The crisis which started in October 2007 has not stopped and no amount of stimulus is going to kickstart this corpse. All the problems which caused the financial crash in 2008 are still here and have not been solved, the banks are still bankrupt (if the accounted correctly i.e. mark to market) even after all the printing and free money they have been given. In fact things are worse now than they were when the crisis kicked off, the TBTF banks are now even bigger and have even larger derivative positions.

Things will start to look a whole load different by the 2nd half of this year when the fed is forced to backtrack on their finishing of QE when it will be realised by most that the fed is the market and QE is going to infinity. This will cause the EU, Japan, GB etc. to increase their monetisation of the debt. I give fiat currencies another 5 years maximum before they are replaced entirely with a new global financial system. The shiny is the ultimate asset to offer protection against what is coming, trying to game the system by swapping between fiat currencies in a race to the bottom is a fools game IMO.

If we do have another massive crash like in 2008 what is going to happen? The central banks will ramp up their fiat money creation, but this time it will need to be even larger than in 2008. It will cause a loss of faith in the currency, which will lead into a vicious circle where the currency can not be created quick enough and no one wants to hold it.

The big reset is coming don't be fooled the happy talk.
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Re: The engineered boom-bust of the UK - what strategy to ad

Postby Stun Lee and Win » Thu May 01, 2014 7:28 am » Google Chrome 33.0.175 Google Chrome 33.0.175  Windows Seven 64 bits Windows Seven 64 bits  Screen Resolution: 1920 x 1080 1920 x 1080

You've been saying that non-stop ever since I have been here!

The market has been destroyed, it took just one medium-sized smashdown to remove the price advances caused by the world being on the edge of nuclear war. It seems obvious that TPTSB will not allow the price to rise any significant amount above the price of production (though simultaneously, they won't push it too far below production). We have been f/&%ed over by TPTSB, I personally have lost a lot of money in the past couple of years, but at least I am no longer deluding myself that there is some mythical reset coming (well of course there probably will be but that will be decades away). TPTSB are stronger than ever.

I will leave it to readers to decide which of us has been more accurate.
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Re: The engineered boom-bust of the UK - what strategy to ad

Postby Pixel8r » Thu May 01, 2014 9:14 am » Safari 7.0.3 Safari 7.0.3  Mac OS X Mac OS X  Screen Resolution: 1920 x 1200 1920 x 1200

Stun Lee and Win » Thu May 01, 2014 8:28 am wrote:You've been saying that non-stop ever since I have been here!

The market has been destroyed, it took just one medium-sized smashdown to remove the price advances caused by the world being on the edge of nuclear war. It seems obvious that TPTSB will not allow the price to rise any significant amount above the price of production (though simultaneously, they won't push it too far below production). We have been f/&%ed over by TPTSB, I personally have lost a lot of money in the past couple of years, but at least I am no longer deluding myself that there is some mythical reset coming (well of course there probably will be but that will be decades away). TPTSB are stronger than ever.

I will leave it to readers to decide which of us has been more accurate.

The last couple of years have been a correction agreed, I feel sorry for anyone who only started buying over the last couple of years as they will have lost money. But most on here have been buying for a lot longer than that and are nicely up above inflation, even after this correction. Personally I started buying in 2005 and have also made additional gains via swapping between metals at strategic times.

You are crediting TPTB with a lot more control than I do, I see the actions of the last couple of years as their last desperate attempt to pretend that everything is just fine. We will revisit this conversation at the end of this year and will see who has been correct in their prognosis.
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Re: The engineered boom-bust of the UK - what strategy to ad

Postby Pixel8r » Thu May 01, 2014 10:39 am » Safari 7.0.3 Safari 7.0.3  Mac OS X Mac OS X  Screen Resolution: 1920 x 1200 1920 x 1200

Stun Lee and Win » Thu May 01, 2014 8:28 am wrote: It seems obvious that TPTSB will not allow the price to rise any significant amount above the price of production (though simultaneously, they won't push it too far below production).

They have held the price where they have for the last 2 years, this has caused a transit to PM's from west to east. The transit of PM's from west to east means that they will have less and less control of the price in the future, as the leveraged paper market transforms to a physical one. This can be seen clearly by looking at the draw down from the ETF's, the deliveries from the SGE and the opening of additional physical futures exchanges in the East.

A physical market means that the price can not be held below the production price, as traditional supply and demand factors come into play rather than banks leverage capabilities.

I understand your frustration, we are all under a lot of pressure currently. This is to be expected as we are their enemy at the moment, they are applying as much pressure as possible to us to attempt to make us decide we are wrong. I know that getting into working all this out has been the best thing that I could have done and am happy with where I am, although things could always be better with hindsight (which is completely useless). Things would be a whole load worse for me if I had listened to what they were saying and invested according to their happy talk.

I don't want anyone to make any decisions based on what I have been writing about, they are just my thoughts. But all I currently can say is keep the faith in what you have worked out over the last decade and don't let mind games caused by monumental fiat money creation sway you. Debt levels are increasing exponentially, it doesn't take a PHD to understand that you can't borrow yourself into solvency.
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Re: The engineered boom-bust of the UK - what strategy to ad

Postby Does Commute Abit » Sun May 18, 2014 6:09 pm » Firefox 29.0 Firefox 29.0  Windows Seven 64 bits Windows Seven 64 bits  Screen Resolution: 1360 x 768 1360 x 768

It's good to see this thread alive and well. I should update a little on my situation and how I have strategised for the "The engineered boom-bust of the UK "
This also explains why I am online a lot less now.

Basically, I've got on with other things and forgot a lot about the financial markets and gold. I bought a house with the wife late last summer and purchased some land alongside (selling 40% of my gold, and all our cash savings to do so). I've linked the repayments to a lifetime tracker and we overpay (or improve the house) each month with our salaries. The idea is to get the LTV low and at an easily remortgageable state before any interest rate shocks. If gold upticks, I may make further sales.

We have cultivated some land and grow lots of veges and produce. This has three benefits 1) I find it very stress-free and the physical work is a contrast to my daytime desk-bound stressful job 2) we give the produce away to neighbours and friends, but this means we get useful things and community back and 3) my health has started to improve physically and mentally as a result of getting outdoors more and finding a new stress-free outlet. Its not related, but since doing all this, my job has turned from achieving nothing to achieving something regularly. I now have hired extra staff with the extra productivity income (another reason I'm not around much, they need training!) and have them doing much of the legwork I used to have to do on top of managing and running things.

I still think things in the UK are going to go bust at some point, but this could be 2 or more years away.
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Re: The engineered boom-bust of the UK - what strategy to ad

Postby Stun Lee and Win » Fri Jul 04, 2014 6:30 am » Google Chrome 34.0.184 Google Chrome 34.0.184  Windows Seven 64 bits Windows Seven 64 bits  Screen Resolution: 1920 x 1080 1920 x 1080

I have had for a long time a goal of 1.73 for the GBPUSD exchange rate and now we are as near as darned it there. At the time of writing, the pound is at 1.717 dollars, 1.263 euros or 175.2 yen. There may be a couple of cents even higher to go but the pound has now gone from being ludicrously overvalued to absolutely skull shatteringly overvalued, so now would be a great time to abandon the absolutely wrecked currency and economy of Britain. To show just how overvalued the pound now is, entry level jobs in central Tokyo start at about 4.70 an hour, and Germany (a much richer country) has just introduced a minimum wage of 6.70 an hour. Longer term observors of the markets might be interested to look at what happens to the pound in the run up to a general election, and might consider the possible effects of the Scottish referendum in mid September.

I would be looking for the low 1.60s against the dollar in the next year, the low 1.50s in the next couple of years and down to 1.30 or so in the next four or five years. House Price Crashers with large GBP deposits are incredibly lucky to have been handed a second chance, but will any of them be intelligent enough to take it?

Edit: I think that you have nothing to worry about now. Prices in Surrey are probably at least 15 percent up compared to last year, and there is still no sign at all of interest rate rises.
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