The British press talk about STAGFLATION

[Mega]

http://www.telegraph.co.uk/finance/e...agflation.html

Looks Like Janszen/Crusty/Mega were right!
Mike

[Chris]

Re: The British press talk about STAGFLATION

The BOE's inflation report from Nov predicts a period of inflation in 2010 when the CPI will head above target followed by a reduction in inflation which will continue to plateau around 2% while the weak economy hobbles along like a cripple.

I can believe their first prediction, not their second.

[GRG55]

Re: The British press talk about STAGFLATION

The BOE's inflation report from Nov predicts a period of inflation in 2010 when the CPI will head above target followed by a reduction in inflation which will continue to plateau around 2% while the weak economy hobbles along like a cripple.

I can believe their first prediction, not their second.

I don't know how the UK CPI incorporates housing [is it similar to the "owner's equivalent rent" calculation in the USA?], but I find it unimaginable that the CPI won't fall, and perhaps significantly, when the London/southern England housing market finally starts to adjust to the reality of the world we are in.

[Southernguy]

Re: The British press talk about STAGFLATION

It reminds me of Argentina and Uruguay 2001-2002. Falling activity, mounting fiscal deficit, then increased indirect taxes, then more falling activity, then growing fiscal deficit, then.........
Collapse.
All that triggering capital flight.
A perfect vicious circle.
If I had a single penny in Britain I would take it out FAST.
Interesting.

[Chris]

Re: The British press talk about STAGFLATION

It reminds me of Argentina and Uruguay 2001-2002. Falling activity, mounting fiscal deficit, then increased indirect taxes, then more falling activity, then growing fiscal deficit, then.........
Collapse.
All that triggering capital flight.
A perfect vicious circle.
If I had a single penny in Britain I would take it out FAST.
Interesting.

and where would you put it?

[lsa420]

Re: The British press talk about STAGFLATION

and where would you put it?

Gold.

What else these days? I'm starting to think jtabeb is right......

[hayekvindicated]

Re: The British press talk about STAGFLATION

Gold.

What else these days? I'm starting to think jtabeb is right......

I started converting my Sterling into Gold back in early 08. Have very little money left here.

[Chris]

Re: The British press talk about STAGFLATION

At what stage does inflation, rising interest rates and falling property prices counterbalance each other so that, in real terms, a long term fixed rate mortgage (say 30 years at 5.5%) begins to make sense?

My thoughts are turning to the property market as a way to make use of inflation and falling currency values by locking in a low (relative to future rates) interest rate in the next 6 months.

After all, holding all savings in gold is just a little bit risky.

Any thoughts on that iTulipers?

[Southernguy]

Re: The British press talk about STAGFLATION

Chris: Iīm certainly not the best person to come in search of investment advice here in Itulip.
When I said itīs wise to take all money from Britain I was thinking of someone as myself not living there.
If you live there, your suggestion, for example of investing in RE through borrowed money at low interest may be very sensible.
Of course, my opinion is limited by ignorance of things like taxes problems and others.
I am personally very wary of borrowing money. That means leverage and my mentality is to invest only the money I have and, above all the money I can afford to lose in every investment.
Thatīs according to my reality, I earn, through business more than my humble lifestyle needs, so I invest for the long term (not always).
Iīm not going to be a billionaire, buy I donīt need either.
Of course, there is one principle my father taught me: donīt put all eggs in the same basket.
Because the best of analysis may be wrong, and besides, "markets may stay ilogical much longer than you may remain solvent" or something alike.
Gold I keep quite a lot, feel good having it, but of course I have other investments as well, RE, here where I live and supposedly know the market, some energy base ETF, and Iīm currently trying to begin a new imports of used machinery business....
Well, sorry if my answer doesnīt look much as advice, but I donīt think itīs wise for me to speak otherwise.

At what stage does inflation, rising interest rates and falling property prices counterbalance each other so that, in real terms, a long term fixed rate mortgage (say 30 years at 5.5%) begins to make sense?

My thoughts are turning to the property market as a way to make use of inflation and falling currency values by locking in a low (relative to future rates) interest rate in the next 6 months.

After all, holding all savings in gold is just a little bit risky.

Any thoughts on that iTulipers?

[LargoWinch]

Re: The British press talk about STAGFLATION

... I am personally very wary of borrowing money. That means leverage and my mentality is to invest only the money I have ...

I agree; given the world's economic "cluster-mess", leverage does not appear advisable.

Accumulating the right asset(s) on dips and without leverage appears more sensible from a risk-return perspective.

[GRG55]

Re: The British press talk about STAGFLATION

At what stage does inflation, rising interest rates and falling property prices counterbalance each other so that, in real terms, a long term fixed rate mortgage (say 30 years at 5.5%) begins to make sense?

My thoughts are turning to the property market as a way to make use of inflation and falling currency values by locking in a low (relative to future rates) interest rate in the next 6 months.

After all, holding all savings in gold is just a little bit risky.

Any thoughts on that iTulipers?

In the right real estate market this may make sense...but for me the "right real estate market" must have already seen substantial price devastation as one of the defining criteria. I am not sure anyplace in the UK qualifies yet, does it?

Second, I am truly wary of the potential that tax starved governments are going to target real estate since it's both immobile and illiquid.

[Chris]

Re: The British press talk about STAGFLATION

I was thinking about farms or small-holdings in Europe rather than a buy-to-let in the UK. I think the buy-to-let market, like the whole residential market, hasn't even started drop like it eventually will.

However, I take your point about taxation with the EU being even bigger zealots than the Labour party in the UK (as hard as that may be to believe).

Does mortgage debt count as leverage in an inflationary scenario? I assumed the leverage comes from deflation, something that iTulip have said is highly unlikely in the US (and maybe the UK).

[Southernguy]

Re: The British press talk about STAGFLATION

I think "leverage" is present whenever one borrows money to invest.
But thatīs theoretical.
The big question in this matter is ŋare your whole assets guaranteeing the investment?
If the answer is no, then your risk is the money you put up front and the taxes-expenses you paid.
If the answer is yes.....well, I wouldnīt do it.