Gcp Infrastructure Inves... Share Discussion Threads

[spectoacc] 10/7/2023 15:33

Chinese had a long time trapped I guess, and fair point re holidays - perhaps the same effect here.

But agree everything is still busy - and not at all conducive to inflation going back to 2%. I'm rates dovish (say 5.5%, but still at that a year from now) and recession bearish (just can't see how inflation gets shaken out the system without recession and unemployment).

One thing surely clear by now - ZIRP is over. Can get a 40 year Gilt yielding 4.5%. 5.7% GRY on the Oct 2025.

[jonwig] 10/7/2023 15:29

Interesting - holidays and air fares!

Well, if they're booked and paid for, they lag. But next season's? This is where they fall off the cliff, along with a lot more discretionary spending.

But to take your view: we were in London last week. Restaurants and events heaving, a lot of value needs to be destroyed! Interestingly, lots of Chinese tourists, many of them young. (Yet RMB weak vs GBP.)

[spectoacc] 10/7/2023 15:05

We are, and the £ is strong (relatively), which helps too.

But not helping much. There's simply too much money around, too much demand, and wages are too high. This started as cost-push, but it isn't anymore.

Sunak's £400bn Covid splurge carries some of the blame; the BoE's excessive QE some more. It's now rock & a hard place, but the extra money has to be destroyed somehow, and a hopefully milder version of the early 90's recession seems the only way.

Don't get me wrong - I'm a dove on rates now, and inflation will come down on its own. But it isn't going sustainably back to 2%, and interest rates aren't the tool they once were - it'll take a long time, a lot of fixed rate mortgages ending, to cause the necessary slowdown.

The market is saying that means rates up to 6.5% (50:50 chance). I think enough time at 5-something, say a year to 18 months, ought to do it.

But worth noting the 3 biggest risers in last month's inflation beat (ie annualised) were food +c.17%, package holidays +40%, airfares +50%. The first might be relatively inelastic but the next two aren't.

PS Mine's a half pint, so it's technically full ;)

[jonwig] 10/7/2023 14:57

Spec - well, if we were down the pub, we could place a bet! Anyway, your beer glass would be half empty, mine half full.

NB - RMB is weak vs USD, GBP, EUR, etc. Export prices lower so we're getting imported goods deflation.

[spectoacc] 10/7/2023 14:49

Q4 2024, if you're lucky ;)

But it is indeed all about employment.

US figure for private payrolls blew out the water last week - hence the market drop.

China suffering big deflation but no longer exporting much of it.

(Monetarism isn't true.)

There's still 1.6 vacancies for every job seeker in the USA.

2.5m on the sick, 7.3m NHS ops backlog, and c.7% wage rises in UK.

Worst of all - by being so late to accept what was happening, the BoE now have a reputation to restore, which means IMO inevitable over-tightening (personally think we're nearly there, not 6% & certainly not 7%), and holding higher for longer. What inflation print would it take to see a cut?

Honestly think we may not see a cut until 2025, go to say 5.5% and stick there, but more difficult to predict the further out you look.

Despite all the above - long GCP.

[jonwig] 10/7/2023 12:47

Brucie - soon!

Producer prices are falling heavily in China and much of Europe. That's affecting oil, gas and power prices (downwards).

Measures of money supply are falling globally (see M2, USA).

In the UK,"A jump in redundancies has triggered the biggest surge in jobseekers for two and a half years as the employment market is hit by rising interest rates." [Telegraph].

Would it be too fanciful to suggest the BoE has over-tightened and will be lowering rates in Q4? Since neither the Bank nor the Treasury seems to have much clue, the theory isn't easy to rubbish.

[brucie5] 10/7/2023 12:23

Taken a modest position here. 33% discount to NAV and a >9% yield does have its attractions!

But where is the bottom!?

[spectoacc] 29/6/2023 06:38

@apollocreed1 - strongly suspect a clumsy seller on Monday, my guess is a council pension fund, and this is just bouncing back. A much-needed bounce back :)

@raptor_fund - £400bn during Covid was the big mistake IMO, particularly BBL's which Sunak put next to no checks & balances on, and led to a massive juicing of the property market and widespread fraud. What's done is done, but we're paying for it now.

Energy price support seems more nuanced - something was needed, but seemed structured as a voter giveaway.

Agree re housing but it'll jack up the price. Labour planning some sort of compulsory purchase from landowners for social housing, which has a little merit but is yet more intervention.

Agree IT/NI but it'll never wash politically. In which case, NI on pension income, surely. Triple lock, final salary, index-linked - if you're a poor pensioner you wouldn't be paying NI anyway as below the threshold, but hit the wealthy (& wealthier) ones, plesae.

Also - contentiously - I'm all for IHT. If you're going to have to pay tax, pay it when you're dead.

[apollocreed1] 28/6/2023 19:44

Anyone have an idea why GCPI is up 7% today? HICL 6%, INPP, 3IN ASLI - also had a great day. But why?

[raptor_fund] 28/6/2023 19:12

Feel we need to stop big giveaways (like energy bill support) in the future and spend more government money on long term fixes (i.e funding energy efficiency)
We also need a reformed planning system that will greenlight quality (and I stress quality) homes as standard. Rolling NI into income tax and levying it on everyone's income, not just working individuals would be a fair way to help lower inflation.

[donald pond] 28/6/2023 07:46

How do people think GCP stacks up against competitors like SEQI?

[hpcg] 27/6/2023 18:06

I bought a chunk more today. Had a good read through the latest financials and when it comes down to it it pays a lot more than government bonds, and the trashy rates the banks are offering. That is exactly the same situation as every other time I've bought, so in a sense means nothing. The difference to me is the need to keep money working because if it isn't its purchasing power is draining away. The risk is much higher rates, but the economy clearly doesn't need 10 or even 8% to dramatically slow it down.

[spectoacc] 27/6/2023 13:13

After years of borrowing at next to nothing, followed by a final & calamitous £400bn binge during Covid, we are indeed stuffed. Debt costs are ratcheting up hugely.

Quite what you do about that, other than "don't start from here", is another argument.

Now no choice but to increase rates whilst the economy is weak - there's too much money around, and inflation is the ultimate evil.

Not so much Volcker as 1990's.

State has got far too big, & can't see it getting any smaller after the next GE.

We've gone OT. Good to see a small bounce off the bottom on GCP.

[donald pond] 27/6/2023 13:09

Rates should have been higher from 2011/12 to 2021. But increasing rates when the economy is weak and debt is high is the wrong approach. I read that the state spends 50% of GDP and is running an 8% deficit. I'd suggest addressing that will do more for inflation than anything else

[spectoacc] 27/6/2023 12:54

Increasing the labour pool is vital, I agree. Whether you can do that by say cutting jobs in the NHS (by far the largest employer) I doubt. Likely the opposite, to get some of the c.2.5m on the sick back into work.

It isn't central banks causing wage demands - it's how tight the labour market is. Recession/sharp slowdown the only realistic way to resolve that.

There's a bizarre Erdogan-esque belief that higher interest rates cause higher inflation. Rates should have gone a lot higher, a lot sooner.

[donald pond] 27/6/2023 12:16

ECB today saying that the main cause of inflation has been firms expanding margins in anticipation of wage demands. In other words, central bank fearmongering triggered companies to add fuel to inflation fire, and now it is raging. Put interest rates at 2/3%, have policies to cushion the worst short term impacts of energy and food inflation, sit back, watch inflation come right back down.

[donald pond] 27/6/2023 12:04

The way to solve this type of inflation is to keep interest rates low (too much money sloshing around and near zero economic growth don't make much sense) and reduce wage pressure by getting rid of the 400,000 extra jobs created in the public sector since 2016 and not raising benefits by inflation. Wages are the big threat now and increasing the cost of mortgages just adds pressure to the need to earn more. This isn't a Volcker moment

[spectoacc] 27/6/2023 11:47

Unfortunately food is still going up in double-digits (18.3% last month YoY), flights/package holidays were +40%, & car insurance a staggering +50%.

There's Still Too Much Money around, most of it from the vast Covid juicing (c.£400bn UK).

All the evidence is of inflation moderating, falling, but not by nearly enough. Average earnings c.7%, wage-price (or price-wage) has overtaken cost-push.

Saying all that, 5-something interest rates surely enough to cause the necessary recession.

@Wc104 - $ looks highly vulnerable to me, but agreed re Sterling, particularly depending what ex-BoE Ms Reeves has in store.

[hindsight] 27/6/2023 11:06

donald, not just commodities, UK PMI is now negative, manufacturing demand collapsing in far east in china and now signapore. This is all deflationary. Wasnt long ago these factors were used for the mad ZIRP policy

Singapore’s manufacturing output decreased 10.8% in May 2023 from a year earlier, its fastest rate of decline since February 2013.
Excluding biomedical manufacturing, output fell 13% compared to the same period last year.

On a seasonally adjusted month-on-month basis, manufacturing output decreased 3.9% in May, and if biomedical manufacturing was excluded, output decreased 8% month-on-month.

[donald pond] 27/6/2023 10:25

Mind you, corn, wheat, oil all down 25-50% over last 12 months. The only thing rising are interest rates!

[williamcooper104] 27/6/2023 10:14

Yep for inflation and energy prices most infra funds only increases their short term forecasts, they all based NAV/DCFs on both inflation and energy returning to trend Most of them have undercut inflation

[williamcooper104] 27/6/2023 10:12

That's why always good to have a lot of dollar assets (not that it's helped me recently though) - not least US markets are cheaper to invest in with vastly more liquidity

[donald pond] 27/6/2023 10:09

TBH my biggest concern is currency risk. With the state being 50% of our economy, deficits running at 5% of GDP and neither party believing that cutting the size of the state is even worth considering, the next crisis may well be a lack of faith in sterling. But who knows!

[donald pond] 27/6/2023 08:34

CCAFAIK long term electricity prices are now forecast to be significantly above the levels predicted in the 2015-2020 period when many of these funds made their investments. And as others have said, when the life of loans is 10 years+, it's the long end that matters. I struggle to believe that £1/1.10 of debt yielding 7% for 15 years is only worth 73p today

[jonwig] 27/6/2023 07:24

Yes, it was a question!

But I was looking further ahead; for example, HICL's assets have a range of maturity up to 2049, I think. This was the chart I was looking at: