Raven Prop P Discussion Threads

[pogue] 29/8/2020 20:21

Why? My views are my own, you feel the need to post other people's views in reply then at least post ones that are relevant.

[kenny] 29/8/2020 19:34

Therefore, perhaps you could lay out all your views backed by third party cross references to articles and/or commentary so that we can all understand and discuss your opinions.

[pogue] 29/8/2020 15:42

Since you have picked up on only a small part of what I said at least use a reference to an article about American consumers and not EU, different beast, and as I said they will drop helicopter money on the US poor not the retirees. The article misses both points.

[kenny] 29/8/2020 15:28

It was stated in a recent post, that US consumers will return to spending - as they have in the past - and this will push up inflation.

Here is an article which demonstrates that low or negative rates reduce spending. Most of the reduction is because older and retired people, who are a large and growing part of all developed economies - spend less. The article suggests they spend less because their income is reduced by low rates:

[pogue] 29/8/2020 15:18

The article posses the question but does not answer it just waffles on. He is only talking just now but he is giving guidance as markets don't like sudden movements even his speech was being trailed before he said it! The solution is helicopter money for the poor and it will be coming very soon its the next step and the Americans will spend unlike the Japs as I said, and the article even states that as well. The FED wants inflation and it will get it one way or another this is their last shot at fixing the economy and it needs to work so everything will be thrown at it.

[kenny] 29/8/2020 15:01

"Are bond yields lower forever or is the Big Bang coming?"

[kenny] 29/8/2020 14:55

"Why the Fed Can’t Talk the U.S. Economy Into Inflation"

[pogue] 29/8/2020 14:07

I choose simple numbers to highlight the point.
Regards government allowing inflation to go too high that they will have to increase interest rates dramatically well as I said inflation is not easily controllable and if interest rates have to rise they have to rise or we just keep printing money until its valueless, house prices will be the least of our worries at that point.
In the end its your belief in the UK politicians' ability to control inflation you are betting on, I don't trust them to do anything apart from keep getting elected and refusing to take any hard decision early enough to stop a disaster as they always will blame the last lot.
We are entering interesting times place your bets.

[rayg5] 29/8/2020 13:43

Yes, I can do the maths too. But this seems alarmist. Even at the height of a rouble crisis the yield here is rarely above 12pc. I don't see 18pc ffs. It topped 13pc briefly in March, as I recall. But it didn't stay there for long and the spread was very wide, even for RAVP. I do remember gilts at 15pc 30 years ago but I doubt we will ever be at that level again as it triggered a crash in the housing market. No government will risk that.

[pogue] 29/8/2020 12:44

If the US sneezes the UK catches a cold.
A little example of what inflation does to fixed interest.
If you bought here at £1 you get 12% interest but if it halves in value due to high inflation you are still getting 12% on the initial amount you placed however if you try and cash in its now 50p and new buyers are getting 18% to compensate for inflation whilst the 12% you are getting has a lot less buying power so you lose capital and buying power in an inflationary environment.
As for how high inflation will go well I remember the last lot we had in the UK and one thing that everyone who lived through it and tried to control agreed on was that it was very difficult to control once it gets into the economy so anyone claiming to be able to control it is a liar especially if they are not going to raise interest rates which was the only way to kill it last time.
We are walking into a high inflation environment as its the only solution to the vast money printing going on and the FED is leading us and all Western Central banks will follow as they all have the same problem.

[rayg5] 29/8/2020 12:38

The Fed will be content with a weaker dollar and the imported inflation which it will bring. Consequently with a stronger pound I don't believe inflaton here is in danger of rising much. If so, RAVP can remain at current levels, regardless of what gold does. Folk buy these prefs for income and any weakness will bring out the buyers.

[eeza] 29/8/2020 10:42

If inflation here gets to 5% Sunak will have filled his nappy multiple times.
Look at UK debt, in the Thomas at 1% inflation. Interest rates start to rise and UK will sink under the weight of interest payments.

[ramellous] 29/8/2020 10:26

Ravp will only ever pay out 12p per share annually. At today’s share price that’s nearly 10% yield. The yield can only increase if the share price reduces. But that’s only for new buyers or old buyers averaging down. Whatever happens with the fed is in the USA not here. The $ is losing value against the £ so inflation looks baked in over there but you have to look at U.K. inflation. If it went up to 5% you are still getting double in yield here. If inflation was to take off 70s style then other dividend producing assets that can raise dividends in line with inflation would be more attractive.

[pogue] 29/8/2020 10:22

Yes I expect RAVP to fall why would it not if the money you get in interest is worth less every time you get it. Demand for a higher interest rate to compensate will push the price down. Look at the price of gold, it does not generate interest but is a safe haven in times of high inflation, people are voting with their money on where we are going and it’s not to fixed interest.

[rayg5] 29/8/2020 10:19

There is no easy correlation between corporate yields and inflation. If inflation rises it does not follow that corporate yields will do likewise. Yes, government yields will rise but that will just narrow the spread to corporates.

[rayg5] 29/8/2020 09:34

But spread between govts and corporates may not need to rise...???

Basically you're suggesting the Ravp share price will fall...

[pogue] 29/8/2020 09:29

Yield on anything will have to rise to compensate for the loss of purchasing power of the money generated. That is what inflation does.

[rayg5] 29/8/2020 08:20

The spread between in inflaton and the yield here is 8 or so points. Are you suggesting the Ravp yield will have to rise if inflation starts to rise? This will certainly happen with govt bonds but with these I'm not so sure.

[pogue] 29/8/2020 08:00

The difference between Japan and the US is the consumer. Japan could not get the populace to spend to raise inflation that will not be a problem in the US. The markets are all beginning to bet the FED will succeed in getting inflation going as the price of gold rises inexrobsly not many commentators believe they will not succeed in raising inflation and many are now beginning to realise they won't be able to control it. Fixed interest will be toast soon and I am down to 2 only now here and BOI and will start reducing those soon. Gold,silver and even bitcoin is becoming the investment of the future look at the charts.

[kenny] 29/8/2020 02:23

"Fed inflation shift raises questions about past rate rises"

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For those who do not subscribe to the FT, an extract from the above article is below:


Jonathan Golub, chief US equity strategist for Credit Suisse, said he saw parallels with Japan and its longstanding struggle to revive its economy and generate inflation.

“We’ve had 30 years of Japan doing very, very aggressive policy, and you didn’t get either inflation or growth there,” he said. “Why do we believe we are going to be different?”

[montyhedge] 28/8/2020 14:07

All this turmoil in the markets, nice to be getting a safe 9%, dividend paid every 13 weeks.

[holts] 21/8/2020 19:47

And to reduce the amount they have to keep funding , all of those being the blindingly obvious , so what's the real idea ?

[owenski] 20/8/2020 21:11

I'd rather have the cash anyway.

[holts] 20/8/2020 21:11

Or to reflect their view that they are so undervalued