Real Estate Investors Share Discussion Threads

[chucko1] 01/4/2020 11:48

But Specto, so what if a few Morrison’s folk are increasing the risk a little. The idea is that you get around a 75% reduction in close social contacts, so that basically means taking transport and fun out of our lives for a few weeks. Perhaps in different batches.

[spectoacc] 01/4/2020 11:37

Ugh, I'm really trying not to post, but:

@RCT2 - There's a juxtaposition in your view too. I agree the airline shareholders, bondholders, pensioners may indeed all get wiped out. I don't agree we'll return to flying in the same way we used to, nor that the unused/repo'd planes will all return to the skies. But even without that, who's going to be providing the new capital? What higher returns will they expect? What happens to the Pension Protection Fund when British Airways is dumped on it?

Feels like a govnt (taxpayer) bailout more likely for the airlines.

@CC2014 - agreed - and more than that, people don't seem to realise that much of the missing economic activity is gone, and won't be recovered. All the property ITs telling us they'll move to monthly rents, or are in discussions about rent recovery, or the govnt telling BtL landlords they can recover the missing rent later - forget it. That activity, that rent, is gone. If no one's been to Wagamama's for 3 months, you won't ever make up those 3 months, even assuming everyone gets back to dining out just the same as pre-virus (they won't).

Apply that across most of the economy, and you've got a problem. I've sympathy with the "what price this lockdown" views, but unfortunately that price is "avoiding unnecessary deaths".

This is a simultaneous demand/supply shock - we've never had one before - that will lead to stagflation. How can it possibly not? We're seeing shortages already, and in a country that imports 87% of its fruit/veg (47% of food overall), there's some serious trouble coming down the line.

And - has anyone been to a supermarket recently? Gave up queuing for Tescos (did we vote in Corbyn? Queuing for food) & went to Morrisons. Sensible 2 metre queues, but try passing 3 people in an aisle with a 2m gap, and not a single (ineffective) mask or gloves amongst the staff, who are running around between us like there's no Covid-19.

Or put another way - we're not doing China, we're not getting this under control anytime soon, it's either ongoing lockdown or a series of them.

I keep saying watch USA, watch China, but if you're a market watcher - watch oil.

[nickrl] 01/4/2020 10:30

Given the pension system has been shot for years its about time it was overhauled. From my circle i see plenty of retired people who are living quite nicely off there final salary schemes (gloating how they've had more out than they ever put in) whilst everyone else pays for it. They will need to take a haircut like everyone else and govt needs to start preparing the way (lets hope they do this better then preparing for covid19) now and just impose like all the other policy they are doing whilst the crisis gives them air cover.

The other danger here is we are rapidly moving away from paying dividends as a founding principle and endorsing well paid execs to just worry about themselves and not there shareholders This also needs a policy response although some have voluntary recognised they need to take a pay cut how many would make it permanent even when there business are substantially smaller than now.

[chucko1] 01/4/2020 09:05

Just about all derivative contracts are on daily margin, including most governments and their Agencies. Credit losses owing to the inability to perfect margin (gap risk upon default) remains minuscule. Even the losses cited to the Lehman default were shown to be massively inflated and subsequently largely reduced after court action.

CLOs will again be a problem, but of at least one order of size less than 2007-9.

I also see the FTSE having another look at 5000. And the DOW 15000, though little idea as to when.

[spectoacc] 01/4/2020 08:53

Let's hope - for all our sakes - the sunny view of Corvid-19 turns out to be the correct one, the economic effects temporary, the lock-downs soon behind us, no permanent damage done.

[skyship] 01/4/2020 08:52

...or even narrow bands:


free stock charts from uk.advfn.com

[skyship] 01/4/2020 08:46

Markets don't move in a straight line - you know that. All active investors play the swings within broad trends.

[spectoacc] 01/4/2020 08:30

Watch USA, watch China.

Edit - hope I'll be forgiven a wry smile for the juxtaposition of "The FTSE looks ahead 6 months" and "Could re-test 5,000 support".

[skyship] 01/4/2020 08:27

Meantime, FTSE dn 3%, but keeping powder dry for the time-being as we could easily re-test the 5000 support.

[skyship] 01/4/2020 08:26

"...but this is going on many, many months"

Many, many months I can live with. As I stated earlier, the stock-market already looks 6 months ahead.

[skyship] 01/4/2020 08:24

chucko - I assume he is referring mainly to the CLO market, which did cause problems in the 2008/9 Crash...

There will of course be massive bad debts to swill through the system - from the casino & leisure resorts, from the oil frackers etcetcetc….but the US changed the rules drastically post the Crash and the CLO market should not present the same concerns this time around.

[spectoacc] 01/4/2020 08:24

@chucko1 - counterparty risk, so yes - all of it. But to take one example - a lot of small oilers will tell you they've forward-sold at much higher prices, eg $60/barrel. What happens to the eg airlines who've bought that oil, hedging, of course, their fuel usage? They're not using any. Does the taxpayer bail them out? Who stands behind those contracts? This is months down the line, but Covid-19 is going on many, many months.

[skyship] 01/4/2020 08:20

From the daily No10 briefings the Chief Medical Officer states that London is still operating below capacity; and that the NHS has free capacity equivalent to 50 hospitals - though admittedly that 2ndstat now a few days old.

By getting through winter (we are now into april) and by postponing elective surgery (hips, knees etc) the NHS has far more beds available.

[chucko1] 01/4/2020 08:19

“Look at the derivatives market”. Which part, exactly, as there are more than a thousand parts to it!?

[spectoacc] 01/4/2020 08:12

So forget the deaths, instead look at a closed-down UK economy, closed-down world economy, baked-in shortages, massive debt issuance.

And watch USA, China.

And the debt market, and - I've yet to see anyone else say this - the derivatives market.

AUTO raised cash this morning I see.

[rcturner2] 01/4/2020 08:00

I'm actually starting to come down on the side of the argument that says that COVID-19 is really not going to be that bad. By pumping out daily death numbers everyone is being scared silly, but the number of deaths is still very small and the total number of deaths currently is below the level of last year. It may well be for example that COVID is killing people who would ordinarily have died from the winter flu anyway.

[spectoacc] 01/4/2020 07:50

@Sky - "Over in 6 months" is a possibility. May burn itself out. Summer months may dampen it. Full lock-down may starve it of victims & it disappear.

But I'd put that at a 10% chance. Forget UK/EU - watch America, China re-emergence, India.

A few stats to get you thinking - the govnt have done a magnificent job in turning the ExCel in London into a 5,000-bed hospital. Not ICU, but not bad. Yesterday the number of emergency hospital admissions in the UK went up over 1,000, in 24hrs. So the ExCel will last 5 days.

20% of NHS staff are off for either Covid, or isolating due to it being in their household. So even with extra beds, there's not the extra staff.

To get to herd immunity takes c.50m of us to get it. c.7.5m hospital admissions. We currently have London full already with 11,000.

[skyship] 01/4/2020 07:42

Well - I admit to being one of the 99%. IMO Covid-19 is not the Armageddon virus.

The stock-market always looks 6 months forward; and dividend cuts will be restored once we get to the other side of the pandemic.

[spectoacc] 01/4/2020 07:37

I welcome disagreement :)

1. Divis have been cut, everywhere, and will continue to be. Banks were mostly State-rescued so I guess the State feels it can call the shots - certainly can with RBS

2. Not just pension funds in trouble - the insurance co's too. Think what next-to-no divi payments means for the stock market and reinvestment too

3. I've seen 4 early rights issues so far - note Carnival's large one yesterday - as well as some emergency debt issuance. Far more is coming. Not quite sure what people think will happen to the airlines. Debt to pay, no planes in the air, costs, no income. EZJ went up 7% yesterday, there's a parallel universe out there.

Covid-19 situation is far, far, far more serious than 99% of people think it is.

[skyship] 01/4/2020 07:29

Hmm - don't often disagree, but think you're on the wrong tack their twice.

# Pension Funds. Cos will have to divert, by law, much needed cash resources to propping up their pension funds, already suffering from massive stock-market falls.

# Pension funds - as above, but also where do you think the pension funds get their cash to pay pensions. Govt debt/bonds and corporate dividends. Rates on the first two categories already at absurd lows, so dividends doubly important.

# Rights Issues - companies may not have much success trying to raise shareholder cash at the moment. Underwriters will tell them not much point; and if attempted widely would only drive the Market lower.

[skyship] 01/4/2020 06:32

Damned stupid move by HMG (EDIT: Now reported as the BoE - perhaps Bailey will be the briefest incumbent ever as Governor). What about the pension funds?