Recession predictions

brisan wrote:

Thanks for that insight So it will not take much for the whole house of cards to collapse again Add Brexit into the mix and it does not look good

This is what I've been fearing all long, I'd also like to add my thanks also, some great insight, I've been aware of the shadow banking system, but unaware of its workings, I'm fearing the really scary stuff, so hopefully it doesn't happen

Just to give and example of why I think the CLO market will be impacted I did some digging on a random CLO that I selected from the CLO's listed on the Irish Stock exchange CAMPUS LIVING VILLAGES (BOND ISSUER) UK PLC.

This CLO issued £157m GBP by securitising the rents on student accommodation properties. It relies on student accommodation occupancy rates and the regular paying of rents. If Covid has impacted these occupancy rates and the paying of rent then this will impact the return (and possibly the capital) on whoever has invested in the CLO. In this case it was probably CLV Funds Management based in Australia that bought the notes to finance the acquisition of UK student accommodation via a web of investment companies and trusts. you can tell this by looking at the prospectus for the CLO Issuance.
source: https://www.ise.ie/debt_documents/Prospectus%20-%20Standalone_59de219c-024a-44fb-87ba-a623700ea7bb.PDF

So the next question is who are the investors behind CLV Funds Management and you will see that Australian pension funds are a source for a large chunk.
source: https://en.wikipedia.org/wiki/Campus_Living_Villages


In Summary
Australian pensions funds will be hit by a downturn in rents from student accommodation in UK/USA/Australia/NZ. The Australian pension funds are invested by the ordinary man on the street that is saving for his pension who could see a big drop in his pension value.

This is just one example but the same logic can be applied to:
- retail shops where the rent from these has been securitised and invested in by a fund.
- Office Space where the rent from the CRE has been securitised and invested in by a fund
- Public/Private Transport where Buses/Trains/planes or other such assets have been securitised and invested in by a fund.

All the above sectors that have been deeply impacted by covid which means that the underlying investor will take a hit. who is the underlying investor is the question but we know that pension fund and insurance companies are heavy investors so that will translate to a drop in your pension value and probably an increase in your insurance premiums. I might be wrong but time will tell as it will take time for the effects to be seen.

The longer covid impacts the wider economy the greater chance that these funds start stopping investors from withdrawing which could put the overall markets into shock, especially if contagion set in amongst the funds because investors were not 100% sure in what they actually had invested in or what risks exists.

Timing belt wrote: »

Just to give and example of why I think the CLO market will be impacted I did some digging on a random CLO that I selected from the CLO's listed on the Irish Stock exchange CAMPUS LIVING VILLAGES (BOND ISSUER) UK PLC.

This CLO issued £157m GBP by securitising the rents on student accommodation properties. It relies on student accommodation occupancy rates and the regular paying of rents. If Covid has impacted these occupancy rates and the paying of rent then this will impact the return (and possibly the capital) on whoever has invested in the CLO. In this case it was probably CLV Funds Management based in Australia that bought the notes to finance the acquisition of UK student accommodation via a web of investment companies and trusts. you can tell this by looking at the prospectus for the CLO Issuance.
source: https://www.ise.ie/debt_documents/Prospectus%20-%20Standalone_59de219c-024a-44fb-87ba-a623700ea7bb.PDF

So the next question is who are the investors behind CLV Funds Management and you will see that Australian pension funds are a source for a large chunk.
source: https://en.wikipedia.org/wiki/Campus_Living_Villages


In Summary
Australian pensions funds will be hit by a downturn in rents from student accommodation in UK/USA/Australia/NZ. The Australian pension funds are invested by the ordinary man on the street that is saving for his pension who could see a big drop in his pension value.

This is just one example but the same logic can be applied to:
- retail shops where the rent from these has been securitised and invested in by a fund.
- Office Space where the rent from the CRE has been securitised and invested in by a fund
- Public/Private Transport where Buses/Trains/planes or other such assets have been securitised and invested in by a fund.

All the above sectors that have been deeply impacted by covid which means that the underlying investor will take a hit. who is the underlying investor is the question but we know that pension fund and insurance companies are heavy investors so that will translate to a drop in your pension value and probably an increase in your insurance premiums. I might be wrong but time will tell as it will take time for the effects to be seen.

The longer covid impacts the wider economy the greater chance that these funds start stopping investors from withdrawing which could put the overall markets into shock, especially if contagion set in amongst the funds because investors were not 100% sure in what they actually had invested in or what risks exists.

This is really interesting.

Except you point about Australian pension funds comment - Listed & unlisted property only makes up 9% of the total asset allocation of the $1.8 trillion of ordinary funds, whereas equities account for roughly half. Much of that property is also in Australia, so any drop here probably wouldn't impact much, unless as you say it was part of a wider contagion.

wassie wrote: »

Well written piece - I feel that prior to Covid there was a lot of noise/worry about the levels of corporate debt the world was drowning in.

Yet since over the last 6 months that conversation has markedly dropped off, yet the problem hasn't gone anywhere.

still plenty of people shouting and screaming over corporate debt though, which is in the private domain!

wassie wrote: »

Well written piece - I feel that prior to Covid there was a lot of noise/worry about the levels of corporate debt the world was drowning in.

Yet since over the last 6 months that conversation has markedly dropped off, yet the problem hasn't gone anywhere.

Bit like our housing problem
Agreed it was well written so as even an amateur economist could understand

brisan wrote: »

That's scary
The fact the banks are trying to hide it even more so

The fed through it’s Primary Market Corporate Credit Facility (PMCCF) have added a back stop to prevent a Big Bang on CLO’s. The other thing that is important is what level of default would impact the banks as most of them hold the top tranches so the lower tranches would need to be wiped out before they get hit.

Timing belt wrote: »

Yes you are correct most of these issues are a created unintentionally whilst trying to fix another issue.

yea i think so, this is getting very messy though, its endangering all humans, including the wealthy

Timing belt wrote: »

Yes it gets more complex with every human intervention but if they stood back and let market sort it out it would be an absolute disaster. I suppose it is is a case of the lesser of two evils.

humans created this mess, and we re gonna have to clean it up, eventually, hopefully the planet is capable of supporting us at that stage. its disturbing we re still holding onto this, the market knows best nonsense, it really is disturbing! i do think we re painfully moving into another form of capitalism, lets hope we dont end this one with a bang, like the last time!

Timing belt wrote: »

Like it or not what real alternative is there. As long as people want to have more than the other person there will always be market forces at play. As I said before it’s all boils down to greed and fear.

i think we re slowly working on alternatives, i particularly like the term, 'progressive capitalism', even though i know nobody really knows what that means, or how we re gonna get to it, but at the moment, it does seem like markets will play a critical role, but we ll also have to accept, markets cant actually truly provide us with all our needs. again, id somewhat disagree that it all boils down to greed and fear, its just humans being humans

Timing belt wrote:

Isn’t that what exists in Ireland.

No, I disagree, yes I will agree though that there is better safety nets here, compared to countries such as the us and the uk, but those safely nets have been undermined for the last few decades, particularly throughout the so called neoliberal/neoclassical era.

Timing belt wrote:

Unlike the UK or America 99% of kids all get the same education. The private school market is tiny in comparison and university places are based on a level playing field and not what school you attended.

Yes, the majority of kids do get a similar education here, but our system truly is designed for a particular type of mind, and if you don't have that type of mind, you ll probably find yourself in big trouble very quickly, and your issues may never be resolved, within the system, which leads to complications for the remainder of your life. I will also agree, our educational system rewards those with certain types of brains, and punishes those that don't. Those that are made to feel frankly stupid within our system, maybe left with very serious complexities after education, which can lead to extremely complex problems for life.

Our educational system is far from a level playing field, many are disadvantaged within it, as discussed. Covid is revealing yet again, how out of date our system is, but sadly, very little will probably change. There's also plenty of evidence to show inequalities are still growing in our society, including from an educational perspective, those from more affluent backgrounds, generally gain access more so of the more prestigious institutions in the country, but yes, more and more citizens overall have been gaining access to third level, presenting a paradox.

Our educational system is also far from free, most parents will tell you this, costs generally increase as one moves through the system, and costs can spiral entering third level, this largely on living costs, again, this adding to the growing inequality issues.

Timing belt wrote:

Health care available to all unlike America and gov policy giving incentives for greener more sustainable outcomes.

Again, we have a similarly developing issue here, but not as serious, compared to the us, our public health care system is under treat, from itself and external forces, we re all aware of the growing issues here, this is a very common outcome, particularly when such political and economic ideologies are introduced, public services basically become a sh1t show, and start devouring themselves.

Timing belt wrote:

In America if you are down on your luck you are ****ed as very little gov support here we bend over backwards to help in comparison.

Again, this is actually another myth, people should truly spend time with the lower classes, something extremely disturbing is occurring amongst them, extremely complex and frankly dangerous psychological issues are developing amongst them, this is truly dangerous for all citizens, and you may forget about professional help, it effectively doesn't exist in the public sector. You ll find, if you need psychological help in this country, you might be better off going private, as I have done in the past. I have also availed of publically funded mental health services, which have been fantastic, but I had to be a student to gain access , again, not all that need this help, can get access to this, as many simply have been unable to obtain the qualifications to enter third level, as discussed. Our growing housing/accommodation and health care issues are more signs of serious growing problems, which affect everyone, but more so, the lower classes. Yes I know, many get a medical card, but if the services truly required, don't truly exist, you ll find that card is truly just a lump of plastic, that's probably better used cutting up cocaine, or some other substances

Timing belt wrote:

Markets are there to provide incentive and opportunity without what jobs would be in Ireland? We would all have to immigrate again to find opportunities.

Yup, markets are critical, but our so called free market, is far from free, it's truly about monopolisation and rent seeking, particularly by plutocratic interests, and there's nothing free about that!

Immigration is a fantastic option for people, but we ve moved on from our dark past, we re an open economy now, doing so much better in many ways, we should be proud of ourselves for this achievement, yes I know, there are paradoxes here to, the world is a complex place.

Timing belt wrote:

Yes we could do better but that comes with time

...and we re quickly running out of time to try resolve many of these issues....

Geuze wrote: »

Good rebound in retail sales, published today.

https://www.cso.ie/en/releasesandpublications/er/rsi/retailsalesindexaugust2020/


Both volumes and value are above last year's figures.

Does this suggest Q3 will see GDP growth?

So the recession will have been six months long?

or did introducing policies such as increasing covid payments, help in this rebound, and will the decrease in these payments, lead to a decrease in that rebound?

Timing belt wrote: »

The workers that kept working from home have an increased disposable income as they no longer have transport costs, lunches, coffees etc. On top of this there is a saving on childcare costs. Bank deposits grew during the same period which suggests not all disposable income was spent.

People that were luck enough not to be directly impacted financially by covid did well during this period but over the next few months may be impacted as businesses tighten there belt. It takes up to 1 year for the effect of covid to be felt fully by the wider economy as it takes time to build new business cases, work with unions etc. Before a restructuring can take place.

...and theres only so much belt tightening that can be done, before the economy collapses on itself, people increase savings for a reason, during downturns, and our government is defaulting to its hardwired economic conservatism, this may not work, they could be playing with fire!

Deleted User wrote: »

Totally incorrect. Even in the worst depression since the Wall Street crash taxes were increased dramatically but welfare wasn't touched. If anything we have an extremely socialist government in place at the moment. In fact Ireland has always protected people on welfare and punished those who work. Allowances for all sorts of things that working people don't get.

When they cut welfare rates to their UK equivalents then you might have a point.

...another myth, which is clearly showing in our housing and health care sectors!

socialist government!

...by any chance are the depths of welfare cuts in the uk, related to their current situation?

Wanderer78 wrote: »

...and theres only so much belt tightening that can be done, before the economy collapses on itself, people increase savings for a reason, during downturns, and our government is defaulting to its hardwired economic conservatism, this may not work, they could be playing with fire!

What do you suggest should happen?

Wanderer78 wrote: »

reinstate full covid payments, and quickly, or we re probably gonna be dealing with a much bigger problem in 21

The country can’t afford to do that and there is no guarantee that the jobs will be there in 2021 or that by then we are not in the same situation as now.