Member Info for steph

https://tradingeconomics.com/united-kingdom/interest-rate go here and click on "max" to see just how crazy it used t be when we used interest rates to prop up sterling exchange rtes. Nothing like something as stupid as that occurring today. I wonder how our UK builders ever traded through that? They did somehow. Much more robust than the market prices in I think. I agree stupid to hold cash right now. Maybe not wildly leveraged perhaps but cash, no way for anybody under 80.

al the builders are going to do well with good margins and moderate expansion until there is actual nominal price falls in house prices in their target areas. House prices during a "normal" recession or slow down tend to plateau rather than decrease in nominal terms. Sellers just hold and sales volumes go down. Of course in inflation adjusted terms a freeze is a real decrease but that is nothing like enough to substantially throw the builders off their existing profit trajectories. As there has only been 2 significant dips in nominal values in the whole post war period (and they were for extraordinary reasons) I don't see nominal prices decreasing any time soon in spite of all the black swans swimming about. P/E ratios for builders is pricing in a potential crash in the foreseeable future that is very unlikely to come. Market just not differentiating from the once every 40 year dip and the normal recessions every 10. Brexit just not big enough to cause another 40 year dip unless the government really f..k up this time. Thatcher was responsible for the first with 16% bank rates and withdrawal of domestic mortgage deductibility at the same time. Can you imagine what 16% base rates would do to the housing market today? Unthinkable. The remarkable thing is the housing market dipped only 30% in nominal terms and recovered relatively quickly. I've not researched how the UK builders traded through that mess. There was quite a few parents to the second which had global as well as domestic policy mistakes behind it. US sub prime fiasco. ECB not printing money when it needed to due to German veto. Mervin King in the UK with his idiotic and overly academic "moral hazard" as queues formed outside northern rock. We on this board all know too well what happened to the UK builders through that induced big recession. Neither of those huge policy errors likely to be repeated in anything like the same scale. Perhaps some new big hit is brewing somewhere we can't see. That is the risk of being in shares and not cash.

upstream of TEF's housing market is the real driver -TEF facing jobs market. It is still in rude health due to international trends and London's relative strengths. Would have been a bit better without Brexit but still strong. http://www.telegraph.co.uk/business/2017/07/11/technology-driving-citys-office-boom/ http://www.telegraph.co.uk/business/2017/07/10/financial-services-still-booming-despite-fading-optimism/ Give me similar long term jobs drivers for the midlands and I'll divest in TEF a bit and buy a few. Personally I think the reverse is true. TEF has same stock statistics as builders who are in much less diverse and robust jobs markets. Knowledge economy and sharing economy ICT jobs will grow in just a few global hubs at the expense of the rest of each country and at the expense of whole countries. It won't quite be "hunger games" inequality between the few lucky global cities who are attracting the new jobs and the rest but geography of job formation counts for a lot if one has anything more than a 3 year plan.

Yes but give me another comparable growing global city with a housing focussed property developer who specialises in only that city and only the regeneration bits of that global city and you may have a real comparable to my TEF investment. It is a bet for me on the international knowledge economy and the tendency of the jobs created to concentrate in a few global cities at the expense of the rest of the planet.

A London focussed builder can be quite big and not outgrow the market. Between 2000 and 10000 units per annum is probably the sweet spot. Big enough (with partners) to take on the largest regeneration sites London can throw up yet well below a 20% market share of need (49,000 units per annum according to London plan). The bigger regeneration sites tend to be in the 1000's of units and often need a couple of billion to get going. I suspect between twice and 4x the size of BKG is ideal. Able to handle the biggest sites better than BKG would be a competitive advantage. Not immediately but 10 years out I think there will be a new wave of large sites as the government starts to tackle the housing shortage in London seriously and is more willing to CPO. Even aggressive estate densification in London can yield 350,000 new units. We have not yet had any real encouragement at the National level for LA's and housing associations to density their estates. It has all been a bit add hock. The current crop of large sites usually date back to the zeros and Livingstone and Blair's focus on regeneration and bringing into use derelict industrial land. Needs a new political push to create some more. That is not going to come from our stale needy dear leader Mrs May. Needs a new Tory Michael Heseltine or even better a new Labour Aneurin Bevan or even better a coalition with both of the modern equivalent. London with a decent Brexit deal (something like EFTA's Norway) with a liberal immigration policy from the rest of the world for skilled labour and a national consensus to go for growth can grow at 50,000 to 100,000 units per annum or more for the foreseeable future. Population will end up being 15 to 20m including existing and new satellites beyond the green belt which is not large for global cites and would still leave London significantly less dense than Paris or any of the Far eastern big cities. Roll on Crossrail 2,3 and 4 to tie it all together.

true I could have said "partners" which is more TEF's style. Still there are advantages to size in the London market and I hope TEF continue a fast growth strategy to get there. This means us putting up for 10 years with the inevitable trade offs in lower dividend pay-outs and tighter margins (due to forward funding and de-risking finance not any operational inefficiency). Only thing I don't want any more of is dilution as a way to finance fast growth. I'd rather TEF stick to it's natural speed limit and expand at the maximum rate it can (on clever finance, partnerships, forward sales and "only" 1/3rd of profits returned to investors through divis). Good question for AGM I think. Even though I am a fast growth hawk I do not like the divis falling below 1/3rd of after tax profit. I'd even vote for a strategy that divi income be raised permanently to 1/2 after a year or two. It helps us long term holders thinking of holding into retirement to have steady divis. Maybe right now I will reinvest 100% but be nice to have an announcement that in a certain number of years divi income will increase as a percentage of after tax. At the moment I am assuming 30p or so divis in 5 years but it could easily be higher.

http://www.telegraph.co.uk/business/2017/07/09/controversial-crucial-londons-future-can-make-regeneration-work/ Assembling viable sites in London will be a guerrilla warfare over the next 20 years with lots of bold Councils (beyond the usual suspects of TH, Newham and Southwark and Greenwich) needing to step up to the plate. Can't see a bold central government initiative (such as the old LDDC writ large) for a long time. Interesting that all 4 Councils with strong regeneration ambitions and able to handle applications of scale are old LDDC or English Partnership affected Municipalities. Even a scheme with only 7000 odd units is considered "out of Haringey's league". Nothing raises the perspective of a "local council" more than a central government regeneration agency on it's patch for a bit. They may find it irritating but it does stimulate ambition. Also a central government agency can face down relatively minor pockets of local opposition easier than a local council. That is why large rail projects are hybrid Parliamentary bills and not local council led. Just would never get built. TEF not big enough to tackle something on this scale without a strong partner. Eventually it will need this scale of partnerships or the size of BKG or a bit of both. New foreign investors wanting to get into the London market, but obviously needing a Sherpa, may find TEF a willing and strategic fit. As TEF bulks up sizewise it becomes more attractive.

Strictly's tri of BWY, RDW and TEF based on all known information that can be gleamed from spread sheets and annual reports is perfectly sensible NO doubt a bit of switching between the three depending on if one or another is lagging or pushing fair value might offer some additional benefit against a steady hold on all three for multiple years. My additional angle to all the analysis so well presented on this board by others is the regeneration angle. It is if anything is my actual professional expertise. Builders are not factories able to sell their product anywhere. They can only sell their product locally in the markets they have chosen to land bank. BWY, RDR may be equal in any analysis of the published information but their land banks and strategies on geography are quite different. TEF has an almost exclusive concentration on geography that services London's. growing knowledge economy. The others do not. If you believe as I do that as AE,. sharing economy (and apps) and other economic trends kick in the international knowledge economy hubs will grow at the expense of the rest in each nation and between nations than geography matters. That is why Brexit and tight immigration policy bothers me so much. It is about the only thing that can seriously disrupt London's natural competitive advantage in the growing knowledge economy. Like the suppliers to the gold rush investing in house builders who specialize in serving the knowledge economy rather than the ephemeral and highly leveraged knowledge economy companies themselves give you some reflected and steadier return but it is still a bet on the knowledge economy. TEF's house market log run is dependent on the creation of well paid jobs in inner and East London. Household formation at lower income bands just does not quite cut it. A 250,000 terraced house in the midlands might but not a 500,000 2 bed flat in London. For my money TEF, BWY and RDW are not equal. Sooner or later the regeneration (and behind that the knowledge economy jobs growth) premium of TEF's geographic patch will allow TEF to outperform the others. For my ISA with a 10 and 20 year time horizon it is 100% TEF for me. For shares I hold outside the ISA shorter term considerations can come into play. At the current relative pricing point I can't see the benefits but maybe at a different pricing point I might diversify.

Terr is my guide to value calculations and tef is a good 20% lag right now against any of the methodologies. Is 20% a reasonable lag given the black swans about? Maybe but the rather steep increases in EPS from here mean that results driven sp adjustments upwards are very likely. I'm holding right now with my finger on the trigger for a top up on a small dip from here or good news on Brexit negotiations. I'll probably top up anyway regardless of Brexit just before the intern results in October and will certainly be topping up my isa again in April 2018.

https://www.therecord.com/news-story/7275187-average-house-price-in-kitchener-and-waterloo-soars-40-per-cent/

http://business.financialpost.com/entrepreneur/fp-startups/after-blackberry-waterloo-startups-see-more-investment-and-talent-come-their-way/wcm/def0afe6-225e-4a17-ba26-e93aa4b0841e worth looking what became of the housing market after Blackberry's collapse. in Kitchener Waterloo. Should have been awful but it was not. You would have lost your shirt if you had money in Blackberry as a company but not as a investor in housing to the skills cluster Blackberry created. Safer to have a secondary investment in the knowledge economy drivers than a primary investment. This is a microcosm of what is happening in London for multiple knowledge sectors. Don't have to pick the winners in the growing thigh tech stocks, unicorns, culture and creative firms or innovative financial service companies. Just invest in the housing providers who service them all in aggregate. That is why I prefer TEF to UK regional builders. Follow the skills clusters for the modern knowledge economy. Long term it is safer and probably better.

why builders and not the global knowledge economy firms themselves. It is my bit of diversification I suppose. When the gold rush was on most lost their shirts looking for gold but the individuals who supplied the prospectors consistently made fortunes. TEF type housing for young ambitious professionals is a bit like that. It does not really matter which firms or even with innovation sector in London succeed. It does not matter if the knowledge firms are on silly P/E valuations. So long as the aggregate adds well paid jobs TEF by supplying that market makes a relatively safe reflected gain from the knowledge economy. Even in Kitchener, Canada with blackberry the builders have done well after the collapse. The knowledge workers stayed and formed dozens of smaller firms. Would have lost your shirt if you were into Blackberry itself but not the builders supplying the housing market to Blackberry's HQ. London England much more diverse than Kitchener, Ontario Canada ever was or will be.

Yes if one is in shares at all the UK builders have a historical and forward case to outperform as a sector. Call you a Buddhist at the back of the TEF church and maybe "swinger" within the sector -in the investor sense of the word of course. I'm a bit of a "Catholic" investor although I hope not "evangelical". I still like my investments to be evidence and not faith based. Diversification within the sector and some evidence based jumping about within the sector almost certainly a strategy with legs but I just don't have the late nights. I feel I have maxed out on time I can into analysis and to broaden out the net would have diminishing returns for me. I feel I know TEF as a company well and I know the TEF regeneration patch very well based on years of professional engagement. To look at the patches of the alternative builders to the same depth would take months of full time research. If I were to do that I'd jump out of the UK entirely and look at the knowledge economy hot spots globally and see if some builders had a high concentration in those markets as TEF does for London. Boston, Berkeley California come to mind but could be Barcelona, Singapore and Shanghai. For builders it is not just the spread sheets. It is where the land banks are that largely determine future value, business model and risk. It is not like a UK manufacturer who will sell their product nationally or internationally regardless of where it is produced. For builders it is local. I don't trust the midlands, Wales, or the South West as a market for new homes long term. I think the well paid jobs in those regions could struggle to expand and could instead undergo a contraction with lucky London sucking in all the higher end jobs in the growing global knowledge economy. Edinburgh might be an exception. For the builders geography and job prospects matter.

FTSE has only gone up 10% over 17 years. Hardly worth the risk to hold shares. excellent analysis of sector in IC last year. House builders are very cyclical and the majors quite dependent of HP inflation for the high margins. http://www.investorschronicle.co.uk/2016/09/23/shares/understanding-housebuilders-eRoxGU1pIpMHLF8TEXp8eO/article.html While holding an index of FTSE 100 for 17 years would not have been worth the effort holding an index of the top 20 builders would have performed quite well (with the exception of TW but that is what an index is for). Nearly all expect TW have exceeded nicely pre crash highs so in the long run it would not have mattered when you bought in -although of course some entry points much better than others but even the worst entry point still would have made good money. Jumping between sector shares and in and out could have made even more than a long term hold but that is theoretical and depends on your timing. https://uk.finance.yahoo.com/quote/TW.L?p=TW.L SO in spite of the cyclical sensitivity if you hold major UK builders long enough they have been a good investment relative to the FTSE 100. I believe this is for structural reasons. There has been consolidation in the sector that has favoured the large builders who have an increasing market share relative to the once diverse small builders. There has been a structural shortage of homes combined with high barriers to entry that has favoured relatively high profit margins even when the inevitable recessions and retraces are averaged in to the mix. SO yes builders are cyclical but you are handsomely rewarded for the cyclical sensitivity if you hold them for long enough in the UK. I think London and TEF's patch is just the extreme end of that analysis. Personally I don't think we are at the top of a cycle. I'd worry if housing output was above 250,000 but it is nowhere close. There is a very low oversupply risk and even if unemployment in London goes up we are talking 4% to maybe 6%, a blip compared to the wild historical gyrations. A very hard Brexit became priced in after May's Conservative conference speech last fall with rigid immigration and ECJ red lines laid out. Seems to me to be room for an upside surprise here rather than a downside surprise. Market had never drank the Brexiteer "cake and eat it" cool aid. Market dropped a lot after the Brexit vote (about 30% for most builders).

TEF have delivered what they said they were going to deliver consistently. Indeed TEF tend to be conservative in any forward projections. It is up to us as investors to interpret how the market might interpret the combination of company results and the background music. Terr's strategy to hold long enough where it all the background music evens out and it just down to long term company performance has much merit. For my ISA I have adopted the same strategy and it is quite relaxing. I really can't say were the SP of TEF will be next year but I'm confident in 10 years it will be a lot higher than now and the same can not be said for any index (including a balanced index of UK house builders). FTSE had gone nowhere for 17 years and might go nowhere for 17 more form here. I did not spot that there would be a major TEF retrace after May 2015. Sold quite a few between 4.40 and 4.93 back then but that was to fund my construction project and not part of some brilliant economic foresight. I fully expected it to break 5 quid by November 2015. Good on those who did see that retrace coming. Terr's postings May 2015 were the most influential. He said the SP had reached fair value and thus further rapid increases were unlikely until results caught up. I thought our P/E ratio was too low for a growth stock (and out of line with US builders) and we had more room to run in May 2015. I was wrong and that was before the dilution and Brexit surprises -which greatly exacerbated the retrace. From here forward I don't feel the SP of TEF is overpriced given the company and background and I am a bit of a Brexit cynic. I was listening the other night to sky news where some idiot was stating without evidence how wonderful Brexit would all be. That is not my view but I still think it is a good time to hold.

http://www.telegraph.co.uk/business/2017/07/05/mays-absurd-brexit-plan-sacrifices-economy-stop-eu-migrants/ I think we are in for some unnecessary and self inflicted turbulence over Brexit. When even the Telegraph can attack needless immigration red lines as aggressively as this something should give and a more sustainable Brexit line emerge and thus the Brexit cloud might lift a bit. That said I believe Brexit and other Black swans are priced in properly and that the downside risk of a chaotic exit is still low enough for me to stay fully invested. Not a time to be highly leveraged though. Need to be in a position to hold through a recession and hold through the full cycle of the disruptive Brexit negotiations. Even with a normal recession there will be plenty of light at the other side within 2 or 3 years if you hold TEF will trade well, keep expanding volume and more or less keep to it's stated 2020 objectives even in a mild recession. SP might dip but it will bounce back. Results are results. I don't think we are about to get a third post war huge recession with real nominal decreases in house prices as we did in the 90's and 2008. If you think that is about to happen of course you should get out of all shares entirely. Can't see what sector would be safe. They will all dip sharply. TEF will likely dip less than the large house builders who have more tied up in land banks that will get written down creating huge paper losses. If you think KIm and trump will be trading nuclear weapons launches anytime soon also a good time to get out of all stock entirely. You can't stay invested without taking some risk.