Can Sunak and Hunt Stem the Tide of Foreclosures?

Saturday June 24th 2023 Monaco 64 home of alternative economics and contrarian views we're going to look at whether Rishi sunak and his Chancellor Jeremy Hunt will be able to stop the tide or the flood of foreclosures from the real estate market and higher mortgage rates before we look into it though I like to look at the concept of the king knuts and the tide some people

say it's a myth that it never happened but I think it's useful to look into it and it says here in the story demonstrates to his flattering courtiers that he has no control over the elements the incoming tide explaining that secular power is vain compared to the supreme power of God and you could replace God also for for nature I would say and everything that happens

in my opinion in markets uh throughout Nations and Society is to do with nature and God you might not agree with me but that's the way I look at it the other uh principle uh or law actually that I want to look at before we look into what's going on in the UK mortgage or real estate market is Newton's third law which I touched upon a

few few weeks ago I think in one of my videos and this third law states for every action or force in nature there is an equal and opposite reaction so I think this will help you maybe understand the enormity of the crisis that we're in and I'll tell you right away that I don't think they're going to succeed in uh resolving this just by making it

so to by telling people that don't worry or uh credit rating won't be affected you can do this and that and we're going to come to that in a minute before I do though I like to say that the Mike and Mario show now is live every uh Friday so Mike and I do it simultaneously on his channel and my channel so that's why I don't

publish it as a recording on The Saturdays anymore so if you want to watch the Mike and Mario show did if you didn't get the chance to watch it live and it's at 5 p.m London on Fridays you can go on to uh my YouTube channel and and search for it because it's there and I'll put it up in the cards here too and before we

uh go into uh what's going on here in the UK just wanted to say that I spoke to Oliver Temple yesterday and they said that they have the uh one ounce gold Krugerrand deal back on so you can get it for half a percent over spot if you use my promo code Monaco 64. all the details are going to be below in the description of this

video so what's going on here in the UK we're going to look at the two-year yield again but as you can see here this is uh fresh news UK Banks agree to a 12 month delay on the home repossessions deal with treasury comes as interest rates forecast to Peak at six and a quarter in house prices to fall 10 percent again that's wishful thinking in my

opinion I think maybe six months ago interest rates are forecast to Peak at four and a half maybe five now they keep lifting it the market is uh behind the curve and I think they're still wrong they're still underestimating uh where interest rates are going to go and uh we're gonna look into that again of course why I think that is so uh the telegraph was

reporting it as well it says hunt offers mortgage flexibility to ease pain from surging interest rates and there's an interesting part on this in this article here it says the average mortgage borrower will suffer a jump in payments of 280 pounds per month according to the institute for fiscal studies after typical two-year rates soared from Two and a half percent two years ago and three and

a quarter percent last year to more than six percent this week uh the bank of being this week increase the base rate from four and a half to five so keep that two-year uh time frame in mind because we're gonna look now at the two-year guilt yield because that's really important it's the reference rate for two-year swap swap yields which are used to set mortgages um

yes so do I think this is gonna help it might help temporarily and I think Jeremy Hunt and Rishi sunak and the bankers and the economists they they assume that they will be able to tame inflation very soon and that everything will go back to normal next year rates will come back down and everything will be all right but I'm afraid to say they've been wrong

about everything concerning uh Rising prices or inflation first they said it was transitory then they blamed it on Putin that then they said oh it's coming back down by by uh I don't know the beginning of this year coming back down to four or three they were even talking about inflation getting back down to two uh before the end of this year then that was like

last year so they've gotten it all wrong and I want to show you uh now something that I've been warning about of course not just in the last six weeks but also last year before we had the crisis I warned about a sovereign debt crisis and we're going to look here uh at uh really who's to blame because we have now a guy who is prime

a negative level with him uh running the finances right and then uh he left as uh Chancellor I think that was uh when uh Boris Johnson also resigned July 5th of thereabouts it could have been a different date but notice how the two-year yield started going up uh well towards the end of 2021 and all throughout 2022 and it's really started picking up at the beginning

or end of August and throughout September and uh notice how list trust became prime minister on September 6 and the two-year yield uh was already above three percent so a lot of people are blaming what's going on now on list trusts and quasi-quart tank but I I think they were just handed uh a poison chalice so to speak and uh whatever budget they might have come

out with last uh September October the markets would have done what they did so what I'm trying to say here is that sunac as Chancellor he planted all the seeds along with his prime minister of course it was Boris Johnson who's not a prime minister anymore not an MP anymore as you can see here the UK was spending huge amounts uh the deficit was the biggest

probably since World War II it went even uh through uh the levels from the 08 crisis 15 percent budget deficit deficit to GDP and that's continuing yes it has come come off a little bit it's only like five or six but it's still very high the budget deficit they're still spending like uh yeah like drunken Sailors if drunken Sailors spend that much I don't know but

uh the other thing I wanted to point out too is the Bank of England uh because don't forget in that period that Rishi sunak was Chancellor the bank of England cut rates from three quarters of a percent which was still really low down to almost zero to zero point one and they kept that rate there from March 2020 until the end of 2021 as you can

see uh when they change finally change rates and the other thing that the bank of England did during this period uh was that they injected 450 billion of funny money or QE and why do they do that well according to this guy here Richard Murphy who is an uh economic Justice campaigner and professor of accounting practice at Sheffield University this is what he said covet cost

the UK around 450 billion pounds it so happens that since March 2020 the bank of Ingham has bought that same value of government bonds our issue to pay for covid in other words neither taxpayers or financial markets have paid for covid the bank of England did but now they're passing on the cost to us and the markets and the bank of England of course and that's

what it's all about so as you can see they did the same amount of QE in about two years that they did from uh 08 or 09 to 2020 so that's the uh Newton's third law there that for every action and force in nature there's an equal and opposite reaction and also they cut rates to a 0.1 percent and the government spent almost 20 percent of

GDP so it's payback time and I think they're they're trying to alleviate the pain of course for for homeowners people who have their mortgages that are due a two-year mortgages well they're also five-year mortgages I would say that are coming due maybe in three years I think that's going to be a problem uh and I think what they're trying to uh do here is placate people

because we have an election next year and they're hoping they're crossing their fingers that everything is going to go back to how it was uh prior to really the beginning of 2022 when interest rates were like zero or negative and now we're going to look at the technical formation here which tells me that it's going to be very hard to stop the tide of foreclosures or

the flood of Court foreclosures if you want to call it and how can I tell this from looking at a chart well because charts are a reflection of human psychology and this uh pennant or triangle formation is a consolidation pattern what does that mean well it means that um after a big move up or down in this case uh the two-year yield has gone up guilt

yields have gone up from minus 0.17 percent back in 2021 all the way up to like uh 475 back in 2022 when we had the crisis so that was a move of uh like almost five percent if you add the negative rate to the uh from 0 to 475 you get 4.93 so usually these consolidation patterns it's like a breather the market takes a breather they

resolve themselves uh three three out of four times roughly uh they continue uh the previous Trend which and we've broken the uh the pennant or flag as you can see or pennant or triangle as you can see here so what happens usually is that from that breakout area you add the distance that the market covered in the first leg which is almost five percent so you

add five percent to about 3.8 percent you get almost a nine percent base rate or actually not base rate but two-year uh yield yield by I would say and I've spoken about this if you look at the the time that it took for um yields to rise from 20 20 21 to 2022 it was about 18 months so if you add 18 months to about a

few weeks ago we we get to the end of 2025 so I think it's going to be rough sailing um and that's why I'm saying that um sunak and Hunt will not be able to stop the tide or the flood of foreclosures and am I happy to see this no but unfortunately people were psychologically in a bad I would say situation back in 2020 2021 2022

people have been in lockdowns they didn't have to work and yeah they had a lot of savings because they couldn't spend the money they're still getting paid sunac as Chancellor he he gave out a lot of largesse to the public and uh he pushed people into buying homes because he didn't want to see also the real estate market collapse he suspended stamp Duty and that's why

people got involved and unfortunately people Trust Authority most people trust Authority and I understand that not everyone the majority of people don't know what I know about markets and about economics but hopefully people who've been watching me for the last few years and I warned about this the whole time of course back then Pro My Hope Is that they protected themselves and they didn't take on

too much debt and uh unfortunately it's going to be uh rough and and I think uh they're they're playing a losing game uh the powers that be and it's ironic that we've got the guy who really ceded this crisis sunac trying to solve it or maybe it's more conspiratorial maybe he did that as Chancellor in order to bring everything down and maybe that's what he's doing

and they have to pretend that they're helping there's that too whatever it might be it won't won't end well because Mother Nature or God if you wanna whatever you want to call it uh will have its uh final say and uh I think I said it earlier if it was so easy to solve problems Market problems like this problems of money and interest rates with just

a flick of a pen or I mean the world would be a very rich place there wouldn't be any poverty anywhere so that's why I think yeah don't be fooled by this uh reprieve uh it's not gonna last and it's not going to get better and that's my opinion so with that I'm gonna wish you all a very good uh rest of the day and a

very good weekend take care bye