UKC

So much doom hard to know where to look first

http://news.bbc.co.uk/1/hi/business/7900854.stm

Repossessions are expected to rise sharply this year.

The number of homes in the UK repossessed by lenders last year rose by 54% to 40,000, according to the Council of Mortgage Lenders (CML).

Despite the recession, the CML said this was fewer than it had originally predicted, but it expects repossessions this year will reach about 75,000.

In reply to woolsack: the daffodils in the park are beginning to pop up though.

In reply to woolsack:

What doom and gloom....?

http://ftalphaville.ft.com/blog/2009/02/20/52715/time-for-the-tin-hat/

In reply to woolsack:

Just reading the headlines is becoming depressing:

- Economy fears hurt stock markets

- Recession reduces total tax paid

- Lending revival 'unlikely soon'

- IMF expects more requests for aid


The third headline is perhaps the most significant for the UK though, an economy that hedges so much against the value of the house.

"The CML said that the mortgage market remained "very weak", as home loans remained hard to obtain."

"Mortgage lending activity continues to be very weak and while people are searching eagerly for some signs of recovery, it would be unrealistic to expect a meaningful revival in lending in coming months," said Bob Pannell, the CML's head of research."

"The CML has warned that, owing primarily to job losses in a recession, more than 500,000 people were set to fall behind on mortgage repayments this year"

In reply to woolsack: not so credit crunch news

http://www.telegraph.co.uk/news/newstopics/howaboutthat/4700148/City-banker...

In reply to Cerulean: But another factor that may support inflated house prices is the lack of houses within the marketplace.

http://blogs.telegraph.co.uk/edmund_conway/blog/2009/02/19/housebuilding_sl...

In reply to grumpybearpantsclimbinggoat:

Clearly yes, and the fact that the casual movers and speculators have all but dried-up. Less supply, higher value...

Plus, now we haven't got Peston ramming it down our throats at every opportunity the general public are quick to forget about the 'disaster' that was so prevalent in the media towards the end of last year. The crisis is still here though, and gathering speed, and people will be ignotant of the knock-ons until they happen.

For example, with housing, the government are leaning on mortgage lenders to be lenient on homeowners with arrears, voicing such things as; "don't kick anyone out until after twelve months". The problem being, if the cash injections don't work at the banking end and the recession continues apace then people will still be losing their jobs, missing mortgage payments, and banks will still be short of capital, so they'll have to take these properties off people (albeit for much shrunken prices on resale) to get at least some money back.

These directives by government will fend-off a lot of the repos until this time next year, thus fending off the real picture of what will happen to house prices. If a glut of repos appear on the market in twelve months it will hammer prices down further, but in the meantime prices will be artificially supported. This tactic will spread the impact of the housing slump.

In reply to grumpybearpantsclimbinggoat:

There have been, and always will be, stories like these, and when the common man is suffering they make much more juicy little articles for people to get on to. Most people in The City still got their bonuses this year, so the same glutonous consumerist spunking continues for a while at least.

Any opinions here on the 1.9% house price rise that Halifax reported for January?

In reply to StonedDonkey: Will be better to comment when we see what happens in Feb and March.

This type of thread started announcing the drop in house price with many refuting the drop existing. It took 6 months for them to be converted or at least willing to accept that the house price boom was no longer continuing apace.

We need to be careful not to make alarmist comments to a very fragile system.

In reply to StonedDonkey:

Yes. London for one. The slightest sign of a dip and people rush in to snap up the bargains. This nudges prices back up. The figures have to be based on actual movements and the only guaranteed area for movement in a crisis is London.

That's not to say that other areas haven't enjoyed the dip opportunity. There are still a lot of folk waiting to jump into the market. If I could get my paws on £100,000 I'd be using it for a deposit to buy-up repos in London.

In reply to StonedDonkey:

Did you read the full sentence?

"There was a 1.9% increase in average UK house prices in January, offsetting December's 1.6% decline. Prices in the three months to January compared to the preceding three months, which provides a better indicator of the underlying trend, were 5.1% lower."

In reply to grumpybearpantsclimbinggoat:

Actually I don't think many did. The debate was more centred on the degree of exaggeration and speculation attached to many of the predictions that were coming out in September and October.

Anyway, I had been thinking of kicking off this thread myself with a few links which I've now lost but in summary:

The Japanese economy is taking a real pasting at the moment with Japanese manufacturing companies shedding very significant proportions of their workforces. Taiwan and I suspect other Far Eastern countries are not doing much better.

From what I can see direct manufacturing jobs are going in large quantities now as manufacturers have used up all their backlog and can no longer afford to pay people to fill their warehouses with goods they can't sell. As much manufacturing is now situated in the Far East it is these countries that are seeing big job losses rather than Europe or the US where the less expendable knowledge workers are still mainly based.

Oh yes, the Baltic Dry Trade index is now apparently twice what it was at it's lowest point....

In reply to Removed User:

Gulp.

Chris Dodd, chairman of the senate banking committee says "short term nationalisation maybe necessary". Does Obama have the balls to do what is necessary? Or will he faff around with another bandaid for a broken leg? The markets expect Bank of America and Citigroup to be nationalized, perhaps this weekend.

If BoA and citigroup get nationalised this weekend expect a domino effect. Lloyds, RBS and various european banks.

I can't stress enough the enormity of this situation, it will affect the very foundation of our culture and financial system.

But at least the media have Jade to keep them busy...

ps Southern California median house price now 50% less than the peak in early 2007. Food for thought: the bubble in SoCal was smaller than the bubble in many other countries, including Ireland and the UK.

In reply to wilding:


Learn to grow food and don't throw anything away!

In reply to Chris Tan Ver. LI - On the Bog:

Ha!

More great news, citibank, used to be the biggest bank in the world, has decided to stop lending money overseas. I wonder why that could be?

Citibank has cut all lending in Denmark
Posted by Edward Harrison on Thursday, 19 February 2009
19
Feb

This comes from the Danish daily Berlingske Tidene. It suggests that Citibank is cutting back all international lending. Citigroup has sold its German operations to a French bank and I understand they are cutting credit lines in the UK as well. In seeing all these stories together, one gets a full view of the kind of cutbacks now ongoing at troubled banks like Citigroup.

In reply to woolsack:

By the way, do you know what happened to people's personal holdings of gold during the great depression?

In reply to grumpybearpantsclimbinggoat:

Saying that this thread successfully predicted a fall in house prices is comparable to predicting that the dinner would be burnt because the oven was set too hot...... when in fact the dinner was burnt because the entire house burnt down.

In reply to RocknRoll: it didn't predict successfully, it posted news reports of a decrease.

In reply to wilding:

Utter bollocks.

In reply to Chris Tan Ver. LI - On the Bog:

You forgot the stockpiling of ammo

In reply to Postmanpat:

Hypothetically, if Bank A, B or especially C is nationalised do you think they will continue to make loans in other countries?


Citigroup Ditches Brazil For Cash
Alex Davidson, 02.20.09, 03:40 PM EST
Move could hint at broader strategy to decrease exposure to Latin America.
Citigroup Inc.
02/20/2009 4:00PM ET
There is more than just the dire need for cash behind Citigroup's move to sell its stake in Redecard, a Brazilian credit card company. It's also a smart business move.

In reply to wilding: Friday is bank announcement night. Opinion seems to be that neither BOA or Citi will see May

In reply to wilding:
No doubt nationalisation would imply, as in the UK,government pressure to maintain domestic lending and the shrinkage or sale of many businesses particularly overseas but this is not "stopping overseas lending".

Two additional points:
1)Citi is so huge that if it suddenly stopped overseas lending the impact back in the US would not be worth the US authorities risking it.
2)At least theoretically every government agrees that the biggest risk out there is of the reemeergence of protectionism.Is this US administration really going to risk leading the protectionist charge by stopping its biggest bank from lending overseas?
If it is then best you buy a shotgun and retreat to the cave....

In reply to wilding:

'By the way, do you know what happened to people's personal holdings of gold during the great depression?'

Didn't they force the public to sell their gold to the government for $20.66 per ounce. I would imagine it would be more expensive today

In reply to wilding:

In what way would the very foundation of our culture be affected by the yanks nationalising a couple of banks?

In reply to stevieo10: Yep, indeed in topped $1,000 an ounce yesterday and is only a little shy of all time highs, expect it to continue upwards.

In reply to stevieo10:

We will see. Considering the government's disdain for savers i wouldn't expect market prices.

In reply to Removed User:

The UK is the original capitalist society and depends on credit. If citigroup gets nationalised then expect the UK government to do the same for UK banks. How do you have a capitalist society when the government controls the lending? It didn't work out too well for the USSR...

Also, the UK imports far more than it exports. I fail to see how this situation is maintained when the UK is bankrupt. How does the UK afford it's present standard of life?

In other news:
AIG will announce $60 billion loss on monday.
Soros says that the world financial system collapsed last september.

I feel like joining woolsack in his bunker.

In reply to Postmanpat:

I agree that it makes financial sense to keep lending abroad. But again, i don't understand how the american public will support a nationalisation that supports overseas operations. My feeling is the attitude will be sauve qui peut. The US government will also not want to own a bank with foreign branches - they will be looking to fix the US side and then privatise the bank as fast as possible.

In reply to wilding:
Having just spent a week on business in the US ( Minneapolis and Nr Chicago) my take on the US econony is this.

The Hotels I stayed in were all full and busy. On one day I had the pleasure ( if that is the right word) of visiting the largest Shopping Mall in the USA. It was heaving.

I visited 4 factories, apart from one which was retooling, the other three were busy. One of which was doing work for Caterpillar, the other for John Deere.

Whilst there has been allot of publicity about the big US banks. I was told that there are alot of mid sized US banks who adopted conservative lending policies, and are fine.

There is no doubt the car industry is in a mess.

So a very mixed picture.......

In reply to neilh:
Well,Caterpillar's December orders were down 30% in North America,down in every geograpahical region except LatAm and across every product category except electric power. That factory may want to keep its costs under tight control!

In reply to wilding:
To have a bit of balance here, the UK have already become heavily involved with part nationalisation of some institutions, with a view to managing the risk until market conditions allow for a more traditionalist capitalist resurgence - Darling and Brown have said this. It's not something to fear.

Citi are only looking currently at a 40% stake holding by the US government with a view to exactly the same rejuvenation process.

This isn't the end of capitalism by any means, it's putting the stabilisers on until the banks have sorted themselves out and can go it alone again. The introduction of a European Central Clearing House will address this for a start. It will manage the counterparty risk for individual insitutions whilst they trade out of bad debt. A well-practiced procedure found in the trading of global commodities.

In reply to Postmanpat:

This is where the news gets out of control. In some areas of caterpillar sales are up 30% for January. It's such a huge company that it all depends on which part you are talking to.Fortunately mine was the one on the increase!Granted in construction equipment it is well down.

In reply to neilh:

Israel?

In reply to woolsack:

I have seen CAt products on both sides, your point being.......

In reply to neilh:

Fair enough, good to see things aren't as bad as expected in your industry although I'm surprised that sales of construction equipment are holding firm.

In my own industry electronics at least one very major player is planning for no recovery until well into 2010 although the extent of the downturn seems survivable. Here's a link to an article which gives a review of a number of different manufacturers in the consumer electronics market: http://online.barrons.com/article/SB123517375218237115.html?mod=googlenews_...

In reply to neilh: My point being that Israel usually has the big armoured Cat bulldozers of course

In reply to Cerulean:
This isn't the end of capitalism by any means.....


It still seems bizarre to some of us that so much attention is being paid to getting the economy back to 'normal' when there are so many worrying siganls about the environment which says that the whole system as it is (or was) just won't work as it has done, and that these signals aren't being properly dealt with.

In reply to Eeeerm:

Care to elaborate?

I get your principle I think, in that if the environment is shafted we're all shafted, but how will the recovery of the aggressive and remorseless money machine that is modern banking capitalism be limited by 'the envronment'?

Most of the money made and lost, that has shafted the core system, comes from the $60,000 billion financial derivatives sector. That doesn't depend on physical environmental factors (apart from of course that people still exist), it just depends on money being made from money, which is made from trade, and therefore will always exist in some form. It simply has to.

In reply to Cerulean: I guess from a laymans point of view that broadly speaking, the system relies upon growth to maintain its viability, and the bigger the growth the better. It just won't work, and with levels of population and unrealistic expectations of material wealth which drives the systems, the collapse is inevitable. So why try and revive the whole thing in its prsent form.

In reply to Eeeerm:

Unfortunately the idiots running the show don't have any other ideas.

In reply to Eeeerm:

I disagree. Growth is not only beneficial but necessary. Populations tend to increase and even if they’re static, growth is needed to increase the standard of living for all and most importantly, those who need it most.

Also, it makes sense that over time we become more efficient and discover improved ways to make use out of the earth’s scarce resources. We’re intelligent beings. It makes no sense for us not to increase our output and progress.

The key is controlling growth to maintaining it at a sustainable level. Unfortunately, greed gets in the way of this and I feel we have much to improve when it comes to the redistribution of wealth.

In reply to woolsack:

Would you care to enlighten us as to your alternatives then?

In reply to Eeeerm:

Ah OK. Something that fits in with your comments here is what I'd call 'systemic growth' i.e. what has been happening in India and China. If you put aside the simple numbers and percentages for a moment 'growth' has come to these places in terms of personal empowerment and wealth, and opportunity. Life was getting better. It is largely a good thing.

A crude example is that a person of limited characteristics, like Jade Goody, would almost certainly be poverty stricken and hopeless as an adult in the old China or India, however our growth has enabled such people to become well-off and even successful here. The aim, if you believe the New Labour hype, from a socialist point of view, is to spread the wealth to all, but via capitalism as opposed to communism (that arguably is fundamentally flawed). The problem is that this creates incredibly wealthy people (and the concurrent ambition and greed) and still causes people to become poor, but it 'drags-up' the overall standard of living for a nation. Back to the Goody example; the opportunity for people within her 'class' would simply not exist without this growth.

In respect of 'the bigger the growth the better', this lesson has been learned long before this crisis. The Bank of England's target cap for inflation of 2% is the rate of 'growth' that has been deemed sensible. That is, 2% allows for sustainable long term and manageable growth, any more (or less), and the problems of old would start to come through again. A common misconception is that our government's (or the US's) fiscal and economic policies are to blame for this crisis, but that's off-target, the blame lies with the aggressive greed (and opportunistic brilliance) of the bankers, the refusal of governments to quash risk with regulation, and the simple mismanagement of debt.

In line with your second sentence though, yes, this is unsustainable in the long-term given the levels of population, and there will always be super-rich and desperately poor with a capitalist dictum. Just as you and I would get poorer if we decided to have 10 kids instead of two, the world will get poorer as population increases, with more of the horrible disparities we see, but as yet there is no plan for the redistribution of wealth. And it's even less likely now.

As an aside, a certain outstanding Harvard physicist called Fischer Black started a lot of this current trouble in the 80s with some fancy sums, but to put it all on him would be like blaming Einstein for Hiroshima...

In reply to Cerulean: Thanks for being patient with your response. Jade Goody would however I feel thrive in a more caring society where chasing money and growth was not so important. I'm not sure that rampant capitalism has bought her much happiness. Extended families come to mind who would care for all members of their group.

In reply to Eeeerm:

Yes, the Goody example was a clumsy one, but in a more unified caring society with the proceeds of trade shared equally amongst the people she would likely either be in care or stuck on a production line putting grey tasteless gruel in the slim pastry casings of 'Victory Pies'. Human nature is unfortunately the enemy of egalitarianism. We want more, and we want it now...

In reply to Removed User:

As I said, it was a very mixed picture and construction equipment is clearly not being sold.

In all honesty I could see no signs of a recession.

Apart from on the news channels......

In reply to stuckonarock:

Yes, can I wind the clock back about ten years and introduce some proper controls on lending please?

In reply to woolsack:

I believe that particular stable door is about to be bolted.

In reply to woolsack:

Nicely side-stepped there!

And here was me thinking you were going to share with us your own innovative take on fiscal policy...

In reply to woolsack:


Yeah, unfortunately our political institutions base nearly all their policies around an outdated form of economics, which is more of a faith than a science. This myopic way of seeing the world is why what seems the right thing for them seems utterly absurd to those with a broader perspective.

I heard a good quote today. "Our society is the most ecology illiterate society to ever walk the face of the earth". If politicians and decision makers were as well versed in ecology as they are with their brand of economics I doubt we'd be in this mess in the first place. (NB. That might sound odd to some folk but ecological thinking can be applied to not just to living systems).

In other news: http://news.bbc.co.uk/1/hi/business/7910329.stm

'Rents down' amid flooded market

The cost of renting a home has dropped as frustrated property sellers have been flooding the market, according to two separate surveys.

Owners were choosing to let rather than sell, having accepted that property prices were likely to stay low for some time, said property website Globrix.

Cities such as Manchester continue to have an oversupply of new-build apartments, said Findaproperty.com.

Its research chief said landlords were adding perks to attract tenants.

Extras such as satellite television or cleaners were being included in the rental agreement to make properties more appealing, said Andrew Smith, of Rentaproperty.com.

Couple of nice young cleaners might be quite a sweetener

In reply to woolsack: "The Globrix report found that the growing supply of properties available to rent had accelerated since the start of 2009"

I can't get my swede around this. Is there a genuine shortage of housing (as the govt claims) or isn't there ? Sounds like there isn't. Also a another potenential reason for falling rents is the generally reduced cost for landlords of servicing borrowings.

In reply to Cerulean:


Correct but,

John Lippert Freidman would be roiled as Chicago disciples rue repudiation Bloomberg.com Dec 23. 2008 “In 1972, Friedman helped persuade U.S. Treasury Secretary George Shultz, former dean of Chicago’s business school, to approve the first financial futures contracts in foreign currencies. Such derivatives grew more complex after Chicago economists created the mathematical formulas to price them, helping spawn a $683 trillion market that’s proved to be a root of today’s financial system breakdown. “

Its what happens when a bunch of Psychologists, economists and a bunch of business people collide and they start to believe their own BS.

Chicago, isn't there a quite important person who used to be a Senator of this part of the world, they also have the Carbon Climate Exchange based in Chicago and its spreading e.g. www.ecx.eu . They will do exactly the same thing again except with Carbon Credits with the gobal currency being based on the Watt. Trouble is we have got to make sure Sir Fred 'the shred' and his kin don't end up ruling the roost, or we will be screwed end of.

Personally I would borrow the Cooperative Society business model on which to base it, they appear to have their heads screwed on.

It will become a system not based on smoke and mirrors but just on smoke.

Got to laugh really, otherwise you will cry.

In reply to woolsack:

Good news for those that may want to buy a house in a year or four...

Nationwide figures are out.

http://news.bbc.co.uk/1/hi/business/7911735.stm

House prices fell by 1.8% in February as confidence in the UK property market failed to pick up, according to the Nationwide building society.

The lender said that the average UK property has fallen in value by 17.6% over the past 12 months, to £147,746.

The Nationwide data:

http://www.nationwide.co.uk/hpi/historical/Feb_2009.pdf

Their average is now £147,746 down from the Oct 07 peak of £186,044.

That is a decline of just over 20%.

lsn

In reply to stuckonarock:

I think, for the first time ever, I agree with something wooly-thinker here has said.

The issue is that the whole model is broken.
The models (underlying big themes or processes of development) have come and gone before - the wheel, international trade, industrial revolution. Some countries have built empires/global influence as they rode the wave of them (the chinese, dutch, british, US, now chinese again).

Some models have become disguised (slavery replaced by low-ioncome third world labour, off-shoring significant environmental damage from mining, etc.)...but they are still the driving force.

What's happened now is that two of the key developmental drivers are failing - debt-fuelled consumerism right now and carbon-based energy shortly.

The problem is that *nobody* has a sound replacement model...and, until we do, things can't move forward.

The current attempts to resurrect debt-fuelled consumerism seem unlikely to succeed, ergo we have a problem.

J

In reply to Moacs:

You are over-egging it a bit on the debt fuelled consumerism.There are plenty of people who have not spent more than they earn, and have low levels or zero debt. There are also plenty of capitalists who foresaw what was going to happen. prime example is Warren Buffet - the world's richest man - who said derivatives were the wmd of finance.Every company he got involved with had to off load such financial instuments.There are also lots of well financed companies and banks who will sail through this.

What we are experiencing is a correction, it's happened before and it will happen again.

In reply to woolsack:

This is exactly what's happening in Norfolk with the second homes. There's been a huge increase in the amount of nice, 2/3 bed cottages coming onto the rental market. They started at about £750 a month, but many are now down to £550 / £600. Local wages simply don't pay enough to cover that monthly outlay and the market is flooded.

Prices to buy don't seem to be coming down, but nothing seems to be selling either. Average time to sell at the moment is quoted as 250+ days.

All great news for us - wishing to rent for a year until things settle down, then we might actually be able to afford something half way nice.

In reply to Moacs: The current attempts to resurrect debt-fuelled consumerism seem unlikely to succeed, ergo we have a problem.



Using a similar broad brush of rhetoric I think there is a fighting chance that a sustainable revival of non-excessive consumerism based on modest levels of debt is both possible and welcome.

In reply to Moacs:
Two separate issues essentially, but debt-fuelled consumerism has exacerbated the other I'd agree. Whether your political and economic model is capitalism or communism the rates of consumption with be primarily be dictated by population levels.

We don't need a replacement system. The fundamentals still work. The system has the capacity to downsize, reorganise, and cope. And remember the recent consumerism is all governed by the availability of credit and the disposal of debt, a business in which we are about to experience a sea-change via the revision of risk and regulation.

This isn't the 'here comes the flood' scenario that many people are forecasting, or rather worryingly apparently hoping for...

In reply to Cerulean:


Your rates of consumption will be dependant on available energy levels. That’s what will place a limit on things. Now weather you want to describe 'credit' or 'cash' as energy you might not be that wide of the mark.

As for the fundamentals, they are basically wrong, they have tried to create something out of nothing and as we have observed it sort of works but then sometimes it doesn't. It is not sustainable and never was for example the herd mentality kicks in and things run away with themselves.

We need a complete re-think, regulation will come in to force however I suspect as usual they will over do it, no more regulation they should concentrate on what already available and use it correctly, the only exceptions to this are the proposed changes in bankruptcy rules for banks etc and depositor protection.

The more complicated the rules of the game the more complicated the ‘work arounds’ (for example the Basel and II Capital Requirements and the use of derivatives to ‘spread risk’), become and you reach a point where no one has a clue what is going on and you get a credit crunch or similar financial hiccup.

Even the folks who measure risk the Credit Agencies screwed up and they are supposed to know how it all works, if the guys who are the experts can’t get it right I think it is time for a complete rethink.

Confidence, what a bizarre basis for such an important element of our alleged civilisation.

In reply to Fat Elvis: Confidence, what a bizarre basis for such an important element of our alleged civilisation.


On the contrary - without confidence and trust civilsation would never have got off the ground.

In reply to Fat Elvis: Confidence has always been the basis for civilisation. Until people became confident that a piece of paper could be redeemed at some future date for something tangible, then nothing could happen that didn't involve physical barter.

The 'system' isn't a brittle structure, like a bridge, that can be broken - it's an evolving, shifting set of rules, expectancies, regulations, assumptions... The balance of these is changing. But we won't be going back to bartering anytime soon.

In reply to Simon Lee:

Yes - absolutely agree (and I agree it's utter generalisation but, without writing a thesis, it's hard not to); but current Gov. direction doesn''t seem to point that way.

maybe we should go all the way? I quite fancy a bit of nice subsistence agriculture...unfortunately that won't support the infrastructure we've come to expect (health, education, transport..)

J

In reply to Moacs: I quite fancy a bit of nice subsistence agriculture

I was fantasising about this on the commute in this morning - an eco house with vegetable patch in the Peak - surrounded with barbed wire and heavily fortified of course

In reply to Moacs: Reduced hours and/or an increase in job sharing would be interesting avenues to explore. There is massive room for more effective health and education policies. Transport (at least by air and car) are going to have to be trimmed back though, get to Thailand while you can!

In reply to Fat Elvis:
No they won't. People will always eat, build shelters, and reproduce. There is no discernible limit. Look at nature. If food grows we grow, and we consume. A simple cycle. (PS. You used the wrong 'whether')

You've failed to identitfy the fundamentals. The fundamentals are that people have things, and want to sell them to get other things. Some will need to hedge against other things they have to take ownership of the things they need. They are the fundamentals, and what started trade. You're talking about advanced 20th century by-products. It is entirely sustainable.

I disagree. The regulation will focus directly on the risk. This has been stated. This will prevent the debt bubble forming again.

There are lots of people who know what has been going on, what is going on, and how to fix it. Read the Black Swan, markets are inherently fallible. They can be rebuilt. The infamous CDS will be something else in five or ten years, and we'll get a fail again.

Which is happening. Most large institutions have been revalued. There has been an unknown, which is becoming more and more of a known.


Without confidence, no-one would have plucked an apple from a tree and bitten into it.

In reply to Rob Exile Ward:


Didn't say it wasn't.

Merely an observation, what a bizarre concept on which to base it then we attempt to quantify it then model it and then market it and then believe it then control it then... watch it fall on its arse and start again all over again.

Quite remarkable, it’s lasted so long.

‘The system isn’t brittle’,

For example, I suspect the communist party in Russia around 1989 may not entirely agree with you. The issue is every now and again it jumps rather than plods along its not a smooth process and our current leaders are trying to smooth out the current jump before it ends in chaos.

In reply to moomin:

Yes, the only fly in the ointment for the first time buyer may be that a substantial deposit may be required as a condition of the mortgage. There seems to be a lot of muttering in the corridors of power about limiting mortagages to 85% or 90% of the the total value of the property. For myself I think this is the wrong approach. Ability to pay back has to do with what proportion of the borrowers income is swallowed up by the loan and has nothing to do with the valuation price of the property.

That said, I can't see the Government rushing to place more obstacles in the way of buyers.

In reply to Cerulean:

Of course there is a limit, its merely a question of how close to the limit you are prepare to push it.

They have been concentrating on risk for years, it’s not a new concept in banking and finance they just forgot where the limit was, or more accurately didn’t understand it or just ignored it because they could pass the risk monkey which was on their backs on to someone else, they did not resolve the risk issue they hid it, in complicated financial pyramids. But alas see previous point above.

‘when the tides does out, you find who’s been swimming naked’ springs to mind.

The regulation already focused on risk, what where the Basel accords about or the Solvency II proposals for then fun ? they screwed it up. The regulators and the banks.

Black swans or White Bears ?

No it was curiosity, and an up yours attitude that resulted in the apple being plucked and scoffed.

In reply to neilh: the number of basket cases comprehensively outweighs the prudent. Correction is wishful thinking IMHO

In reply to woolsack:

Back that up with some facts .

In reply to Fat Elvis:
If you read what I said, you'll note I said 'discernible' limit. There is no discernible limit. For example; give me a maximum occupancy for the planet, and I'll tell you when we have to start the cull...

It will be completely different. I think you're confusing a 'risk-based approach' with 'risk focused regulation'. Wildy different approaches to control. I know this having taken a brokerage from prescriptive to risk-based. This one is a new theory once again.

I think rather that it was hunger prompting risk-taking. Much like the current crisis.

In reply to woolsack:

I categorically guarantee you that we will all still be lending and borrowing, trading and hedging, swapping and selling, long into the future.

We don't have to behave like the press. We have the luxury of relaxed consideration, without the need to sell papers. There is a phrase 'less so' that we could use. The world isn't black and white.

In reply to Cerulean: A good 12/18 months ago I remember you denying we were entering a downturn. Remember me posting about salesmen at the car dealership?

Life will go on for sure but we are in unchartered waters with this one

In reply to Cerulean:

I categorically guarantee you that we will all still be lending and borrowing, trading and hedging, swapping and selling, long into the future.

The amount of lending will be significantly reduced. The banks have lost the ability and/or the will to lend at the same levels as the last few years.

This fact alone ensures that house prices will continue to fall.

lsn

In reply to lowersharpnose:

"If I lend you my prize ram can I borrow your plough. Aye it was a good days trading at market. Tomorrow? Hedging in the lower field. Swapping over to wurzels to sell to Fred"

In reply to Cerulean:

Callum McCarthy (now ex) Chairman FSA 13th Feb 2006.

http://www.fsa.gov.uk/pages/Library/Communication/Speeches/2006/0213_cm.sht...

Because in his opening paragraph he used both terms 'I have been asked to describe the FSA's approach to risk based regulation. I want to discuss what we mean by a risk based approach; why we have adopted a risk based approach; and what this means in practice'

Now this would indicate to me, that the two appear to be the same thing or at least one is built upon the other and of course;

'First, we have as a guiding principle the explicit objective of a non zero failure approach – that is, we do not try to prevent the failure of all financial institutions we regulate, but believe it both unavoidable and indeed desirable that some should fail – unavoidable because no regulator can control all those he regulates, so that accidents will occur; and undesirable because reward and risk are linked'

Well it seems everyone else is confused about it and what’s, more they admitted defeat before they started.

But you are right it will be different, or perhaps more likely they will just give it another name but in reality it’s the exactly the same.

So perhaps you could explain the two approaches to me because I am lost. Of course you could argue about the difference of the words 'focused' and 'based' and I am sure you could. Or drop in the precautionary principle just in case.

As for the apple, perhaps, more like Eve probably promised him a quick leg over if he picked it or equally he thought it would impress her if he picked so he could get his leg over.

As for the population, 2 Adam and Eve and its debatable that that figure may be two to many.

In reply to lowersharpnose:
To reiterate:

I categorically guarantee you that we will all still be lending and borrowing, trading and hedging, swapping and selling, long into the future.

In reply to Fat Elvis:

It's reasonably simple. the risk based approach instructed Compliance and Risk staff at firms to apply the Rules and Guidance of the 900 page Handbook to the areas of risk within their business, and make educated and considered internal rules and procedures to govern the risk in line with the dictum of the rulebook, taking heed of the Guidance.

The new system is specifically geared around holistic risk levels and target setting by authorised firms so that the same levels of risk taken by the corporate body can never be reached again. For example; it's fine to hang your wallet, and even your wife's jewellry, over the edge of the Grand Canyon, providing you've first established that your feet are set firm and your frame isn't over-balanced. i.e your profile allows for risk and loss, but not for complete failure (See NR/ RBS gearing etc.)

One is taking a risk based approach to the application of regulation, the other is considering risk, then applying rules to it specifically.

Many didn't understand the transition from prescriptive to risk-based regulation so we can be forgiven for dropping the ball early-on here too, which some inevitably will.

In reply to Cerulean:

I categorically guarantee you that we will all still be lending and borrowing, trading and hedging, swapping and selling, long into the future.

Well yes, but, so what?

Surely, it is the changes in activity levels, volumes and values that matters?

Such activity is not going to return to 2007 levels any time soon (in real terms).

lsn

In reply to lowersharpnose:
Just making the point that there is a vast difference between the travails of the housing market and the future of finance as we know it. I think it's essential for individual understanding that the issues are separated. Yes, the credit crisis will definitely affect and limit the housing bubble, but there is back-up - the government and public coffers. You will still be able to get 90% mortgages in the future, the effect of the crisis will likely just hammer-down, and in some cases remove, the investment portion of a property's market price.

When the prevailing rhetric is talking about a complete reversion or collapse of the system then people need to know that it won't be. Even with complete banking nationalisation there will be a return to full commercial functionality, just over an indeterminate period, and with a diluted result.

Certainly. The problem with talking about finance, and this crisis in particular, is that people come to the discussions with different interests and agendas and the current crisis is approached from different angles. We need parameters on what is actually being discussed, eg. the global derivatives market and the future of investment banking, the UK domestic housing market, or the effect one will have on the other. For what it's worth I think you're right on the money about the domestic housing market. Another 15% before Christmas....?

In reply to Cerulean:

I don't think you can decouple the UK from the Global crisis. Too many people on here try to do this and it is completely pointless and unrealistic. Only when you join all the dots do you see the bigger picture

In reply to Cerulean:

Another 15% before Christmas....?

I'll go for -12% in 2009, give or take, followed by double-digit/high single-digit falls in 2010.

We have lenders unable and unwilling to lend, rising repossessions, high and rising unemployment and a government who has an empty war chest.

It is not going to be pretty. There will be much misery and the pain will continue for decades. The UK will have to increase taxes to pay for past profligacy and current salvation attempts.

http://www.economist.com/blogs/buttonwood/

...to reach the mid-1990s buying point, either incomes have to double (not going to happen any time soon) or prices have to halve. Of course, there is nothing written in stone to say that things have to be as bad as they were in the mid-1990s. They might be worse. The recession looks set to be deeper and unemployment is likely to be higher.

How, given this graph, are house prices likely to stabilise in the near future? Indeed, the latest 1.8% monthly fall suggests the trend is accelerating....

Good luck out there.

lsn

In reply to woolsack:

I don't think anyone is trying to decouple the UK from the global crisis.

I was *separating* the 'UK housing market' from 'the global derivatives market'.

The only tangible link between these two is the bad (housing) debt wrapped up in the packaged products that were fastened to the derivatives. The bad bit in the apple if you like. And the black mushy bit was largely made up of US toxic housing debt, rather than UK debt. The infection spread to our banks when they bought the apples on the international market, and then the crunch kicked-in because they realised they were bleeding cash left right and centre when these 'assets' suddenly devalued.

In reply to lowersharpnose:
This ^^ is what will dictate the future for prices, what level unemployment rises to, and how much pressure the government can successfully apply to our banks to lend in volume to customers. Taking ownership as they are doing should facilitate this process, ref NR's new lending plan, and the presence should allow people to run with long-term arrears without fear of repo if they lose their jobs. There's a lot of 'ifs' coming up though, and we'll all inevitably pay for this process in tax, so a fundamental drop in the standard of living is as good as confirmed.

In reply to Cerulean:

We'll get our 2012 Austerity Olympics after all just like 1948

In reply to lowersharpnose: I think that the problem is that we're comparing this boom with previous booms which were driven by other factors, eg double allowance of MIRAS.

I'd say we're going to be looking at nominal falls of around 20% this year and 10% in Q1/2 2010 before a few years of static nominal prices equating to real reductions before steady inflation +<2% for say 5 years before we all go mad again.

The big factor yet to hit prices is the lack of voluntary market volume. At the peak we were looking at what was it 100k sales per month, which fell to around about 20k spm of which 5k were reposessions and an estimated further 5k non voluntary sales.

As repos and non voluntary sales increase this will drive down prices further and faster.

PS the moon or the miners arms, SHW no go.

In reply to Anonymous: .

The number of people having trouble paying their mortgages continues to increase

http://www.ft.com/cms/s/0/5b57f208-06c1-11de-ab0f-000077b07658.html?nclick_...

Late mortgage payments hit record levels

Households are finding it harder to pay debts on time, with the number of subprime mortgage holders falling behind on payments at its highest ever.

Standard & Poor’s, the credit rating agency, examined the performance of loans bundled into securities – bonds or notes – and sold to investors. The rate of delinquent or overdue payments, particularly those late by 90 days or more, are a leading indicator of the losses that lenders are likely to make on those loans.

The data showed that “non-conforming” or subprime mortgages – home loans to people with patchy credit histories – hit a record delinquency rate in the fourth quarter of 2008, rising to 28.6 per cent of all such loans outstanding.

S&P noted that the stock of repossessed homes stood at 3.5 per cent, up from 2.8 per cent at the end of the third quarter and 1.6 per cent in the first three months of 2008....

lsn

In reply to woolsack:
"Insurance giant AIG has reported a loss of $61.7bn (£43bn) in the final three months of 2008 - the largest quarterly loss in US corporate history."

http://news.bbc.co.uk/1/hi/business/7918643.stm

That will take some beating

In reply to lowersharpnose:

Does the article say whether these are UK or US mortgages? I don't have the time to register right now and read the whole article but the author sounds American.

In reply to Removed User:

It is in the UK business section and mentions UK mortgages in the article and not the US (though, I'm still not entirely sure it is about the UK).

If you want to read an FT article, but don't want to register, you can normally get around it by going through Google.

Try the cutting and pasting the headline + FT into the search box, you should get a link to the article that does not require registration.

lsn

In reply to Removed User: I have access

Households are finding it harder to pay debts on time, with the number of subprime mortgage holders falling behind on payments at its highest ever.

Standard & Poor’s, the credit rating agency, examined the performance of loans bundled into securities – bonds or notes – and sold to investors. The rate of delinquent or overdue payments, particularly those late by 90 days or more, are a leading indicator of the losses that lenders are likely to make on those loans.

S&P noted that the stock of repossessed homes stood at 3.5 per cent, up from 2.8 per cent at the end of the third quarter and 1.6 per cent in the first three months of 2008.

It said: “We believe that the rise in repossessions is partly due to an increase in time between repossession and sale, given the current low number of housing transactions in the UK”.

That has implications for lenders who granted prime mortgages, suggesting these too may suffer higher losses because repossessed properties cannot be offloaded as quickly to private buyers.

An estimated 70 to 80 per cent of all UK subprime mortgages have been packaged into securities, and the data give a comprehensive overview of those loans. Rising delinquency rates could make banks even more reluctant to lend.

However, one brighter note is that subprime mortgages are becoming more affordable. As banks bring their standard variable rates down in line with Bank of England interest rates, far fewer borrowers face “payment shock” when a fixed-rate term ends. Some standard variable rates are even lower than the “teaser” rates that enticed borrowers.

The picture for credit card debt was not as gloomy as subprime mortgage lending, although the fourth quarter was weaker after a stable third period.

The overall rate of delinquencies rose to more than 6.4 per cent by the end of December. That was still the highest level since S&P began publishing quarterly reports in 2003.

Roughly half of all European credit card balances are in the UK.

Charge-offs – the amount banks have decided will never be collectible – rose to almost 6.9 per cent in December, the highest level since August 2007.
Copyright The Financial Times Limited 2009

In reply to lowersharpnose:

How is your 'pot' doing today?

In reply to RocknRoll:

Down 1.5%.

FTSE down 5.3%, Dow down 4.2%, NASDAQ down 4%.

Not too bad.

In reply to lowersharpnose:

That's a shame, but how is it doing over the past 12 months? Please, please, please tell me it's fallen faster than the domestic property market.

In reply to RocknRoll:

Please, please, please tell me it's fallen faster than the domestic property market.

It has.

In reply to lowersharpnose:

No luck.

Any idea why the stock market is falling particularly fast at the moment?

In reply to Removed User:

2000 is a long way down

In reply to Removed User:

A lot of it is the publicaton of share dividend reductions by many major international firms. This knocks confidence further. Some dividends are now at their lowest since 1938. Shrinkage...

In reply to Removed User:

Any idea why the stock market is falling particularly fast at the moment?

Same old, same old.

AIG reported a quarterly loss of $60+ billion, making a total for the year of nearly $100 billion.

Soon, we will be talking serious money.

IIUIC, AIG insured a wide variety of the fanciful financial products. Including lots that got us into this mess. To big to fail and all that, oils the wheels, too much uncertainty if it goes down, counterparty risk, blah, $100 billion, blah.

Hank Greenberg and other AIG execs should go to jail, so should some from the ratings agencies.

lsn

In reply to lowersharpnose:

... and maybe we can entice Fred with a "free and very safe hotel for the rest of his life" instead of his 650k/year pension

In reply to StonedDonkey:

He'd do a Kenneth Lay

In reply to StonedDonkey:

Problem with ratings agencies is that it's the SELLER who pays for the rating!

Can you imagine if a home seller produced the survey when selling a house?!

In reply to 2pints: Nobody would be stupid enough to suggest that, surely?...

In reply to Rob Exile Ward: ouch my HIP seems to be hurting

In reply to gingerdave13:

Do they incluse structural surveys and important stuff?

Thought they just had that energy efficency nonsense in them?

In reply to 2pints:

That is only a problem if the surveyer is a dishonest crook. If survayers (or ratings agents) are honest then the report is the same whoever pays for it. However it seems from the reaction to HIP's that surveyers are all crooks or at least think they are. Either that or they don't like the idea that each house might be sold after a single survay rather than 3 or 4...

In reply to Cerulean:

A further "no surprise"...

http://news.bbc.co.uk/1/hi/business/7925481.stm

House prices 'dip a further 2.3%'

House prices fell by another 2.3% in February in the UK, according to the country's biggest mortgage lender.

HBOS, now part of Lloyds Banking Group, said that the average UK home was now worth £160,327.

The lender said there were "tentative" signs that housing market activity was beginning to stabilise, but added 2009 would still be a difficult year.

The lender's preferred annual change figure - which takes a three month average - is down 17.7%.

When looking at February's prices, the cost of the average home was 17.8% lower last month than in February 2008. ...

The sample sizes are very low.

lsn

BoE cuts rate to 0.5%.

Well done to those base rate tracker beneficiaries.

lsn

In reply to lowersharpnose: Where do we go from here when they've used their last silver bullet?

In reply to lowersharpnose:

Cheers for this, started a March thread...

In reply to woolsack: we start a "lost decade" of depression, with an Olympics thrown in to step on our head just when we started to tread water

In reply to Cerulean:

A late reply from last months thread.

"It's reasonably simple" and "holistic" are not two phrases I would use in connection with each other, one tends to confuse the other and provides a little to much elbow room for comfort.

As long you fully understand ‘it’ and any advice you may provide is clear, concise and accurate all is ok.