Friday, Sep 19, 2008
If Iggy and Mick and Ozzie had been in charge of the world’s financial system they couldn’t have made more of a mess of it than the present bunch of gangsters in hand-made shirts
Times Online: Why the market meltdown is just like Reservoir Dogs
"The incredible scale of this market f***-up is so huge that it can only be expressed with inappropriate language. We really all need to sit down and take a moment. There’s simply no point in pretending that sober looking men with distinguished haircuts and well-cut suits have any sort of monopoly on wisdom and good sense. This is finance’s shame, and rock’n’roll’s finest hour. Mothers, don’t let your daughters marry a banker." Right on dude!
Posted by last_days_of_disco @ 08:49 PM (728 views) Add Comment
12 Comments
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1. last_days_of_disco said...
"Yeah, right. However, before I get too smug, let’s forget how all this started: a simple lie. Imagine a house you own, or the house of someone you know who owns property. In your mind’s eye, walk outside the house and look at it and say, “How much is this property really worth?” You and I and the great British public were quite happy to bid up the prices of our tulip homes, watch Changing Rooms, and alchemically transform our bricks into gold."
Its funny how an article like this which is just so clear comes from the desk of the finance editor, no, the hard news team, no, News->Tech and Web->Personal Tech. Well done Michael Parsons!
2. handle_it said...
Perhaps he knows he's on the to-go list ? ;O)
3. bystander said...
This article should be on the front covers of every tabloid and broadsheet, but it won't be. Good find LDOD.
4. plato said...
Nothing new to us,but a very interesting point re the dotcom era,when this created a global market for this catastrophe to spread like a virus worldwide. It was a bubble itself and crashed big time,but set the scene for the next even bigger bubble. I think we need to consider this globalization 'thing' very,very carefully indeed. Nature has a reason for it's natural borders.
5. mdmick said...
I have trouble with the analogy.
Young people don't feel the same pressure to jump on the tulip ladder,
or to jump on the tech-stock ladder. So the simple analogy fails in that sense.
During the period that a London monthly rent equalled roughly a London monthly mortgage repayment, was it really so crazy to get a mortgage? That was a calculated risk: worst case, walk away and lose the deposit and one's credit rating - return to being a renter.
Then, when prices started getting so high that an 'interest only' mortgage was the way in, again, this was a calculated risk because house prices could have gone further out of reach - permanently: defy historic 3.5 x earnings and become more like a country like Switzerland where property is permanently incredibly expensive.
I can't make that kind of analogy with tulips or tech stocks, per se.
6. enuii said...
Quote:- 'We now have all the evidence we need to conclusively state that the well-dressed titans of Wall Street and the City have been pigging out like sloppy drunks at a Vegas buffet.'
Sums it all up really, it's like pass the parcel where everyone takes a commission everytime a package of loans changes hands. Quick, pass it on, get rid of it, get your slice of money before the music stops and everyone realises the game is up. Unfortunately for us ordinary mortals the powers that be keep putting a quid in the electricity meter to keep the music playing so their mates can get extra parcel passing time.
7. enuii said...
madmick, you have to transport yourself back to the relevant period of time and into the mindset of the participants to understand the analogy. If you are an uninitiated bystander on the sidelines the situation can look completely incomprehensible, a bit like Rugby Union.
8. Tenyearstogetmymoneyback said...
At 46 I'm old enough to have seen this twice.
Remember when they abolished dual tax relief on mortgages.
Lots of people thought that if they didn't buy a house before the August ? deadline they would never be able to afford one.
My neighbours sold their house in 8 hours!
The funny thing was once they deadline had passed there was no incentive for any couples to buy a house .
Look at the graph on the home page and you will see what happened next.
:- Duncan
Bought 1989 £65500 Sold 1999 £70500
9. mdmick said...
He is focusing on herd mentality. I am just pointing out that a lot of the people with mortgages are not doing it because they want to follow the herd opinion -
they have evaluated the risk and decided that it was one worth taking - using quite reasonable grounds, in my view. If he was not framing his story with a herd mentality book as a manual then I would find it easier to join the dots.
As you guys have pointed out recently, the subprime home buyers in the USA can walk away from their homes without oweing the negative equity. As someone else said recently, they seem to have made a smart move.
10. Nelson said...
All those past 'decisions' were based on two flawed 'herd' assumptions - that property prices NEVER go down and that interest rates would NEVER go as high as they did in the early 90s. If I heard it once, i heard it a thousand times.
Even now, people don't really believe it - in fact, prices haven't really reduced by much yet at all...its only just begun. My bet is that it will go to prices of 1998/9 levels - looking at previous graphs. What are other people's predictions?
11. alan said...
Good stuff.
It's a Haynes Manual for those car repairs, by the way....
12. handle_it said...
@ 9. Yes I thought that name looked wrong too. I guess going to a public skool his daddy didn't work-on is own motor...