January 2009 Archive
Friday, January 30, 2009 
Gordon is 'absolutely confident about Britain’s future'
Telegraph: Gordon Brown: All Britain needs is confidence in itself
Having failed to see (or ignored) the problem and not acted early enough to solve it Gordon waxes lyrical about the British spirit and problem solving of the ability of its people (rather than it's government). After all if we don't talk the country down all our problems will go away, so lets all remember that 'careless talk may cost Gordon his job and record of financial prudence and sound economic stewardship.
Planned moment of mirth?
Times Online: 'Hello? I'm in a press conference!
''Gordon Brown's glum expression is usually unbreakable. Even when he accidentally told MPs in the Commons that he'd "saved the world," the PM didn't allow even a flicker to cross his lips.''
"American Jobs for American Workers"
Reuters: U.S. business group works to kill Buy American plan
The House of Representatives approved the measure this week as part of a $825 billion bill to kickstart the U.S. economy. In the House version of the bill, the "Buy American" measure would require all public works projects funded by the stimulus package to use only U.S.-made iron and steel. European steelmakers object, saying that would violate U.S. commitments under the World Trade Organization's government procurement pact.
New rules for EU membership.
Guardian: Iceland to be fast-tracked into the EU
will be put on a fast track to joining the European Union to rescue the small Arctic state from financial collapse amid rising expectations that it will apply for membership within months, senior policy-makers in Brussels and Reykjavik have told the Guardian. Ian Traynor on fast-tracking Iceland into the EU and the euro Link to this audio The European commission is preparing itself for a membership bid, depending on the outcome of a snap general election expected in May. An application would be viewed very favourably in Brussels and the negotiations, which normally take many years, would be fast-forwarded to make Iceland the EU's 29th member in record time, probably in 2011.
More Gloom from MSN
MSN: What Next for Sterling
A few gloomy (or from our point of view good) comments on house prices among other gloom.
Housing Bubble
Times: The 10 people most reponsible for the recession
The bursting of the housing bubble and the collapse in confidence throughout financial markets was not caused by one individual or a single decision, so pointing the finger of blame is a near-impossible task. Give it a shot anyway. Here are ten suggestions for the nine men and one woman responsible for the mess we're in. Once you have read the notes, vote.
Foreigners pull out their cash from British Banks
UK Bubble: Another scary chart
Foreigners are holding sterling deposits in UK banks amounting to 30 percent of GDP. With interest rates at historical lows, that money is beginning to go home.
Keep on falling....
Financial Times: No end in sight to slide in UK house prices
The slide in house prices, which began as long ago as 2007, shows no signs of abating, according to two new surveys. One traditional forerunner of house price rises – that of buyer inquiries – appears to have lost its historical connection with house purchase activity. Although inquiries have been rising strongly for months, the number of houses purchased and the level at which they have been bought, has not risen in line. “While the fall in house prices and the parallel reduction in interest rates have probably made many households curious about what is currently available in the market, many are likely to be hesitant to commit in a recessionary environment.”
Another blow to Government lending plans
Mortgagestrategy: Self cert mortgages face extinction
Self cert mortgages face extinction after BM Solutions and Bank of Scotland became the latest lenders to pull out of the sector. The HBOS lenders, now part of Lloyds Banking Group, will no longer accept any self cert business. Both in recent years have been large players in the self cert sector. This comes after both GE Money Home Lending brands iGroup and First National revealed they were to stop accepting new self cert business last week, and Bristol & West pulled out of new mortgage lending completely. Nationwide’s The Mortgage Works and Britannia’s Platform remain the only lenders who offer any kind of self cert mortgage.
Fake Alistair Darling Twitter page
Twitter: Alistair Darling
I'm 87% sure this is fake, but its funny all the same! There's also a Gordon Brown one at http://twitter.com/gordonbrown
3.8% fall in US economic output
BBC: US economic output falls sharply
US economic output fell 3.8% in the last three months of 2008, the worst quarterly contraction in more than 26 years, official figures have shown. Much steeper than the 0.5% fall between August and October, it is also the first time the US has seen consecutive quarterly economic declines since 2001.
Dresdner House Price Bubbles Analysis
FT: Serial Bubbles
FT Alphaville show a chart-heavy synopsis of some Dresdner research, showing the house price bubbles versus stock market bubbles in the US, UK, and Japan. They end with an interesting chart showing the relative ratio of house prices to stock markets in all three territories since 1984. Conclusion: UK house prices at a 25 year high to the equity market!
"British Jobs for British workers"
BBC: Refinery strikes spread across UK
Strikes have been breaking out across the UK in support of a mass walkout by energy workers in Lincolnshire angry at the use of foreign workers. Hundreds gathered for the third day of the original strike at Lindsey Oil Refinery after owner Total gave a £200m contract to an Italian firm. "All we want is for Gordon Brown to fulfil his promise. He said British jobs for British workers."
HELLO. I'm at the World Economic Forum
BBC: Brown interrupted by his mobile
Sorry, not really related to crashing house prices but too funny not to post.
Why your tax bill could be rising for decades
MoneyWeek: Why your tax bill could be rising for decades
Forget the economic slump. The only real problem with Britain today is that people like you don't understand what's going on. At least, that's the theory in some parts of the Labour party, it seems.
Crash Gordon leads the fight to save planet Earth
BBC 'Government backed' news: Brown urges global 'confidence'
'Crash' Gordon Brown today urged world leaders to love the financial crisis as much as he is He called for "clear reforms" of the financial system to be agreed at the G20 meeting of leading economies in April to rebuild trust in banks. In other words he told the forum that we his "glass is half full" moment and if they said the right things their respective populations would be as stupid as the british and not realise that all these countries had been sleep walking into financial meltdown. "Crash" said, "There was a real risk that if banks restricted lending to domestic customers only this would harm global trade and exacerbate the economic downturn." - In other words please lend to our british banks or someoene will realise that the banks I have saved are actually insolvent
UK state media grasping desperately
BBC 'News': Mortgage approvals rise slightly
In the past few weeks some commentators have suggested that activity, if not prices, in the housing market might be about to start picking up. Surveyors and estate agents have reported a rise in enquiries from potential new buyers.
How to avert financial disasters in future
Economist: Greed—and fear
A substantial article on some of the causes of the financial crash and the difficulty of avoiding them in future.
Money gift to the rich
Guardian: Quantitative easing: last resort to get credit moving again
The problem with quantative easing, i.e. printing money to purchase assets, is that -if- the easing doesn't work, then the government has just paid 10 million for something remaining at a value of 1 million, basically purely and simply -giving- money to asset holders. Which is pretty terrible. Or, should everybody believe that the qe will work, then individually they won't want to sell anyway, because holding onto the assets is better. The whole thing depends on the impossibility of perfect accuracy in guessing the future price. Which is impossible. So hopefully, should qe be deployed, they should err on the low side of valuations and take compulsory asset ownership from failed/ing enterprises, otherwise the taxpayer will lose a lot.
Brief report from closed session in Davos
BBC News: How bad is the crisis going to get?
A few quotations from Nassim Taleb and Nouriel Roubini but nothing we don't know already...
HUH? I thought they had only just gone into recession??
Japantimes: Japan's longest boom died in October '07
Japan's longest economic boom in the postwar era ended in October 2007 and the nation has been in recession since then, the government announced Thursday.
S&P 500 faces a 40% slump
MoneyWeek: S&P 500 faces a 40% slump
In short, what most pundits don't seem to realise is that this isn't just a nasty recession. It's a deflationary credit-bubble collapse, and with inflation already heading for zero, a Japan-style slump is a real possibility.
NZ Cartoon putting downturn in perspective
New Zealand Herald: Cartoon: Pestilence, famine, war, death ... and sub-prime mortgages
Cartoon: Pestilence, famine, war, death ... and sub-prime mortgages
The Times raises an eyebrow for a moment
The Times: Why househunters need not hurry
"Estate agents, ever the masters of optimistic analysis - who else uses the word charming when they mean rundown? - were quick to jump on these figures as an indication that the housing market could soon bottom out. Sadly, their prediction is likely to prove as accurate as describing a Victorian terrace as a unique opportunity."...........I like it......
Ouch
Daily Mail: Housing crash traps 1.2m in negative equity
A collapse of nearly 20 per cent in house prices means around 1.2million families are trapped in negative equity, it emerged yesterday. Figures from the Nationwide confirm that Britain is in the grip of the worst housing market crash since its records began in the 1950s. A year ago, less than 100,000 homeowners were in negative equity. The average price of a home has dropped from £186,050 at its peak in October 2007 to £150,500 today - a fall of £35,550. At their current level, anybody who has bought a home since 2003 paid more for their property than it is currently worth. Government figures also revealed nearly one million homeowners in England are struggling with their mortgage. An average of 2,500 people are being made redundant and around 85 small firms are collapsing every day.
Union leaders condemn delegates on crisis response
Times: PARIS UNREST WILL SPREAD ROUND WORLD, UNIONS WARN
The gloom surrounding this year’s World Economic Forum descended into confrontation yesterday as international labour leaders launched a withering attack on the 1,400 business executives and 41 heads of government at Davos over what the labour leaders alleged was their failure to respond effectively to a deepening crisis of their own creation.
The current recession is far worse than what we faced in 2001/02, warns Kirby Daley, senior strategi
Cnbc: Equities to Fall Further,
Need to prepare themselves for a further decline in valuation
Bit late now
Times: Gordon Brown orders thousands of new council houses
The biggest council house building programme for decades was ordered by Gordon Brown yesterday as he urged town halls to rescue the construction industry and help to kick-start the economy. Rules should be relaxed to allow councils to borrow more money and to keep the proceeds from rents and sales, the Prime Minister said. Last year only 375 council homes were built.
London an international lauging stock
The Economist: Reykjavik-on-Thames
Londongrad was a metropolis of lunatic house prices and multiplying restaurants, ornamented by rich foreigners and serviced by poor ones. For many businessmen and financiers it was a no-questions-asked utopia of perpetual growth, lavish bonuses and capital flows, and unlimited easy credit. Until the credit dried up. Now, suddenly, jobs are evaporating, the pound is falling, banks may soon be natonalised. Economists and traders have begun to refer to London by an ominous moniker: Reykjavik-on-Thames.
It Aint Gonna Happen - Sell Sell Sell !!!!
Cnbc: 'Bad Bank' Exclusive
A government-run bad bank is likely weeks away, reports CNBC's Charlie Gasparino.
Whether going back to the original TARP plan of buying bad assets will run into the same problems as
Cnbc: The Trouble with TARP
Whether going back to the original TARP plan of buying bad assets will run into the same problems as before, with CNBC's Charlie Gasparino
Thursday, January 29, 2009
Just hilarious! I suppose he's busy working on soviet UK's new manifesto!
Times online: Alistair Darling pulls out of Davos
"A spokesman for the Treasury said it was decided that since a number of people Mr Darling had been due to meet had pulled out of Davos, his time would be better spent doing other things." Errr, like searching for a bigger fag packet to use to work out his latest bail-out scheme. Oh how these spivs, fat cats and financial charlatans are avoiding the flack that will come their way.
Is this the way to ease unemployment, or to incite riots?
Bbc news: Hundreds join refineries walkout
Hundreds of energy industry contractors have walked out at sites in northern England and Scotland in an escalating protest over the use of foreign labour. The dispute began at the Lindsey Oil Refinery, North Lincolnshire, on Wednesday after a construction contract was awarded to an Italian firm.
More bear food - and tips on how to grow and catch your own
Guardian: Life after the apocalypse
What if the doomsayers are right ... what if society, as we know it, really is about to collapse? Do you have what it takes to make it in a world without electricity and running water? Tanya Gold offers an essential survival guide. I am an urban girl. I have no skills except whingeing and bingeing. I can barely open a packet of Hobnobs without an explosive device. The post-apocalyptic norm - see 28 Days Later - is for survivors to sit in desirable country mansions, eat tinned tomatoes, develop post-traumatic psychosis and shoot each other. Never in any apocalyptic scenario in any movie I have seen - and I have seen them all - does anyone try to live off the land. Fun things you could do after the apocalypse: Break into M15, read all its secret files. Oh, no! She was murdered! I knew it!
"Huge pent-up demand"
Guardian: More boom and bust ahead in housing market
"The risk of another housing bubble is huge," said chief executive of Shelter, Adam Sampson. "Demand has not gone away and, once mortgage lending comes back, there is a danger that huge demand will be unleashed and the increase in house prices will be very sharp indeed." He called on Gordon Brown to put together a fiscal stimulus package for the construction sector, to meet future demand and save thousands of jobs in the industry.
Just the beginning?
BBC News: Huge crowds join French strikes
Huge crowds have taken to the streets in France to protest over the handling of the economic crisis, causing disruption to rail and air services.
Quick - Someone get a restraining order out on these jokers before we sink below the water line!
Gaurdian: Common sense has no place on the Brown-Darling Titanic
Simon Jenkins accuses Alistair (former supporter of the International Marxist Group) Darling, now in charge of the treasury, and Gordon (I have a history degree so I'm right when I say I predicted this mess) Brown of fiddling while the good ship Blighty is taking in water faster than a E-ed up raver who can't stop dancin'. Having surrounded themselves with bankers (of both the financial and merchant kind!!) they appear oblivious of the problems in the 'real' economy and how their own disastrous interventions are not really helping those annoying symptoms of the credit/financial meltdown - people!
Ahwight Terence my son
Telegraph: Only the market can save us from the crisis
The country's first grocer gives us the benefit of his wisdom, only it's 25-year old wisdom from elsewhere: "For the best way to tackle many of today's challenges is to harness the dynamism of the market and the power of the consumer." Right on, Terry - that one hasn't been tried lately. 'Ere squire, your sprahts are lookin' a bit knackered. Gimme a paund o' them outofdates.
Is This The Fate Of The British Pound?
BBC News: Zimbabwe abandons its currency
Zimbabweans will be allowed to conduct business in other currencies, alongside the Zimbabwe dollar, in an effort to stem the country's runaway inflation.
Bankers still only interested in their own nests
Guardian: So, when does the contrition start?
Concise view of the reluctance to make the changes needed.
Commercial Property Crash of 2009
The Market Oracle: Commercial Property Crash of 2009
Don't be fooled - commercial property is no bargain - They're an upbeat bunch in Southampton , it seems. The BBC took a trip down the local high street yesterday to ask shopkeepers in the town: "are you more or less optimistic about your business than 12 months ago?" And the answer? Three-quarters of the panel were still "defiantly optimistic about business prospects for 2009".
How the bailouts could break us all
MoneyWeek: How the bailouts could break us all
The logical consequence of the banking bail-outs is full nationalisation, says Adrian Ash. But where is the money going to come from, and what happens if it all goes wrong?
Hedge funds going for gold
FT Alphaville: Gold is the new money
A hedge fund has begun offering investors the chance to have their investment denominated in gold, as worries grow over governments debasing their currencies by printing money. Osmium Capital Management, a $178m hedge fund manager based in Bermuda, is launching a new share class allowing investors to hold shares measured as troy ounces of the fund, rather than US dollars, sterling or euros.
If the Banks have a major problem then so does the housing market
Moneymarketing: Expert doubts auditors can sign off banks as “going concern”
Auditors may not be capable of signing off banks as a “going concern” due to the difficulty of predicting the behaviour of volatile markets, an expert has warned MPs. Independent Audit director Jonathan Hayward was quizzed by MPs on the Treasury select committee yesterday on whether or not the big four accounting firms were actually capable of understanding banks assets and liabilities well enough to sign them off as a going concern in the forthcoming full-year results season.
The Great Depression of the 21st Century
Stable Currencies News: The Global Financial Crisis
Causes and consequences of the financial meltdown; The speculative onslaught; Financial fraud and the “bank bailouts”; Bankruptcy of the real economy; Impacts on employment, wages and social services; Towards a spiralling public debt; The economic crisis and its relationship to the Middle East war; The centralization of corporate power; The concentration of wealth; The globalization of poverty. What are the policy alternatives?
Ermm, house prices still going down
Land Registry: House Price Index 2008
The December data shows a continued decline in annual house price change, with a movement of -13.5 per cent. This marks the sixteenth consecutive month where annual price change has decreased in England and Wales.
While’st They bankrupt the Country- we sit quietly by…..
SFSC News: George Monbiot on printing our own money
If the state can’t save us, we need a licence to print our own money in the Guardian is a good overview of what we’ve all understood for years: the centralisation and monopolisation of national power has been winning over local and town initiatives, by the strength of national currencies. Now, ‘globalisation’ undermines the sovereignty of nation sates and makes states bankrupt. We live in “interesting” times!
"money for old rope".
Telegraph.co.uk: Buy-to-let: Landlords warned to avoid 'unfair' fees
Many landlords in London and the South East are charged fees of around 11pc for renewing properties on a "let only" basis, according to the National Landlords Association (NLA), The organisation called these fees "unfair" as the estate agent did no further work to earn them. "Over 70pc of landlords consider this renewal fee to be unfair and not a true reflection of the work actually undertaken," the NLA said.
Commercial property is no bargain
MoneyWeek: Don't be fooled - commercial property is no bargain
It's going to be a bad year for commercial property. Prices could fall another 25%. So steer clear of the big yields offered by UK property stocks - we're still a long way from bargain-hunting time.
This years news that somehow slipped through the net
Dormroom derivatives: Profiting From Bernanke's Super-Fed and Obama's Newer Deal
An in depth appraisal of the bigger picture with many thoughtful comments to widen it's value as an info resource. Less than $40 billion a year ago, the excess reserve deposits held by the Federal Reserve has ballooned to $860 billion. The banks can also deposit printed money into a Fed category called “Deposits with Federal Reserve Banks, other than reserve balances,” which is what the Supplementary Financing and General Accounts also fall under. The “Other” subsection of these deposit accounts, which can be construed to represent bank deposits, has increased from $281 million in September to $15 billion today. Both the reserve and non-reserve deposits comprise another huge pool of excess liquidity on the Fed's balance sheet that doesn't immediately affect circulated currency.
Keep it Simple
Bloomberg: U.K. Mortgage-Bond Plan May Fail as Investors Seek Higher Yield
The U.K.’s plan to revive the market for mortgage bonds may fail because new government-backed securities may be too complex and won’t offer high enough returns, according to Calyon’s Harpreet Parhar. “There’s no natural investor base for this product,” said Parhar, a London-based asset-backed debt analyst. “The guaranteed notes could end up being too complicated for traditional government bond investors, while the remaining asset- backed investors won’t buy it because they can get far higher yields in unguaranteed bonds.”
There may be hope!
Independent: We'll get poorer faster than since Attlee's time
Attlee brought in the NHS. If this is the sort of public work that GB has in mind to stimulate the economy, then that isn't so bad.
Rare black swan shows US economy is doomed
Blogging Stocks: Technical analysis predicts trouble
Everyone should see this. I never believed in technical analysis until today.
£572bn Package Passed By House Of Representatives
BBC: US House passes stimulus package
The US House of Representatives has passed President Barack Obama's $819bn (£572bn) economic stimulus package. Passed by 244 votes to 188, no Republicans backed the plan, saying it was too expensive and would not work. The Senate debates the plan next week, and it could face stiff opposition as the Democrats have a slimmer majority.
Nationwide latest (part 2)
BBC Business: House prices 'continue to slide'
The slump in house prices continued in January with prices falling by 1.3%, according to the Nationwide, the UK's largest building society. The mortgage lender said the rate of price falls had eased slightly when compared with December's 2.5% slide. But the fall took the annual rate of decline in house prices to 16.6%, from a 15.9% in December. Amid rising unemployment, job security worries were likely to be putting people off buying a new home, it said. The average house now costs £150,501, down from £153,048 a month ago and £35,543 below the peak of October 2007.
-1.3%MoM, -16.6% YoY
Nationwide: January house price index
The price of a typical house fell by a further 1.3% in January, as the deepening economic recession and financial market turbulence continued to weigh on housing market sentiment and activity. January’s decline leaves the average price of a typical house at £150,501, down £30k from last year. Prices fell £2,547 in January, down 1.7% without the seasonal adjustment
Several economists are expecting official interest rates to fall to the lowest levels in almost half
News.com: Australian dollar to hit all-time low of US47c, bank says
BNP Paribas also expects an Australian economic growth rate of close to zero in 2009, "The RBA will want to get rates down rapidly, taking them to levels not seen since the 1960s," he said, adding Australia was likely to enter a recession in the second half of 2009.
Wednesday, January 28, 2009
What they don't like is governments going into deficit to help ordinary citizens
Toronto Star: Financial elite have no shame
Let's imagine, for a moment, how different the public debate would be today if it had been unions that had caused the current economic turmoil. In other words, try to imagine a scenario in which union leaders – not financial managers – were the ones whose reckless behaviour had driven a number of Wall Street firms into bankruptcy and in the process triggered a worldwide recession. Needless to say, it's hard to imagine a labour leader being appointed to oversee a bailout of unions the way former Goldman Sachs CEO Henry Paulson was put in charge of supervising the $700 billion bailout of his former Wall Street colleagues. with comments by Canadians
Let me get this straight. Banks, car manufactures; who's next in line?
BBC News: Car worker subsidies 'considered'
The government is considering giving car firms a "wage subsidy" to encourage them to put workers on shorter hours rather than making them redundant. Business Secretary Lord Mandelson faced the call from the Unite union's Tony Woodley at a motor industry summit .
Oh really? But this recession isn't like the last one
Yahoo: The 10 safest jobs in a recession
1. Teaching. 2. Working in the NHS. 3. Other public service jobs. 4. Public transport projects. 5. Home insulation and other 'green' initiatives. 6. Energy. 7. IT. 8. Human resources. 9. Interim managers. 10. Accountants / finance directors / compliance officers. ----- [I think this recession is of a completely different character to the last one, so a lot of predictions like this are liable to be wrong.]
Fun Online Poll
Pollcode.com: What kind of tax/economic system would you prefer?
For a given level of taxation (the lower the better, obviously), would you prefer: A) Low and stable house prices; lower taxes on incomes; and a steadily growing economy? or B) Wildly fluctuating house prices; higher taxes on incomes; and a boom-bubble-bust economy?
Don't Agree says Brown
Independent: Worst of all! Economists point at UK
"The UK is expected to suffer the worst slump of all advanced nations in the "deepest recession since the Second World War", world economists said today. All major economies are expected to experience steep falls in output in 2009, but the drop for Britain is forecast to be substantially greater than the average, according to the International Monetary Fund's (IMF) World Economic Outlook". (Gordo will tell the world how to go forward into prosperity tomorrow)!
The bngger did it again!
Telegraph: George Soros has been shorting sterling during its recent slide
George Soros, the man renowned for "breaking" the Bank of England by selling the pound in 1992, has admitted he has been shorting sterling in recent months.
Renting is better than buyer and here's why
Until Debt Do US Part: Renting is better than buying and here’s why
I currently rent. A few years ago I was looking at buying an apartment in the area that I currently live. I didn’t buy a place because I felt that the housing market was overpriced and I didn’t want to be lumped with even more debt. That said at the time I was looking into buying a place I had a lot of debt (I still do) that would have prevented me from getting a mortgage. I was told that I could have fudged a few things and get a mortgage but I knew that I wouldn’t be able to pay so I declined. On top of that the fact that I was being advised to fudge a few things meant that things were really getting out of control.
Hello ? Yes ? Any expensive property for sale ? Yes, plenty...Where ? Cuckooland....
PERE: UK developers ‘starting to raise prices’
Hello ? Yes ? Any expensive property for sale ? Yes, plenty... Where ? Cuckooland.... Big silence..... Hello ? Big silence..... F£$%^&* they put the phone down again.....
The most ridiculous propaganda yet from the BBC
BBC 'News': The High Street
9 optimistic vs. 2 pessimistic outlooks from a 'random sample' of high street retailers. The best one? The estate agent's of course - "The market's just starting to turn. Now is a good time to buy and I'm employing people, rather than laying them off." This is a shameful day for the UK state media's bureau for public information.
Auction Action Stateside
Bloomberg: Fannie Mae Foreclosure Sale at 50 Cents on $1 Shows Price Reset
uctions are resetting real estate values at the neighborhood level, while President Barack Obama tries to find a way to limit foreclosures and revitalize the worst housing market since the Great Depression. Bargain hunters such as Parkin, a 50- year-old aerospace engineer who is shopping for a personal residence, and mom-and-pop investors on the prowl for rental properties, aren’t waiting for federal aid. They are buying foreclosed properties for as little as 10 cents on the dollar. Lenders seized 9,787 houses a day in December, or almost seven a minute. Even after the 26 percent drop in residential prices since June 2007, there are enough unsold homes to last 9.3 months at the current sales rate.
Not Sayara Begg this time
BBC Radio 1: Debt diaries
Chris Guy bought his place a couple of years ago for £153,000. But now the value of his house has fallen to about £120,000. "I feel a bit gutted really. It's a bit of a shock to find I'm about £33,000 down on what I paid for it," he says. Debt counsellor Chris Tapp says there's no easy solution to the problem of negative equity. He says: "There's not a huge amount Chris can do, particularly in the current market. But, over the course of a number of years, house prices are likely to go back up." "So actually in five or 10 years, he's still likely to make a tidy profit."
Shortest article of the week.
Metro: A standard variable fate for homeowners
"Many homeowners looking to remortgage at the end of a deal are better off on the standard variable rate. Those owning less then ten per cent of their home face high interest rates on new deals, said Moneyfacts.co.uk." That's it. That's the whole article!
U.S. May opt for the Bad Bank approach.
Bloomberg: FDIC May Run ‘Bad Bank’ in Obama Plan to Remove Toxic Assets
The Federal Deposit Insurance Corp. may manage the so-called bad bank that the Obama administration is likely to set up as it tries to break the back of the credit crisis, two people familiar with the matter said. FDIC Chairman Sheila Bair is pushing to run the operation, which would buy the toxic assets clogging banks’ balance sheets, one of the people said. Bair is arguing that her agency has expertise and could help finance the effort by issuing bonds guaranteed by the FDIC, a second person said. President Barack Obama’s team may announce the outlines of its financial-rescue plan as early as next week, an administration official said.
A nation of shelf stackers - yay us !
MSN: Asda to create 7000 new jobs
Supermarket chain Asda will create 7,000 new jobs this year, a spokesman said. More than half them will be created by the opening of 14 new stores and the planned expansion of 15 existing sites
Gold set for an 'uber-move'?
MoneyWeek: When will gold break through $1,000 an ounce?
The global economic slump has caused industrial precious metal prices to fall - but according to Dominic Frisby, gold will still be in demand over the next few years, and could be gearing up for an 'uber-move'.
Very interesting
Contract Journal: Construction output to fall to 1996 levels by 2011, says forecast
That would be a drop of about 20% in volume terms. It would put this recession on a par with the collapse in workload that followed the first oil price shock that saw construction output dive from its zenith in the spring of 1973 to its nadir in autumn 1976. That was the deepest recession in construction since World War II and it was soon followed by a second recession
Well Done Gordon Brown :) Bankrupt Uk
Moneyweek: £20bn tax rises and spending cuts ahead
£20bn tax rises and spending cuts ahead
BTL latest - amateurs versus professionals
FT: Fifteen per cent of amateur landlords making a loss
While 100 per cent of professional landlords have managed to make a profit despite the credit crunch, 15 per cent of amateur landlords have made a loss. According to new research by Business Development Research Consultants (BDRC), there is significant polarisation in fortunes between 'amateur' private landlords (those who own four properties or less) and 'professional' private landlords (those with more than 20 properties).In total, 7 per cent of private landlords questioned had been involved in some repossession activity by a lender in Q4 2008. A further 4 per cent had missed at least one mortgage payment in 2008.
"Foreign investors pile into UK housing market "
Mortgagestrategy: Overseas buyers reap benefits from weak pound
Foreign investors are piling into the UK housing market as the value of the pound continues to deteriorate, figures from Hamptons International show.European buyers are increasing turning to the discounted UK housing market, as house price falls of 20% are magnified by the strength of other major currencies against the pound. The data from Hamptons International reveals that the number of European buyers for high-end properties in central London climbed 20% in Q4 last year compared to same period in 2007.
I never thought we would see this in the UK!!
The sun: 8,000 Hondas are mothballed
No doubt they will use this as an excuse to say land vlaues have to go up and houseprces go up too due to lack of space left after storing millions of cars that won't sell..... simple drop the price and sell em...
Shoot them
The Guardian: Directors of state-backed Lloyds asked for a pay rise
"Eric Daniels, the Lloyds chief executive, is currently paid a basic salary of £1.03m. The bank's other five executive directors before the HBOS takeover was announced had a basic salary of between £590,000 and £680,000. They also have short- and long-term incentive schemes that include annual bonuses of up to 200% of basic salary, with the exception of Daniels, who can boost his salary with a 225% bonus payout."...............anyone feel sick?
Millionaire's playground getting pwned
The Sun: Sandbankrupts
MILLIONAIRES’ playground Sandbanks has been ravaged by the credit crunch, The Sun can reveal. Renowned as one of the wealthiest places on the planet, the slump has ripped apart the luxury lifestyles enjoyed by many of its high-roller residents. At least two multi-millionaires have gone bust — one losing a staggering £35million. Estate agents are struggling to sell any of the lavish mansions on the tiny peninsula. Homes have been repossessed, restaurants have emptied and at least one hotel has been forced to close for half the week.
FT turns über-bear: the west's decline is imminent and inevitable
FT: Why I fear the west’s luck has run out
Previous assumptions simply do not apply. Homeowners should forget about houses going up in value – all that is history. They are places to live in. So cut back on your outgoings. Pay rises are off the agenda. Wholesale pay cuts may yet become common. Put some cash aside if you possibly can; you might lose your job. I fear most citizens’ plans for the future must be put on hold. This is not something happening to other people – we are all in trouble. Plenty of observers, including me, have criticised the media for being too gloomy. I am now beginning to believe that they have not been gloomy enough. Expect years of negligible growth, permanent high unemployment, declining property prices, higher taxes, crumbling currencies and falling living standards.
Meadowhall and Bullring up for sale as debt burden rises
Times: For sale: £750m of retail assets
The UK's two biggest property companies will sell about £750 million worth of retail assets within weeks as they try to pay off debts. British Land is close to selling a 50 per cent stake in the Meadowhall shopping centre, Sheffield, for about £550 million to a joint venture between an Abu Dhabi fund and the AIM-listed London & Stamford [a property 'vulture' fund]. Land Securities is nearing completion of a deal to offload a one-third stake in the Bullring shopping centre in Birmingham, to an Australian fund for £200 million. British Land and Land Securities are both selling assets at substantially lower prices than they would have commanded 18 months ago, as their debt burden becomes larger. Hammerson, which owns another third of Bullring, is rumoured to have put its stake up for sale too
How long will the American HPC last?
Charles Hugh Smith Blog: Endgame 6: Housing As Shelter, Not Speculation
Smith was one of the few commentators who predicted the American bubble before it became evident to the mainstream (http://www.oftwominds.com/blogs/housing-cliff.html) and here he expresses the opinion that the USA has a long way to go. So how long will the UK HPC last?
Tuesday, January 27, 2009
I could have done something but didn't bother admits Brown
Daily Mash: I WARNED OF CRISIS TEN YEARS AGO THEN DID ABSOLUTELY NOTHING ABOUT IT, SAYS BROWN
During a speech to the Foreign Press Association (FPA) Gordon Brown admitted that at any point he could have stepped in and stopped the impending crisis.
Are U.S banks now getting the message?
Guardian: Citigroup aborts plans to spend $50m on a company plane
The embattled Wall Street bank Citigroup has cancelled its purchase of a $50m (£36m) corporate jet after a political outcry on Capitol Hill over the price tag. After defending its plan to buy a French-made Dassault Falcon 7X yesterday, Citigroup performed an abrupt u-turn with a terse statement this morning saying: "We have no intent to take delivery of any new aircraft." Citigroup has received more than $45bn in taxpayers' money to stay afloat amid ballooning losses from mortgages and credit-related derivatives. From the White House downwards, politicians have criticised the bank for upgrading its fleet of aircraft.
Anne Ashworth smacks down the BTL amateurs
Times: The tale of the bonkers buy-to-let brigade
In the boom you decide that buy-to-let could be a profitable sideline and arrange mortgages to finance your portfolio. You snap up several inner-city flats, assuming that there will be demand from well-paid young professional tenants, although the area is already oversupplied with such accommodation, and salaries in the locality are modest. The gloss of prosperity you have observed in surrounding streets is financed more by credit cards than chunky salary cheques. The downturn hits and you lose your own day job. You use the dwindling sums you are receiving in rents (tenants are few and void periods grow longer) to finance your lifestyle rather than pay your mortgages. This scenario is far from fanciful. It is the typical tale behind many portfolios being repossessed.
“Homeownership is beginning to look a much more realistic goal for thousands of 1st time buyers"
Mortgagestrategy: Average first-time buyer putting down £20,000 deposit
Almost two fifths of prospective first-time buyers are increasing the rate at which they save towards a deposit in 2009, with the average saving £20,000, shows research from Abbey Savings. Some 38% of those already saving towards a deposit say they are looking to increase the rate at which they put their money away in 2009. Meanwhile, 40% of those without any form of deposit stated that they had now decided to start saving this year. With house prices looking increasingly affordable, those with a deposit said that they intended to try and save on average an extra £203 each month this year in order to get on to the property ladder, while those who were just beginning to save a deposit said that they intended to put away £123 on average each month.
A view from across the Channel
Guardian: How Britain lost its way
Britain from a French perspective. Lots of fair points but some may find them controversial.
Apparently, it's a good time to invest in property [yawn!]
The Times: Ready, Steady, Invest!
“If you had to write a recipe for the right time to buy property, you would list all the conditions we have at present,” says Gary Murphy, partner and auctioneer at Allsop.
US House Prices Still In A Nosedive
S&P: Home Price Declines Continue as the S&P/Case-Shiller Home Prices Indices Set New Record Annual Declines
Data through November 2008, released today by Standard & Poor’s for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, shows continued broad based declines in the prices of existing single family homes across the United States, with 11 of the 20 metro areas showing record rates of annual decline, and 14 reporting declines in excess of 10% versus November 2007.
Banking Meltdown? No Worries we'll just Barter
FT: Nations turn to barter deals to secure food
Countries struggling to secure credit have resorted to barter and secretive government-to-government deals to buy food, with some contracts worth hundreds of millions of dollars...The countries’ struggle to obtain credit to import food is boosting the price of domestic crops. Ms Sheeran said that prices of crops in some African countries were rising sharply even as international food commodities prices had fallen from last summer.
Latest plan to exploit the weakness of the property market
Citywire: New Pinder fund aims to exploit land market weakness and return 21%
Property investment firm Pinder Fry & Benjamin (PFB) is targeting returns of 21% with a new fund that will buy up agricultural land and sell it on for residential use. The PFB Strategic Land Fund will aim to buy up to 20 agricultural sites before securing planning permission to use them for residential development. PFB chief executive Ed Williams said the fund could exploit the weakness of the property market by buying the land cheap.
Just in case anyone was worried they might have to drive a car more than two years old...
The Times: Cabinet approves aid for struggling car industry
A classic example of the government intervening to stop the invisible hand from allocating vital resources to those that are most productive. All done in the name of good intentions, which laden the road to disaster. The UK will never start making things that people NEED whilst the government continues to force companies to make things that people at best only want. a bit. Why are we bailing out employees of an Indian company anyway?
Or: Cameron alludes to looking to see if any criminal laws were broken
Telegraph.co.uk: David Cameron calls for criminal actions against bankers
David Cameron last night expressed disbelief that financial watchdogs were not pursuing criminal investigations against banks and bankers who have caused the financial crisis. - I can't help but agree. Arguably bankers cost the world millions of souls in WWII. The ramifications are of a humanitarian scale. Prison is quite comfortable for white-collar criminals these days, and I'm sure its a bearably transient experience when you know you've got your millions waiting. Better to fine them all they have and future earnings and leave them to carry on in a 2 bed semi with a Tesco trolley in the front garden.
UK: Distributive Trades Survey Not Quite As Bad As Expected
CBI: NEW YEAR STARTS WITH A WHIMPER FOR UK HIGH STREET - CBI
Despite the New Year sales 2009 got off to a poor start for most UK retailers, who reported that sales continued to fall sharply, and expect that February will be as tough, the CBI said today. In its latest Distributive Trades Survey, 16% of retailers said year-on-year sales volumes rose in the first half of January, while 63% said they were down. The resulting balance of -47% represents another heavy fall in sales, but the decline was slightly slower than in December and broadly in line with expectations. -- Previous was -55, consensus expectation was -53
Why banks won't lend you money
MoneyWeek: Banks have money - they just don't want to give it to most people
The recession started with a banking crisis, but it's taken on a life of its own - things will get a lot worse before they get better. So it's no wonder that banks are refusing to lend to failing businesses or overstretched home-buyers.
Jim Rogers v's Gordon Brown. Round 2. Wonder who will be proved right?
FT: Tell me about the UK’s next big growth industry
Sir, While reading my favourite newspaper over the weekend, I was interested to see I was mentioned a couple of times. My quote that the UK “has nothing to sell” is exactly what I said (View of the Day, January 22), but it must be seen in context. It was in a paragraph wherein I was discussing the drying up of North Sea oil and the collapse of the financial system. The next sentence, “The UK has nothing to sell”, in that context meant: The UK has nothing to sell to make up for those two holes. I then went on to say that therefore the currency would suffer, so I think it was clear to everyone what I meant.
Desperate, scared and not knowing what to do to survive the economic storm
The Trends Research Institute: Economy in Collapse - Drastic Actions Will Be Taken
KINGSTON, NY, 22 January 2009 -- President Barack Obama will use his poll shattering popularity to swiftly enact policies that will prove to be among the most costly and potentially destructive in America's history, predicts Trends Research Institute Director Gerald Celente. "We are forecasting dramatic measures will soon be taken by the Obama Administration that will worsen the credit crisis and severely damage the nation's economic system," says Celente. According to The Trends Research Institute Director, the new President who swept into the White House on a tidal wave of unprecedented enthusiasm and the blessings of a strong majority, will have free reign to take whatever actions he deems necessary. ~~~~~~~~~~~~ will they take us with them again?
British Property Federation’s Annual Residential Conference
Property Week: Property industry wants radical rental solution to UK housing crisis
The British Property Federation said that with repossessions almost doubling and tens of thousands facing negative equity, the creation of a professionalised, branded rental sector, where large landlords provide long term homes to rent, 'could be the answer to Britain’s woes'...The BPF is seeking changes to stamp duty when buying multiple properties and portfolios, reinstallment of the system of direct payment of local housing allowances to landlords, and it also wants rental developments to be specially recognised through the planning system...
A financial disaster of unprecedented magnitude
Bridgewater Associates, Inc: The British Question
"When we add it all up, we are concerned that the UK banking problem will be too big to save by the British government and that the markets and the government authorities have still not fully added up the picture".
Living in a fools paradise?
Daily Express: BROWN'S LOST HIS MARBLES
''In a speech that risked a furious backlash, the Prime Minister said the recession was his opportunity to forge a new global financial system. Astonishingly, Mr Brown even claimed to have predicted the current financial crisis 10 years ago''
Mini-Madoff
Reuters: NY financier arrested in alleged $400m Ponzi scam
Authorities on Monday arrested the chief executive of a private New York financing firm on suspicion of running a purported Ponzi scheme that attracted $400 million in investments, U.S. law enforcement officials said. Nicholas Cosmo, head of Agape World Inc on New York's Long Island, was said to provide commercial bridge loans, but was instead operating a traditional Ponzi scheme in which early investors are paid with the money of new clients. Victims were introduced to Agape World through trusted friends, family members or colleagues who reported returns of 14 percent in less than three months. The business purported to be making high-interest bridge loans to construction companies in need of fast cash.
Iceland turfs out the rulers who caused their mess
Times: Credit crunch claims Iceland government
The global economic crisis claimed its first government yesterday when Iceland’s ruling coalition collapsed amid a cacophony of popular protest. The Government resigned en masse after days of mounting anger over the country’s financial meltdown. The protests, which began peacefully after the nationalisation and overnight bankruptcy of Iceland’s three main banks, turned violent last week with the nation experiencing its worst riots in 60 years. At their height 32,000 people — more than 10 per cent of Iceland’s population — took to the streets of Reykjavik banging pots and pans in what came to be known as the “Household Revolution”. Jubilant protesters celebrated outside Iceland’s parliament yesterday after news of the Government’s fall. The country’s future looks far from secure, though.
Best to know what you're getting into
Telegraph: No UK safety net for Post Office savers
Apologies to anybody who thinks I'm off topic but I thought that any blog readers who are thinking about putting their precious deposit savings in the Post Office really should know about this.
Monday, January 26, 2009
Rightmove irony?
Rightmove: Beaconsfield - 7% Return on Investment Guaranteed for 12 Months
Got to be the best one I've seen for some time: "Beaconsfield -7% Return on Investment Guaranteed for 12 Months" maybe not -7%, but -20% ;-)
Pure negligence, if true and I doubt that.....
Mail Online: I warned of global financial crisis ten years ago, claims Brown
''We must create a framework for the international governance that we currently lack. We must consider at a global level the regulatory deficit. For a decade I have said that the current patchwork arrangement is inadequate.’''
From Brown Bounce to public Backlash.
Independent: Voters lose faith in bailouts and VAT cut
Latest figures from the ComRes survey for The Independent would indicate the Brown bounce is suffering a backlash as Labour's popularity slumps. The poll puts the Tories on 43 per cent (up four points on last month), Labour on 28 per cent (down six), the Liberal Democrats on 16 per cent (unchanged) and other parties on 13 per cent (up two). The Tories, even with a significant lead should be wary with significant doubts over the strength of the front bench team with 49% of the public regarding the team as "lightweight".
Government Must Fear the Falling Pound
Bloomberg: Pound Plunge May Push U.K.’s Brown Off Currency Fence
John Major, James Callaghan and Harold Wilson each had to cope with currency-market turmoil that weakened their reputation for managing the economy. A dispute over aligning with other European currencies forced Margaret Thatcher to resign in 1990. “It has certainly undermined prime ministers before,” said Philip Whyman, professor of economics at the University of Central Lancashire. “It could do for Brown.”
HPC getting even more support in some areas
MailOnline: Locations of secret new bail hostels revealed: Is there one near you?
Ministers have today revealed the postcode locations of hugely controversial bail hostels used to house thousands of criminals in residential streets. The Ministry of Justice has come under repeated fire for signing a multi-million pound contract with a private firm to house a mixture of convicts on early release and suspects who are awaiting trial, in a desperate bid to ease prison overcrowding.
London house prices already down 55% (in yen)
FT: Exchange adantage
A flat that cost £3m in 2007 is now worth £2.4m. But the effective discount is even greater for foreign buyers.
Will gold prove to be the safe haven everyone is talking about? Or is it another bubble in the makin
FT: Gold breaks $900 barrier
Gold rose above $900 a troy ounce on Monday, hitting a three and a half month high and posting record highs in euro and sterling terms as investors sought safe haven from troubled equities markets and expensive government bonds. Precious metals traders said that investors, particularly in Europe, were pouring money into gold exchange traded funds – a popular way to gain access to the metal – and also buying physical gold, from coins to large bars.
$100 Florida Mansion
Times online: Ex-Lehman chief sold $13m home to wife for $100
Richard Fuld, the disgraced former chief executive of Lehman Brothers, sold his $13.3 million (£9.6 million) Florida mansion to his wife in November for $100, according to real estate records. Mr Fuld, who is widely blamed for the collapse of Lehman Brothers in September last year, bought the house with his wife, Kathleen, in March 2004 for $13.75 million. On November 10, the 62-year-old banker transferred the seaside mansion into Mrs Fuld's name in return for $100.
Speechless!
Timesonline: Gordon Brown: "I called for global financial reform ten years ago"
Gordon Brown claimed today that he had been warning for ten years that the international financial markets needed to be more strongly regulated. The Prime Minister said that it was a decade ago in Harvard that he first called for an international early warning system to alert countries to developing crises in any part of the world, because the huge global growth and reach of financial systems meant that all markets, all economies and all banks were now interdependent.
Cheap Financial Stimulus
Bronte Capital: Why the Federal Reserve should LITERALLY throw money out of helicopters
Problem is people aren't spending. You need to convince people not to hold money. You have to really convince people that there will be inflation. The Federal Reserve should hire a couple of hundred helicopters and load each one 10 million dollars in neatly bound parcels of $1000 each. Total cost $2 billion plus trivial helicopter hire. Of course people will fall off roofs after searching for money that might have landed on their house. They might die... All of this increases the visible recklessness of the policy. It may actually induce mass spending of American dollars for (self-fulfilling fear of inflation)– a massive stimulus. And it will do it all for $2 billon. Obama has a stimulus package of $1.2 trillion – or about 600 times as large. This is relatively cheap.
Main business sectors in crisis make up 1/2 of all registered businesses
National Statistics Online: Registered Business as at March 2008
As at March 2008, the property and business services sector accounted for the largest number of businesses with 31.9 per cent of all enterprises registered. This was followed by construction with 11.6 per cent of all enterprises registered, and then the retail sector with 9.2 per cent, making a total of 52.7% of all businesses registered in England & Wales.
Lesson for the day: greed is not always good
The Australian: Beachfront site falls $5.5m in six months
An Aussie rejected an offer of 14.5 Millions last July after buying the property for 13.5 million in June 2006. Last weekend he got $9,010,000 at auctions.
Gordon Brown in denial that the economic mess we are in is due to him
Fresh Business Thinking: Gordon – The Golden Rule Of Holes Is – STOP DIGGING
When Gordon Brown spoke to Evan Davis on the Today Programme on Friday he was given plenty of opportunities admit that his government had made some mistakes and that part of the economic mess we find ourselves in is due to him. Not what we need at a time of crisis – can someone please take away his spade! At the same time can we take heed of some sound advice offered by former British ambassador to Washington Sir Christopher Meyer on BBC1’s Question Time when he called for an end to party politics during the economic crisis? A call that was completely ignored by Liam Fox who attacked the Government's current economic policy and called for an immediate general election! We are in crisis and as Iain Martin quips; “Denial is a river in Egypt”.
interesting
retail research: Who's Gone Bust in UK Retailing 2005-9?
i see stylo plc has just gone too...
Clown failed to see the boom and failed to prepare for the bust
BBC News: What has caused the UK recession?
"Britain is facing the worst recession for decades and the PM's response is to run around like a headless chicken announcing all sorts of schemes without any detail without commanding international confidence for what he is doing, let alone public confidence"
Brown too busy with "other things" to do Budget
Evening Standard: Brown forced to delay Budget
Gordon Brown and Alistair Darling are set to postpone the Budget until April as they consider whether to try a new economic stimulus package.
Sharpen your knives for the following
Guardian: Twenty-five people at the heart of the meltdown ...
"The worst economic turmoil since the Great Depression is not a natural phenomenon but a man-made disaster in which we all played a part."
Why politicians are suckers for protectionism
MoneyWeek: Why politicians are suckers for protectionism
Politicians are trying to appear decisive by pushing protectionist policies, in a misguided attempt to protect domestic markets. But shutting down global trade will only make the financial crisis worse...
Equal Opportunities Recession
BBC: Downturn 'hitting women harder'
TUC general secretary Brendan Barber said it was going to be an "equal opportunities recession", compared to the aftermath of Britain's previous economic downturns. "Job losses in sectors where men predominate such as manufacturing and construction are now being balanced by job losses in retail and hospitality where more women than men work. But job losses among men are still more likely to hit the headlines as women tend to work in smaller workplaces where redundancies go unnoticed by the media. "With so many households absolutely dependent on women's wages, the government must ensure that women benefit from programmes to help those facing redundancy and the long-term unemployed."
Chinese monetary contraction
Pettis: Monetary conditions might exacerbate the Chinese adjustment
Article about monetary contraction with a lot of well thought out comments. As usual, not good news. Overcapacity much larger than thought making it difficult to refocus on domestic demand, money leaving the country, an increase in non performing loans and the possibility of a large number of hidden existing ones, all leading to a contraction in credit.
Pent-up demand still hiding in cupboard
BBC: Bank mortgage approvals down 52%
The number of new mortgages for house buyers approved by the UK's banks fell last year by 52%. The British Bankers Association (BBA) said the number of these approvals went up from 17,000 in November to 22,000 last month. However, this was still 47% down on December 2007.
Stop muddling through everyone
BBC: Brown warns against 'pessimism'
The economic crisis should be treated as "the difficult birth-pangs of a new global order", Prime Minister Gordon Brown has said. In a speech he promised to fight to prevent the UK and other countries retreating into protectionism. Mr Brown called for "new rules" for international trade, warning against "pessimism" and "muddling through".
The Most Clearcut Poll In History?
Original Poll: Important Online Poll
Your chance to vote for the most incompetent Prime Minister in the history of UK politics (as if there is any doubt)!! As we are currently being denied the chance to vote officially, Gordon wants to know what you really think about his magnificent efforts to save the world from economic disaster. I understand that a 99% or greater vote for Gordon could trigger a general election, so please take the time to vote today.
Is your family in recession?
Times Online: Is your family in recession? Take our quick test to find out...
The UK is officially in recession, but not everyone is suffering: some households have been hit hard by job losses but others have benefited from falling prices and lower mortgage rates. Which camp are you in?
only red alert? Maybe depression alert would be better
yahoo: UK Cities On Recession Red Alert
Belfast, Liverpool, Wigan and Hull have been put on a recession "red alert" as a study reveals the downturn will hit Britain's leading cities harder than expected.
Bond Crisis In Germany
FAPU: The financial crisis explained in simple terms
No doubt the Telegraphs Ambrose Evans-Pritchard will take this as a sign of the collapse of the Euro.
Hometrack's Latest Survey Results Out.
Bloomberg: U.K. House Prices Fell Annual 9.4% in January, Hometrack Says
U.K. house prices had the biggest annual decline since at least 2001 in January as the recession worsened and banks curtailed lending, Hometrack Ltd. said. The average cost of a home in England and Wales fell 9.4 percent from a year earlier to 158,300 pounds ($216,000), the London-based property researcher said in a report today. The monthly decline of 1 percent was led by London, where prices slid 1.1 percent from December.
Quelle surprise. Here we go.
The Times: American exporters in last-ditch attempt to stop Obama raising the trade barriers
A coalition of leading American exporters, including Boeing, Caterpillar and General Electric, is trying to stop a “Buy America” clause being included in President Obama’s $825 billion stimulus package.
The button didn't work? Press it again!
Guardian: Darling plans new rescue package for ailing economy
Alistair Darling has accepted that a second emergency package of tax and spending measures may be needed in this spring's budget to claw the economy out of a deepening recession, the Guardian has learned. Despite the deterioration in the public finances, the chancellor is willing if necessary to borrow more money to help strategically important industries and to help lay the foundations for economic recovery. He will start work this week on plans for a British answer to Barack Obama's green jobs agenda.
Sunday, January 25, 2009
Podcast on the UK Economic Mess
CWR: The UK Economic Mess
30 mins discussion on the mess that is the UK and sterling
A summary of the past week
Telegraph.co.uk: British economy is on the brink
The Bank of England says the average ratio of debt to equity within British banks is more than 30 to 1. In other words, the bank balance sheets are roughly 440 per cent of Britain's GDP. As a result, the government is too small to help, in trying to bail out the banks, is in danger of chucking not just good money after bad but the entire economy after the banks.
Reports on housing included this week
CNNMoney.com: Earnings, economy - here comes 'terrible'
Investors this week will face the largest batch of company report cards yet, in what is quickly shaping up to be the worst quarter for corporate profits in a decade. The earnings avalanche will test the market's mettle. Last week, the Dow fought back after falling below the 8,000 point psychological benchmark for four days in a row. Analysts say if the Dow can hang on to this level in the weeks ahead, that's a good indication that a bottom has been set.
We have failed to paint it black
Telegraph: Remote farmhouse featured in cult film Withnail and I for sale
Anyone for a timeshare?
Fun Online Poll
Pollcode.com: By when will the Nationwide's UK average house price index have fallen below its level of five years earlier?
In brief, The Nationwide's average UK house price in December 2008 was £153,048. Over the period March to July 2004, it rose from £142,584 to £154,299. I can't wait for the first headline reporting that "House prices are lower than they were five years ago", but can we guess correctly when that will happen? Over to you.
Fred Harrison's land price contour map
Where can I live?: Find your new home ...
FH and other Land Valuer Taxers have pointed out often enough that there is a distinct land price contour map to the UK (or anywhere else for that matter), with its peaks in Central London and other major cities, which taper out into the countryside but with smaller peaks round railway stations that get you to the nearest town for working, shopping, leisure etc. I have been alerted to this new web-site which helps you find a property to buy or rent within x minutes travel of y Tube station below a price of z. It's not as good as a proper contour map, but you can see that for a given x and y, if you reduce z (the price range), the amount of choice you have shrinks and moves further away from your chosen destination station y.
Explains It All
You Tube: Money Is Debt
Spend 45 mins to view this production which will make you wonder why you never realised the smokescreen before.
Spare rooms compete with reluctant landlords, forcing down prices
Independent: Rental income on wane as homeowners stoke up supply by letting rooms
"Hard-up homeowners trying to let a spare bedroom is being pinpointed as one of the factors keeping down rental prices, says Spareroom.co.uk. [No vested interest there...] It found that average prices in the UK fell 0.5 per cent during December. The number of overseas workers coming to the UK has plummeted owing to the weak pound and a tough jobs market. And companies are no longer moving employees around the country to the same extent: a key driver of the market. Added to this, 27,000 more homeowners took in a lodger last year to cope with pressures on household income and meet mortgage repayments. We expect at least another 35,000 households to take in a lodger this year, adding to the supply. Rents are likely to be under pressure for some time".
David Smith: "People get things wrong" (but never himself, nooo)
Times: Britain is not Iceland. Is EU the next Japan?
"Whose daft idea was it to spoil the banking package with such dire news?" --- If the truth doesn't fit the narrative, David wants to change the truth? --- "Sterling’s problems are partly related to the curtailment of international banking flows into the City and to the view among some that Britain will suffer a much worse recession than other big economies after Friday’s figures showed a 1.5% drop in GDP in the fourth quarter. But Germany and America look at the very least similarly afflicted." --- Umm no. The UK economy relied on the City. The City relied on securitisation, which has gone for a very long time. Germany is not afflicted in the same way. --- "Episodes of sterling weakness are followed by periods when it rises too much." --- Past performance is no guarantee of future results
Some banking greatest (*)hits
Observer: Why they all owe us now
"Distressed debt is symptomatic of the leverage boom that has brought the British economy to its knees. It is inevitable that HBOS and RBS own a large slice of this worthless paper. And their problem is now our problem."
Everything grinds to a halt for want of money.
The Guardian: If the state can't save us, we need a licence to print our own money
I want to introduce you to another way of negotiating a credit crunch, which requires no moral hazard, no hair of the dog and no public spending.
M0 has gone parabolic! Year-over-year in December 2008, it was up 98.9%!
ZEAL SI: Big Inflation Coming
Late 2008’s stock panic has certainly had a complex and multifaceted impact on popular psychology. Mindsets and outlooks that were scoffed at as recently as 6 months ago have suddenly become fashionable. One of the more intriguing is the meteoric rise to prominence of the deflation thesis. The growing legions of deflationists see an unstoppable depression-like deflationary spiral approaching like a freight train. They cite some convincing data. The stock markets have been cut in half in just a year. In the past 6 months, some key commodities prices fell farther and faster than they did in the entire Great Depression. House prices are down by double digits across the nation, with no bottom in sight. And credit is a lot harder to come by today ~~~~~ with charts
The rubbish will soon be piling up on your doorstep
Independent: Britain is facing return of three-day week
The prospect of the three-day week returned to haunt Britain yesterday as it emerged that ministers are considering paying firms to cut hours in order to survive the recession.
Ministers impose huge rise in court fees for those on brink of bankruptcy.
Independent: 'Stealth tax' on recession victims
Ministers were accused last night of profiteering from the soaring numbers of people facing bankruptcy after they announced huge increases in fees at debtors' courts. Charges are to rise by up to 233 per cent for debt proceedings from next May, affecting hundreds of thousands of people who plunge into the red. The move, which has been branded a stealth tax on those least able to pay, comes as a survey by The Independent reveals the depth of Britain's debt problem ~~~~~~~~~~~~~~~~~ forget re-arranging the deck chairs let's just tie their arms behind their backs and throw them in the water
Beckett Bashing
News of the World: House slump beats wages
FAMILIES are losing more money on their homes each week than they are earning in their wages, new figures reveal.
Worth a read but not very accurate.
Guardian: Q&A: How much does Britain actually owe?
A few things missed of the debt pile is PFI and Public Sector Pensions.
Nice to know that the private sector is so generous with it's money!!
Daily Telegraph: £35 billion black hole in council pensions
Do you wonder why councils are really cutting the number of rubbish collections? Well it's so they can save the money for their pension!
Britain was just three hours away from going bust last year after a secret run on the banks, one of
mail: Revealed: Day the banks were just three hours from collapse
City Minister Paul Myners disclosed that on Friday, October 10, the country was 'very close' to a complete banking collapse after 'major depositors' attempted to withdraw their money en masse
Saturday, January 24, 2009
THE government’s hospital building programme faces a “capital desert”
Times: Hospital building programmes face axe
Looks like the governments much trumpeted keynesian spending plans are going down the toilet as both they and their pet PFI programme run out of easy money. 'PFI’s have always been the NHS’s ‘Plan A’; for building new hospitals, especially as they used to be off-balance sheet. There was never a ‘Plan B’. Now none of the banks have any money or are likely to have any for a few years, the absence of a ‘Plan B’ is going to cause a real problem in taking new hospitals to conclusion.'
Reality is beginning to dawn
timesonline: When is the right time to get back on the property ladder?
"Capital Economics, the consultancy, does not expect prices to recover to 2007 levels until 2032."....properly bearish.
Haven't heard from the Comedy Club in a while
Assetz: Why You Have Missed the Boat If You Wait to Buy Property When the House Price Indices Are Going up
It's quite common to hear property buyers and investors say they're waiting until house prices fall further before they buy. Our view is for a 0-10% fall in prices over 2009. For the professional investor or savvy homebuyer doing deals with sellers, the best prices you'll get are when sentiment is at its worst when people believe the world is terrible and there is no solution. Right now we have quite possibly just passed the worst possible moment in the property market when it comes to achieving the best possible prices. We are seeing signs that the distressed property market is beginning to turn up. People in the know start to buy first before very obvious indicators say that the time is right. Act like a professional investor with a mind of your own, not just listening to the herd.
Currency Wars
Reuters: China hits back at U.S. in currency row
China's central bank on Saturday said U.S. accusations that it was manipulating the yuan currency were misleading, a day after Beijing cautioned incoming Secretary of State Hillary Clinton to handle their ties with care. The remarks from Su Ning, a vice governor of the People's Bank of China, were the bank's first public reaction to comments from U.S. Treasury Secretary-designate Timothy Geithner, who said this week that Beijing was manipulating its currency exchange policies to gain an unfair trade advantage.
Minister throws toys out of pram
BBC News: Minister attacks banking bosses
According to Lord Myners, Banks and their "grossly over-rewarded" executives are partly to blame for causing the economic recession and added "I have met more masters of the universe than I would like to, people who were grossly over-rewarded and did not recognise that." The Brown government countered his comments with 'these were Lord Myners' private views, and were not the words of the chancellor or Treasury'.
Bankers really don't know what they're doing
Guardian: Bankers lead way through the trap door
"This week's eye-catching example was Frits Seegers, head of Barclays' retail division, who revealed that he did not simply dip into his savings to buy £1m of shares in the bank in August 2007 - he borrowed the money to do so, using the Barclays shares that he already owned as security. Those shares are now worth 90% less than they were."
How much worse can it get?
MoneyWeek: How much worse can it get?
"The risk is that we, and in particular our children, get saddled with well over £1 trillion of national debt without any real benefit to show for it – unless of course, so much new money is printed that we end up with inflation making a comeback in a few years time."
Summary of today's BTL market
Motley Fool: Buy-To-Let Mortgages In 2009
"Two years ago a lender would offer you a deal if your expected rental income (as determined by a valuer) covered 110% of your monthly mortgage repayments. Now this has risen to an average of 125% or 130%. And many of the lenders which had reduced the buffer you needed on rental income have gone bust." Bust, you say? On a property investment? Surely not!
Matthew Parris says: we were living beyond our means and must now reduce our expectations.
The Times: There's no new motor to drive the economy
The coming nonsense is that when this recession is over, countries such as Britain should seek and find our salvation in (in what will become a buzz phrase of 2009-10) a “new economic model”. Wrong. Actually we're just stuffed. We hit a tree. There is no replacement economic model for us to drive off in. We must bash out the dents, clear the broken glass, remove the bumper from the front wheel, and limp on as best we can. We should accommodate ourselves to that prospect.
Electricity demand falls as economy slows at fastest rate since 1980
Guardian: Lights go out across Britain as recession hits home
While official figures showed the economy contracting at its fastest since 1980, National Grid said demand for electricity had fallen over Christmas at homes and factories across the land, and Poland confirmed that thousands of its citizens were coming home from Britain and Ireland. Poland's treasury minister Aleksander Grad told the Guardian that the economy there, unlike Britain's, would avoid recession. Poland's banks had been regulated tightly and had not got into the toxic derivative products that have brought down banks around the world, said Grad
Off Topic - info for HPC regulars who have switched to cash during market uncertainty
Moneymarketing: Standard's pension sterling fund invested more in sub-prime than cash
Standard Life’s Pension Sterling Fund has a higher weighting in sub-prime mortgage backed securities than it does cash, it has emerged. Despite being promoted as a home for investors’ money “when the short-term outlook for equities, fixed-interest securities and property is uncertain”, the fund has 13 per cent invested in “non-conforming residential mortgage-backed securities”, while only 12 per cent in cash. The insurer has been bombarded with complaints from both advisers and investors after it performed a shock revaluation, which saw nearly 5 per cent wiped off the value of its Pension Sterling Fund.
Why FTBs should watch and wait
Daily Express: RENT 'CHEAPER FOR FIRST-TIME BUYER'
It is still cheaper for first-time buyers to rent a home than buy one, despite house prices falling by 16% in the past year, according to a study. Houses prices are at their lowest level for five years, relative to income, but the high mortgage rates levied on first-time buyers continue to price them out of the market, according to propertyfinder.com.
Foreign bankers took advantage of lax UK rules - now UK taxpayer is saddled with massive losses
money morning: Great Britain - The “Rust Belt” of Global Finance
''Because of the importance of Britain’s financial sector, its bank bailouts need to be nearly as large as those in the United States, yet its tax base is only one quarter the size.''
Free money for everyone!
Times: Taro Aso gives Japanese £100 each to stimulate economy
Japanese Prime Minister Taro Aso believes that he has hit upon a scheme that will solve the crisis in an orgy of consumer spending. The move, which he has described as “the best economic measure of all”, involves a handout of at least 12,000 yen (£100) to every citizen over the age of 18. The scheme, however, has plenty of doubters. The problem is not that the Japanese do not have cash, but that they are too scared to spend it. Indeed, Japanese households are already sitting on net cash savings of Y778 trillion (£6.5 trillion).
What a refreshing change
Times: Why househunters need not hurry
Three principal factors influence the short-term direction of house prices: the supply of mortgages, the level of employment and market confidence. A quick examination of each factor suggests that we are still a long way off the bottom. Falling house prices are now firmly entrenched in homebuyers' psyche, increasing the chances of a destructive downward spiral. When prices are falling, there is an incentive for buyers to delay purchasing. This resulting fall in demand forces vendors who need a sale to cut prices further, but this only encourages buyers to delay further, and so the cycle continues. Nobody ever rings a bell at the bottom of the market, but it seems a safe bet that buyers are not going to be in a worse position in six months to a year's time.
Friday, January 23, 2009
Britain is heading for economic depression for the first time since the 1930s
Telegraph: Britain on the brink of an economic depression, say experts
Families must brace themselves for a slump of far greater severity and longevity than the recessions of the 1980s and 1990s, they warned. They said the current crisis will be of a scale to rival the biggest peace-time crisis in modern history — the Great Depression.
FSA and Government on collision course
guardian.co.uk: Hedge fund made millions betting on Barclays crash
One of London's most successful hedge funds has made £12m in just four days by betting on a fall in the Barclays share price, a move that will heighten the controversy over so-called short-selling strategies. Lansdowne Partners, which also profited from the fall in the share price of Northern Rock at the height of its problems, sold Barclays shares last Friday - when the bank lost almost a quarter of its value in frenzied trading - and bought them back again on Wednesday after they had fallen by almost £1. Probably more to do with government failure to disclose liability details than blaming hedge funds who take advantage of this fact.
The pound will bounce back
QCK Finance News: Pound sterling will rise say Goldman Sachs
The economic situation in the United Kingdom is being portrayed as being in a worse situation than it really is, according to Goldman Sachs, who say that they are accordingly bullish on the pound and on gilts.
AWorst-case trade scenario: five years of no growth
australian: AUSTRALIA is staring down the barrel of its worst export slump in 50 years.
It poses a bigger shock to the nation's terms of trade than at any time since the 1997-98 Asian crisis.
Cavalry to Rescue - Again
BBC: Obama says stimulus deal on track
President Barack Obama has said that Congress is on target to approve his planned $825bn (£608bn) economic stimulus package by 16 February.
The Changing Face of the High Street
The Guardian: The Story of a High Street
Experts say that 1 in 10 high street shops will be out of business by the end of February 2009 and 1 in 6 will close by the end of the year. High Street mainstays such as Clinton Cards may look healthy on the surface but belies the fact that, having made a £13m annual loss, the chain is having to close shops across the country. Many of the smaller card shops are already insolvent. Currys and PC World are teetering on the verge of share meltdown and Marks & Spencers under-performed during the weeks leading up to Christmas. In capitalist terms, we are indeed entering a brave new world.
Gold stays solid as currencies soften
MoneyWeek: Gold stays solid as currencies soften
In the current economic slump, no country wants a strong currency. Every central bank may be tempted to inflate away their debt. That's good news for gold, the ultimate store of value.
Iceland’s prime minister resigns
FT.com: Iceland’s prime minister resigns
Iceland’s prime minister resigns
HPC blog makes it into the top 20 personal finance blogs!
Times Online: The 20 best British personal finance blogs
With Britain officially entering recession today, there's never been a more crucial time to micro-manage your finances. Every day it seems there is a fresh news of job losses and stocks crashing through the floor. Whether you are worried about losing your job or the state of your pension, preparation is the key to weathering the storm. So Money Central has scoured the web to bring you a round-up of what we think are the best British personal finance blogs - let us know if we've missed your favourites and we'll add them to the list:.
What sterling has going for it
FT Alphaville: In defence of sterling
According to the IMF, sterling is still the third most popular global currency reserve...The point being, a sterling crash would be equivalent to Lehman times 10 as far as contagion for global markets go. It cannot just crash and disappear like Lehman - that would be in no-one’s interest...the UK government enjoys one significant benefit to say currency crisis countries like Russia and Argentina - the vast majority of its debt is denominated in GBP...The UK is among the leading exporters of manufactured goods in the world. Germany and China, of course, are way out in front. Then comes the USA, followed by Japan. But in fifth, sixth and seventh places, in a tight group, are the UK, France and Italy...
Is Obama's judgement in question here?
Fox News: We Can't Trust Timothy Geithner
Banks and politicians trust him. And maybe at this point in our country's history, that's why we shouldn't. In a country where thousands of people are losing their jobs, we are promoting a guy who has made three major errors in judgment, any one of which would have put you or me in the unemployment line.
Market disruptions ahead
FT: Short View: Currency interventions
John Authers's thoughts on forex manipulation. Very interesting in the context of the currency discussions here. A bit dry but I know you love it.
Our Exports are not that shabby Mr Rogers
FT Alphaville: Dear Mr Rogers…
Letter from David Simmonds of RBS. "Dear Mr Rogers, We followed with interest this week’s media scrum around your Armageddon-esque vision of Britain.... Your contention that the UK has nothing to sell also seems exaggerated judging by the data. UK exports form a rising share of output, reaching almost 30% of GDP in 2006-07 from an average of 11% in the 1960s, 15% in the 1970s and 17½% in the 1980s (Chart 3). The related argument that the UK no longer has any sort of manufacturing sector is similarly open to challenge. As with most developed economies, manufacturing is shrinking as a share of GDP but – even in the UK – is still larger than the financial intermediation sector. "
We can't get out of debt without structural reform
CynicusEconomicus: The importance of the ability to service debt
Another post from this blog. The argument being that long term the UK cannot repay the debts. Jobs come from debt/savings shrinking or increasing or just churning(healthy). However, in a period of excessive debt from say, speculative bubbles, how would the debt/savings be run down. His point is that the UK, and hence the debtors in the UK, don't make anything and so are unable to repay debts irrespective of increased borrowing from government, his argument being that increased government debt just makes things worse. So, basically rather than UK savers paying UK debtors and allowing them to work it off, the only way they can spend their money is on real goods/production which pretty much mainly come from abroad...(continued..)
Its now the wrong type of recession
The Times: UK recession unlike any other, says Gordon Brown
""This is a completely different type of event, as everyone recognises." Mr Brown declined to detail the level of taxpayers' exposure to the financial crisis through the multibillion pound schemes to bail out the banking sector, despite a call from the Treasury Select Committee for the Government to come clean.
What Porsche's profits tell us about the financial crisis
MoneyWeek: What Porsche's profits tell us about the financial crisis
Porsche made more money in 2008 from stock market trading than it did making cars. It's a good illustration of why we're in such a mess now. We all became too focused on making money from financial wizardry than from doing what we were good at.
If Gordon Brown is so determined to spend our cash, let's at least have some fun giving it to him!
BailoutBrown.com: BailoutBrown.com
The British banking system, like the banking system across the globe, is inherently broken. That much is obvious. As with any problem, especially one so complex, on such a great scale and with so much depending on the outcome, there are a number of ways of fixing it. However, the decisions the UK government is taking to get us out of this mess involve some gigantic, almost inconceivable sums, and we feel that the government hasn't put the figures in the public domain in a clear, easy to understand format.
The great ship that is Britain.
Telegraph: Brown's rescue ship is heading for the rocks
"What should be a well-constructed bailout is being undermined by government confusion and short-termism" Another article that starts off well but sadly misses the point. It's not about trying to repair the current system that should be the issue as the current system is the cause of all our problems. The only answer is something new and fair.
Heartwarming attack on the banks
Telegraph: Financial crisis: It's impossible to get any hard facts and figures from British banks
"...the juxtaposition of "reputable" and "banks" forms a glaring oxymoron."
Corruption of the highest level.
Telegraph: Northern Rock may get £10bn from government to increase mortgage lending
The Treasury has yet to make a final decision on its plan for Northern Rock, but there are growing expectations in the City that the Government is planning a more radical capital injection than previously thought. The move would represent a reversal on the policy of shrinking the nationalised lender as quickly as possible so that it could repay the Government's £27bn loan. As part of the repayment efforts, the bank is currently making 2,000 employees redundant.
Incompetence? NO! Corruption? YES!
Telegraph: UK recession: Gordon Brown admits he failed to see economic crisis
He said that despite warning about the possibility of some breakdown in the markets it was impossible to predict over the past 10 years that they would seize up totally. The Prime Minister refused to admit that Britain was living through "a bust" and repeatedly failed to say that in fact he had not abolished "boom and bust" - an achievement he often claimed while he was Chancellor. Mr Brown said that previously the whole of economic policy had been focussed on "how to control inflation". The Government had recognised there had been a danger of "institutional failure in the banking system" and acted to bolster national regulation, he insisted.
Can an interest rate of zero be too high?
MSNBC Business WWeek: Even zero isn't low enough to boost economy, Goldman Sachs study says
Can an interest rate of zero be too high? Unfortunately, yes. A new analysis by Goldman Sachs concludes that the Federal Reserve's cut in the federal funds rate to a record low of zero to 0.25 percent on Dec. 16 isn't going to be nearly enough to get the economy going again. The report says the Fed would need to reduce the federal funds rate to negative 6 percent by the end of 2010 to supply the needed amount of monetary stimulus.
Third bailout necessary
Telegraph: Barclays, RBS and Lloyds need £80bn more in capital, analyst warns
The warning will fuel fears that Royal Bank of Scotland, Lloyds Banking Group and Barclays may be fully nationalised, coming after a week in which share prices in all three banks have more than halved. Nomura added that the latest Government bail-out measures "do not change the key issue of the unknown and potentially unlimited losses of the banking system, and therefore whether it will ultimately require further capital injections".
second stage of the real estate bust is about to hit US
CP Newsletter: Another Real Estate Crisis is About to Hit
The 1,120,000 lost US retail jobs in 2008 are a signal that the second stage of the real estate bust is about to hit the economy. This time it will be commercial real estate--shopping malls, strip malls, warehouses, and office buildings. As businesses close and rents decline, the ability to service the mortgages on the over-built commercial real estate disappears.
The latest spin on BTL lending
Citywire: Buy-to-let lending not doing as badly as the rest
Buy-to-let lending volumes held up better those for the housing market in general, the City regulator reported today, although it said that this changed in the third quarter of last year.The Financial Services Authority (FSA), which pulls together figures from all regulated lenders, said that new lending in general showed continuous weakening, having declined by 59% since its peak in the third quarter of 2007. On the other hand, it said lending for buy-to-let had been ‘more stable’, accounting for 11 to 12% of overall residential lending since the second quarter of 2007 even though actual volumes were in decline over the same period.
It's official -where are Gordon's sound fundamentals now?
BBC: UK in recession as economy slides
The UK is officially in recession for the first time since the early 1990s, government figures have confirmed. Gross domestic product fell by 1.5% in 2008's final quarter, following on from a 0.6% contraction in the previous three months. That means that the widely accepted definition of a recession - two consecutive quarters of falling economic growth - has been met. It also represents the biggest quarter-on-quarter decline since 1980.
historic declines in housing prices, growing job loss - these negative trends are accelerating
Bloomberg: Housing Prices, Starts Tumble at Record Pace in U.S. Recession
Jan. 22 (Bloomberg) -- Home prices in the U.S. dropped the most in at least 18 years and builders broke ground on the fewest houses since record-keeping began as the recession deepened, government reports said today. Record foreclosures and the highest jobless claims in 26 years are dragging down home prices as the economy enters the second year of a recession.
"Then you will see the return of what happened under Labour in the 1970s, including emergency cuts t
telegraph: David Cameron warned that Britain may go bankrupt and have to ask the International Monetary Fund for a bail-out because of the government's "irresponsible" handling of the economic crisis.
Jim Callaghan went cap in hand to the IMF to save the pound in 1976, with the Labour government forced slash spending as a condition of the emergency loan.
Sorry, another currency story, but it's a good one
Telegraph: What's wrong with Sterling?
How bad is this fall in the pound? In a word: hideous. Measured against a basket of other currencies the pound has fallen by a quarter over the past year This is more than any previous devaluation in the past century. Greater even than in 1931 when the UK was forced to abandon the gold standard and saw the pound plummet by more than 24 per cent against the dollar. Greater than after Black Wednesday and the abandonment of the Exchange Rate Mechanism. Greater than 1967, when Harold Wilson was forced to make an extraordinary televised statement to the nation claiming that the "pound in your pocket" would not be worth any less after his devaluation.
Thursday, January 22, 2009
Don't take it personally, it's a global problem.
FDR: The New Millionaire Lifestyle
Once considered unthinkable, many banks have decided to check their reputations at the door and beat a path to the lender of last resort, in a desperate gambit to survive:Once considered unthinkable, many banks have decided to check their reputations at the door and beat a path to the lender of last resort, in a desperate gambit to survive...
El Gordo tries to Save the UK and the World (again).
Reuters: UK may inject 10 bln pounds into Northern Rock-report
Gordon Brown is considering injecting 10 billion pounds into Northern Rock to use the nationalised bank to ramp mortgage lending levels.
The latest plan being hatched to prop up the BTL market
Moneymarketing: Lenders set to be landlords to curb repos
Lenders are likely to become landlords by buying up distressed properties in an attempt to halt repossessions and stop house prices falling, according to leading valuations firm eSurv. Director of business development Richard Sexton says a number of lenders are close to launching such a proposal particularly, but not exclusively, with buy-to-let mortgages. Sexton says: "A number of lenders are considering creating extra company vehicles which will purchase repossessed stock and manage them as rental portfolios until such time as the market allows for a disposal at a better price and offering finance against repossession stock to improve marketability.
Recurrent theme
Mish: Pound Sinks As Britain Teeters On Edge Of Bankruptcy
The British Pound has imploded on fears of bank nationalization and Prime Minister Gordon Brown’s plan to give the Bank of England unprecedented powers to buy securities.
The Tories warned that the soaring number of repossessions is only 'the tip of the iceberg'.
mail: One family kicked out of their home every 10 minutes as repossessions rocket 92%
The economic crisis has got dramatically worse since September, which means even more families will now be losing their battle to keep their home.
One For the Anarcho-Syndicalists Amongst Us
Times Online: Squatters Move Into Park Lane Mansions
A group of artist / activist squatters have moved in to occupy two houses in Park Lane that belong to Britain's richest landowner, the Duke of Westminster. This is like a flashback to the early '80s anarchist / punk movement - thought it might evoke some memories for the oldies on here. The activists make a good point about the absurdity of property left vacant by the richest people in the country, another sign that the property market is anything but free.
BBC can finally use the R word instead of 'the downturn'
Telegraph: UK recession: It's (almost) official
Figures published on Friday will provide official confirmation that the UK is in recession for the first time since the early 1990s. Analysts expect the economy to have shrunk a dramatic 1.2pc in the final three months of the year after contracting 0.6pc in the previous quarter. The collapse in house prices and crisis in the banking sector has driven the economy into what many experts now predict will be the worst recession since World War Two.
Selling off all our council housing maybe not such a good idea after all
24dash: Council Housing waiting list hits 1.77m
The number of households on local authority housing waiting lists hit 1.77 million, official statistics from the DCLG showed today. The figures are from April 2008, before the recession took hold. Council chiefs said pressure on councils was mounting as the credit crunch led to rapidly-spiralling repossession rates and called for more money to build homes. The Local Government Association said one family in every 12 is now on a council waiting list and the proportion will rise as people losing their jobs can no longer afford to maintain mortgage payments. Paul Bettison, the association's housing chairman, called for the ability to borrow off council assets to buy new homes. The DCLG said the council waiting list is not an accurate guide to the number of families in urgent housing need.
Has greedy John Varley unwittingly sold a majority stake in Barclays for a song?
Evening Standard: Is this the man who sold Barclays down the river?
While Barclays' main British rivals, Royal Bank of Scotland, HBOS and Lloyds TSB, were forced to go begging to the British Government for assistance, Barclays persuaded the royal families of Abu Dhabi and Qatar, and the sovereign wealth fund of Qatar, to stump up £7 billion. They agreed to wait seven months for conversion to shares at a price of 153p. However, if at any time before 30 June, Barclays raises more money at a lower price, the Arabs can exchange their notes. As Barclays shares have since slumped to 66p, they could almost triple their holding - which would give them around 55 per cent of the British bank. For Barclays, the UK provides more than 50 per cent of its earnings. The rapidly weakening UK economy has made its condition even more fragile.
Next year it will be double again
BBC: Home possessions 'almost double'
The number of people losing their homes after failing to meet their mortgage repayments has almost doubled, the UK's financial watchdog has said. The number of possession orders granted by courts in the third quarter of 2008 was 13,161, up 92% from a year earlier.
Will somebody tell this horrible person to stop writing sensible articles!
John Redwood: Why RBS shares fell
There are still people clinging to the absurd notion that RBS shares have been falling again because the ban on short selling was removed. Figures released show that no short positons were opened against RBS in the first three days after the lifting of the ban, yet the shares plunged downwards. The reason RBS shares have plunged again is primarily the company’s release of estimated figures for 2008. These showed an estimated loss of £8 billion, coupled with “impairment charges” (losses or write offs to anyone else) of £15-20billion! In other words the City forecast I have been using here for sometime of around £28billion of total losses gave people a good guide to the magnitude of their problems.
Lean times for the Celtic tiger
MoneyWeek: Lean times for the Celtic tiger
Investors are getting jittery about the possibility of European governments defaulting on their debts. Could Ireland be the first - and could the eurozone break up?
Oh dear
FT: Sony mega revision
Good job Sony doesn’t major in calculators. On Thursday the Japanese electronics and entertainment conglomerate said its annual operating profit forecast – made just three months ago – was out by a whopping $5bn. The new forecast is for an operating loss of nearly $3bn in the year to March. This implies a $3.6bn loss in the fourth quarter, suggesting the company is bleeding about $40m a day. Perhaps they simply got the decimal point in the wrong place. Easily done when you are dealing with millions, billions and trillions! Just as the BBC who regularly make this mistake, reporting billions as millions.
Optimism from the Independent
Independent: Jeremy Warner: It's grim but is the UK really "finished"?
While Jim Rogers talks his loud American talk, Jeremy Warner is more sensible
Bailouts rise from: £2 billion in September 2007 to today's £1 trillion
Market Oracle: British Pound Panic Selling, Counting Down to Bankrupt Britain
The British Pound continued to plunge to new lows in response to the latest step taken by Gordon Brown in effectively bankrupting Britain to win the next election, which is to under-write the toxic bad debts with an another tax payer down payment of £200 billion. As you can see we have come a long way from £2 billion in September 2007 (Northern Rock) to today's £1 trillion, a truly huge number that amounts to £34,000 per UK tax payer, how much will it cost Britain to service such a liability? This is still but the early stages of Britain's road to bankruptcy and currency collapse as my earlier analysis pointed out in November 2008
The FSA has faith in Darling.......NOT!!!!!
The Guardian: Darling kept in dark as FSA lifted ban on short-selling
"A rift has opened up between the government and the financial authorities after a furious Alistair Darling was kept in the dark over the lifting of the ban on short-selling, which may have contributed to this week's tumultuous crash in the value of banking shares."................Cant the man take a hint?
Good Summation of Brown's Economic 'Miracle'
New York Times: Falling Pound Raises Fears of Stagnation
Good article from the NY Times comparing the UK to Iceland and describing the unsustainable boom in the UK that led to bust: "Even more than their American counterparts, borrowers in Britain turned to local banks to fuel a real estate boom that was as much a national pastime as a rational decision about what to buy. Household debt as a percentage of disposable income hit 177 percent in 2007, compared with 141 percent in the United States."
Busted businesses
Business Receivership Database: Latest Businesses in Administration
This list highlights the enormity of the financial situation as hundreds of businesses are shown to have thrown in the towel in the last two months (from 23 November 08). Surprisingly though, only two Estate Agents are on the list.
Does this epitomise how far we've all departed from reality?
BBC News: Fast bucks: how Porsche made billions
"Porsche is world famous for its iconic sports cars. But car manufacturing isn't the only thing the company is good at. Last year it made six times as much on the stock market as it did making cars. Industry insiders are only half joking when they call it a hedge fund with a carmaker attached. Porsche says its stock market trades are only for one reason: to take it towards its long term goal, the takeover of car making giant, Volkswagen." Off topic I know, but how many would lose their jobs if this gamble went wrong? Whether it's by talentless celebrity, BTL or stock market gambling, will this maximum money by minimum effort obsession ruin us? Who will actually invent or make stuff
Wednesday, January 21, 2009
China’s official urban unemployment rate jumped for the first time since 2003 and may climb to an al
bloomberg: China Faces Worst Unemployment in Decades as Slowdown Deepens
“Growth has fallen off a cliff in China in recent months,” said Paul Cavey, chief China economist at Macquarie Securities Ltd. in Hong Kong. “It does already feel like a recession for a lot of people.”
Yesterday BHP Billiton became the Government's biggest headache, announcing a 6000-person culling of
smh: The big cull: Rudd faces his worst nightmare
Now the two big factors standing between us and the recession-stricken overseas economies has been a stronger financial system and high employment. The economy has held up in the face of falling property and share markets but if unemployment takes a grip the effects quickly infect the wider economy.
Germany is facing a deep recession in 2009, according to a report from the German government
cnbc: Germany Heading for Deep Recession
Germany is facing a deep recession in 2009, according to a report from the German government Wednesday. Norbert Walter from Deutsche Bank has the details.
Consolidation in everything is more or less a given. Or is this just conspiracy nonsense?
Telegraph: Fundamentalist View: 'There will be only two London-listed banks left by the end of 2009'
But the government is now the largest, or only, shareholder in Lloyds/HBOS, RBS and Northern Rock and it seems highly likely that HSBC and Standard Chartered will be the only UK-quoted bank shares by the end of 2009. Even in these tough markets, however, it is worthwhile to continue to think about the need for long-term, inflation-beating investments to fund or supplement retirement. UK equities can do this over the long term because gross domestic product (GDP) – a measure of economic output – growth will return and plenty of companies are in decent shape to benefit from this.
The Underlying value in Currency - Why the pound is falling
CynicusEconomicus: The Underlying value in Currency - Why the pound is falling.
Just found this blog with excellent articles. I post this one but the others are good too. To summarise, the pound is on the way down for good and we are doomed. Probably best to read it yourself. Not on this article but another one, he insists that wealth is moved out of the country by returning immigrants, which I disagree with. The only end use of sterling is to purchase goods in the UK, whether it is temporarily moved out of the country or not doesn't matter. But certainly wealth has moved out in that we have large debts abroad. Anyway, lots of different articles, well written, well worth a read. I agree with his opinion that the pound is on a permanent move downwards.
Go on, treat yourself to some gilts
Bloomberg News: Goldman Sachs Says ‘Stick to Guns,’ Bet Pound to Rise
Investors should keep betting the British pound and gilts will rise because the country’s economic slump is being overplayed, according to Goldman Sachs Group Inc.
Bonuses at the Crock
BBC: Rock staff bonus 'indefensible'
"The decision to award most staff at nationalised bank Northern Rock a 10% bonus is "indefensible", the Liberal Democrats have said. Treasury spokesman Vince Cable said: "This is bringing the worst of the City bonus culture into a public body." "
What every Brit has sadly known for years
FT: Jim Rogers: ‘UK has nothing to sell’
“It’s simple, the UK has nothing to sell.” Mr Rogers says the two main pillars of support for sterling have been North Sea oil and the strength of the UK financial services sector, in particular, the City of London’s role.
Rightmove should debate with Michael Hughes!
BBC News: What happens when the dust settles?
Tend to agree with Michael - the end of the shadow banking system with its levered stack of mortgage back securities, and the introduction of curbs on short term bonuses for bank staff mean the mortgage market has changed forever.
Not really news...
Marketwatch: Gordon Brown turns from hero to goat
But nice to see the world waking up to the reality that Gordon is a Moron.
Overview of global complexities facing new president
Guardian: Obama needs to act fast - but America's problems won't be solved overnight
Covers several nasty potential consequences around the world of the current economic mess.
sorry could not help it......
Fair Investment: House prices could start rising again by the end of 2009
"...Because the number of new sellers has halved as the level of new enquiries has doubled, Rightmove.co.uk predicts that the UK property market is now within eight per cent of the lowest it will go and will therefore soon bottom out, as supply and demand runs its course and pushes prices back up again by the time 2010 is rung in..." With this kinda logic, I am sure we already missed the boat folks.....
Big law firms are feeling crunch pangs
The Lawyer: UK 200 Total Redundancies: 2157
The top 200 Law Firms in the UK have so far provided P45s to 2,157 staff. Most of these have come from Clifford Chance although Hammonds conveyancing arm has recently gone into administration, possibly resulting in thousands of other redundancies.
That "New Bank" plan is starting to take shape...
The Metro: Britannia and Co-operative to merge
The "New Bank" plan is basically instead of shifting all the rubbish to a new bad bank at taxpayers' expense, a new or existing smaller bank starts from scratch, takes everybody's deposits at slightly higher interest rates than averybody else, then offers remortgages to good risks (< 60% LTV, < three-times-earnings, good credit history etc) at slightly better rates than everybody else. I've looked at their balance sheets for 2007 and they both seem very dull and sensible, no fancy inter-bank mortgage backed nonsense. So now they have decided to go for 'critical mass'.
Or ... Banks hit further as pound slides
BBC 'News': Pound slides further as banks hit
This is a classic case of uneducated meeja muddling up cause and effect; bank stocks are taking a hammering because the size of the banks internationally-held debts are increasing relative to GBP. So the sliding pound is the cause of the banks problems, not an effect. Years ago when seeking to abolish student grants, Mrs Thatcher used a similar argument - "A University education leads to higher earning potential". This was missing the point that the two were completely unrelated. Smart people earn more, and smart people tend to go to University. The causal link is absent though.
Well I never
BBC: Mortgages 'fell by 30% in 2008'
UK mortgage lending fell by 30% in 2008 to the lowest level since 2002, according to the Council of Mortgage Lenders (CML). Lending totalled £256.4bn last year, compared with £363.7bn in 2007. And mortgage lending fell in December to the lowest monthly level since April 2001, the CML added.
8 to 1 vote, so who was the one?
BBC: Bank voted 8-1 to cut UK's rate
The Bank of England's rate-setting body voted 8-1 to cut rates to 1.5% from 2% this month, minutes from its meeting have revealed. Earlier in January the Bank of England cut interest rates to their lowest level in its 315-year history.
Quick, we need another initiative from GB
BBC: UK unemployment rises by 131,000
Employment minister Tony McNulty said the figures were "very disappointing" and predicted things would "get worse before they get better".
Expect a rise in gold....
Times: Mervyn King paves way to start Bank print presses
''The Bank of England's Governor paved the way last night to unleash the weapon of “printing money” in a last-ditch drive to combat the rapidly deepening recession. Mervyn King braced Britain for a further sharp slump and a “difficult year for all of us”, and laid the groundwork for the Bank to turn to “unconventional measures” as interest rates fall towards zero.''
Great British Kroner is a goner
Daily Telegraph: Seriously Alarmed
The slide in sterling has turned "disorderly". We can argue over whether or not the first phase of devaluation acted as a shock-absorber for the economy, providing a cushion against debt deflation and the housing crash. But the latest dive has a very malign feel. For the first time since this crisis began eighteen months ago, I am seriously worried that British government is losing control. The currency has fallen five cents today to $1.39 against the dollar. The danger is blindingly obvious. The $4.4 trillion of foreign liabilities accumulated by UK banks and guaranteed by the government are twice the size of the British economy. We have only £0.06 trillion in foreign reserves. There is a real risk that Britain may have to default on its debts for the first time since the Middle Ages
Britain doesn't have the luxury of Iceland's "solution"
Telegraph: UK cannot take Iceland's soft option
"The British government faces an excruciating choice. It cannot let Royal Bank of Scotland and its fellow mega-banks go to the wall. Yet it risks being swamped by the massive foreign debts of these lenders if it takes on their dollar, euro and yen exposure by opting for full nationalisation. The parallels with Iceland are disturbing. But Iceland at least had the luxury of letting banks default – shifting losses on to the rest of the world. It refused to honour foreign debts. The UK cannot go down that route because it would set off an asset price death spiral. So whatever the temptations, Chancellor Alistair Darling cannot copy Iceland."
Sterling on an inexorable slide ?
DAILY WAIL: STERLING FINISHED ACCORDING TO SOROS PARTNER
Sterling plunged to a seven-year low against the dollar today as one of the world's top investors warned the currency was 'finished'. The pound fell more than two cents to hit a low of $1.3965 as traders reacted to the Government's latest multi billion-pound bailout of the banking system. It is the first time sterling has dropped below $1.40 since mid-2001 and is on track for its biggest one-day percentage fall against the dollar since late 1992.
Tuesday, January 20, 2009
Roubini: formerly left field, now mainstream
Telegraph: US banking system effectively insolvent
Losses in the US financial system may reach $3.6 trillion (£2.6 trillion) before the credit crisis is over, suggesting the country's banks are "effectively insolvent", according to the man who predicted the current economic meltdown.
Merve the Swerve Goes Large
SKY: Bank Chief Admits Policy Failure
Britain's economic policy failed to stop the recession, the governor of the Bank of England has admitted!
How safe is my money in RBS?
telegraph: After yesterday's upheaval in the markets, savers with RBS would have every right to feel a little jittery about their money this morning.
After yesterday's upheaval in the markets, savers with RBS would have every right to feel a little jittery about their money this morning.
''Gordon Brown....is fighting to avoid going down in history disgraced completely''
Telegraph: Gordon Brown brings Britain to the edge of bankruptcy
'This catastrophe happened on GB's watch, no matter how much he now opportunistically beats up on bankers. He turned on the fountain of cheap money and encouraged the country to swim in it. House prices rose, debt went through the roof and the illusion won elections. Throughout, Brown boasted of the beauty of his regulatory structure, when those in charge of it were failing to ask the most basic questions of financial institutions. The same bankers Brown now claims to be angry with, he once wooed, travelling to the City to give speeches praising their "financial innovation".'
NAEA calls for effective market reform
mortgagestrategy: NAEA calls for effective market reform
Peter Bolton King, chief executive of the National Association of Estate Agents, says: “For years, the National Association of Estate Agents has been calling for an appropriate level of regulation to be introduced as mandatory in the UK housing market. “I would like to reassure all of the hardworking and reputable estate agents in the industry, as well as the thousands of people considering getting onto the property ladder, that the NAEA will fight to ensure that any reform to the industry is effective." "hardworking and reputable" ??????
HBOS sued by homeowners over shared appreciation mortgages
Times Online: Barclays, HBOS sued by homeowners over shared appreciation mortgages
A group of homeowners who claim they were sold unfair shared appreciation mortgages took the first step towards suing their lenders today.
Worthless house price survey of the day
Primelocation [pdf]: London prices up 0.55% MoM, 3.8% YoY
Asking prices in Prime London areas rose by 0.55% (£7,001) in December, the second successive month of rising values, and are now 3.8% higher than in December 2007, according to Primelocation.com's latest House Price Index. Andrew Smith, Primelocation.com's Head of Insight, comments: "Over the past couple of months prime agents have reported a modest upturn in activity, a trend which can be attributed to the impact of falling prices, lower interest rates and a rise in demand from overseas buyers attracted by the dip in the value of Sterling. This explains the recent stabilisation in asking prices and provides tentative evidence that we are beginning to approach the bottom of the market."
had to post this, imagine an estate agent as a bouncer!!!
cnn: From broker to bartender
In fact, many of the bartenders, bouncers and servers employed at Mash's clubs are out-of-work mortgage brokers, loan officers and real estate brokers, he said.
Cpi 3.1% Rpi 0.9%
FT: Inflation falls by less than expected
UK inflation fell in December by the most since 1992, although still came in higher than expected. CPI fell from 4.1% to 3.1%, higher than the estimated 2.7% consensus from economists. RPI, which is often used to set wages and benefits, had a big fall from 3% to 0.9%
More toxic debt
The Wall Street Journal: U.K. Home Prices Forecast to Drop 45% from Peak
Analyst reports issued by Morgan Stanley and Royal Bank of Scotland Group PLC last week each said derivatives were pricing a peak-to-trough fall of 45% in U.K. house prices from August 2007 to the end of 2010. RBS's estimated that such a substantial fall would put 60% of HBOS's mortgage book into negative equity, more than half on Lloyds TSB's books and more than a third at Barclays PLC and RBS. HBOS and Lloyds this week merged into Lloyds Banking Group PLC.
More bailouts to come, so keep selling sterling
MoneyWeek: More bailouts to come, so keep selling sterling
Britain’s not finished with bank bailouts yet. With the spectre of nationalisation hanging over the sector, and the Bank of England ready to start printing money, the outlook for the pound is grim.
Inflation shouldn't be a problem; should it?
Telegraph: Sterling slumps to eight-year low after second bank bail-out
The pound, which was trading above the $2 mark less than 12 months ago, slumped to below the $1.40 mark for the first time since June 2001 in morning trading in London after registering a fall of more than three cents yesterday. Currency traders have been aggressively selling the pound as the depth of the recession facing the UK becomes clearer. Interest rates are now at 2pc and most analysts expect the Bank of England to continue cutting close to zero in an effort to get money moving around the economy again.
No conspiracy here - just political and economic facts
Market Oracle: Orwell's 2009
Great article. The US Government now spends $2.9 trillion per year, or 20% of GDP. With the proposed stimulus, government spending could breach 30% of GDP. In 1929, Government spending accounted for only 9% of GDP.
VAT and mortgage costs down
BBC: Big fall in UK inflation to 3.1%
Consumer price inflation fell sharply in December to an annual rate of 3.1% from November's figure of 4.1%. The change was due to falling petrol prices and the reduction in VAT from 17.5% to 15% that was announced in the pre-Budget report on 24 November. The headline rate of inflation measured by the Retail Prices Index (RPI) fell to 0.9% from November's rate of 3%. RPI takes account of mortgage costs, which also fell following December's cut in interest rates.
Importing Chinese Hyperinflation
Market Oracle: Hyperinflation Begining in China and Will Destroy the U.S. Dollar
"Those expecting deflation are in for a surprise. Western nations who are lowering interest rate very sharply, without fearing inflation, are mainly concentrating on the domestic dynamics of their economies and the value of their currency. My bet is that no one is even considering the possibility that inflation could be imported from China, and, when cheap Chinese imports stop being cheap anymore, it will catch everybody completely by surprise. "
Ten years of euro membership have lured Spain into a terrible trap
telegraph: The euro is torture instrument for Spain
S&P did not say explicitly that EMU has become an instrument of debt-deflation torture for Spain. That would be breaking the great euro taboo. It insisted that EMU provides an anchor of stability. But that is pro-forma dressing. The sub-text is that Spain cannot recover until it breaks its chains.
Rogers urges investors to dump Sterling - UK is 'finished'. Typical end-game of a Labour government!
Bloomberg: Yen Gains to Record Versus Pound on Concern Bank Losses to Rise
“I would urge you to sell any sterling you might have,” said Jim Rogers, chairman of Singapore-based Rogers Holdings, in an interview with Bloomberg Television. “It’s finished. I hate to say it, but I would not put any money in the U.K.”
Last laugh for property debtors?
Guardian: The nuclear options
The latest bank salvage is plainly not enough. Soon we might be looking at a huge write-off of debts ... So what's the catch? The obvious one is that for every debt, there is a saver. Where would that leave pensions - or in fact the whole system of capitalism? Until confidence was restored, firms and individuals would have to learn to live without investment, relying on cashflow to fund growth. It might delight Marxists, but it would be a socially retrograde step, entrenching the wealth gap in non-financial assets like property.
"Jubilee" isn't the word I'd use...
Telegraph: Biblical debt jubilee may be the only answer
The Treasury's £200bn plan to soak up toxic debt will be followed within days by a US variant from the Obama team. Germany cannot be far behind. There is no guarantee that the measures will succeed. The vast scale of government borrowing may exhaust the stock of global capital. Markets are already beginning to question the credit-worthiness of sovereign states. The Fed may find it harder than it thinks to disengage from colossal intervention in the bond markets. In the end, the only way out of all this global debt may prove to be a Biblical debt Jubilee. Creditors are not going to like that.
Monday, January 19, 2009
green light for quantitative easing being given to the Bank of England
cnbc: BoE Gets Green Light for Quantitative Easing
On looking at the UK government's second bank bailout package details, Peter Dixon from Commerzbank Securities noted that one of the aspects of the package was the green light for quantitative easing being given to the Bank of England.
nice interactive DIY analysis
New York Times: Is it better to buy or rent?
I just substituted the pounds for dollars and played with the slidey things- not sure it checked out number wise (remember to leave the property tax at zero) but at the moment, buying does not seem like a good option- might be different in Manhattan. There is another article (seems corporate pushed) in the same issue advocating being brave and having a punt. Sentiment is becoming more mixed, at least in the corporate rags.
RBS brink as shares plummet by 69% City is warned: 'You're about to become Iceland-on-Thames'
mail: Glum: Mr Darling with his package of measures. He admits if they do not work the whole economy could collapse
Liberal Democrat Treasury spokesman Vince Cable warned taxpayers could lose a fortune if the scheme was not properly implemented. 'There are some very reputable people in the City this morning estimating that on a £100 billion insurance scheme the taxpayer could lose £30 to £40 billion.
The Nightmare Continues
Telegraph: National debt will be three quarters of country's wealth
Britain's national debt will be worth almost three quarters of the country's total economic wealth by next year, the European Commission warned yesterday. predicted that the latest banking bailout scheme would "very, very rapidly" dig Britain deeper into an even deeper public spending black hole and blamed Gordon Brown for failing to "consolidate" during the boom years.
Like a child on a long car journey Rightmove shouts out are we there yet!
Citywire: Rightmove asks 'are we near the bottom?'
Rightmove today asked ‘are we near the bottom?’ as it reported prices were nearing its predicted floor and as the number of properties coming onto the market slows and base their bottom call on ‘a chronic lack of new supply both in the resale and new homes market’.
A double disaster to start the week
Forbes.com: TOPWRAP 7-UK banks thrown a lifeline, Spain credit rating cut
The worst financial crisis in 80 years has already felled top banks and pushed much of the world into recession. SPAIN DOWNGRADED Spain suffered a credit rating downgrade by Standard & Poor's, to 'AA+' from 'AAA', prompting the euro to tumble as investors feared others in the euro zone could suffer the same fate as they spend heavily to refloat their economies. European Central Bank President Jean-Claude Trichet said for the euro zone as a whole, 'after an exceptionally difficult 2009, to consider 2010 as the year of recovery seems to me like a good working hypothesis'.
First class article by Mark Dampier (Hargreaves Lansdown)
Moneymarketing: A political plague
The underlying cause of the housing problems was an unchecked rise in land values. As I have said previously in this column, the only person to have foreseen this, to my knowledge, was Fred Harrison in Boom Bust, written in 2005. US house prices are likely to fall by another 15 per cent before they reach the bottom, making a total fall of at least 40 per cent. I mention this because our housing market was even more overvalued than theirs. Our housing market has fallen by about 16 per cent, so there is long way to go, especially considering an almost guaranteed sharp rise in unemployment. Anyone predicting a modest recovery in 2009 is fooling themselves. The best leading indicator of house prices is mortgage approvals...............................Read on
An irresponsible and irreversible act...
Mail: Bank is given the green light to print more money
It should now be clear to all, that Gordon Brown does not care in the slightest about either savers or savings. ''The Bank of England was today given a licence to print more money to bail out the failing economy. In a drastic new twist to the financial crisis, the Bank's monetary policy committee has been told it can increase the money supply if it believes more cash is needed to kick-start the financial sector.''
Brown is bankrupting the UK
Telegraph: Bonds tumble as Government admits no cap on taxpayer risk
What happens when government bonds become worthless? Is this what Brown warned the journalist against speculating on this morning?
Housing market falls seen extending into 2010
Reuters: Housing market falls seen extending into 2010
LONDON (Reuters) - House prices will fall about 11 percent this year and the market will take up to two years to stabilise despite the lowest base interest rates in the Bank of England's 300-year history, a Reuters poll showed.
Ask a simple question ...
Institute for Economic Affairs 'Blog: Should banks be lending to house buyers?
"Should the UK government really be encouraging households to borrow money to buy houses in the current climate? And should it be encouraging banks to lend to them as part of the latest bailout package? Clearly there is considerable pent up demand for housing and this will grow over time. But a responsible government would surely be telling first-time buyers and others to put off their purchases. What is the sense in taking out a mortgage to pay for an asset that is declining in value by 15% a year? And instead of exhorting the banks to offer cheap finance so households can saddle themselves with negative equity, the government should be congratulating them for their entirely rational behaviour of limiting their exposure to the housing market".
World's largest supplier of materials to the building trade needs a bailout!
Daily Mail: Wolseley seeks £400million lifeline from investors
It is in talks with shareholders and private equity firms to raise between £200million to £400million to help pay down its £2.7billion debt pile. The firm which owns Plumb Center, Build Center and Bathstore, has been hit by the slump in the number of homes being built. Chief executive Chip Hornsby has been talking to private equity groups about raising additional capital in a private placement. In November, it closed 200 branches in the UK to offset tumbling profits. Around 2,380 of its 74,000 workforce will be made redundant in the next few months, with 2,000 jobs going in the UK and Ireland.
Righmove Asking Price House Index for Jan 09
Rightmove: Rightmove Asking House Price Index - Jan 09
Average house asking price down by 1.9% (average) in January, more enquiries and less properties coming on to the market. Letting market currently oversubsribed.
The latest banking bail-out won't be the last
MoneyWeek: The latest banking bail-out won't be the last
So the Government has yet another bank rescue plan. But it won't be the last, says John Stepek. And because of reckless lending, bad policy and poor regulation, taxpayers will be left with billions of pounds-worth of garbage.
Hilarious impartial investment advice
Evening News (Edinburgh): Property prices drop by £100k in sales stunt
... Steve Spence, senior partner at Neilsons solicitors and estate agents, said: "It's the first time we've done it because we've never had a situation in Edinburgh where property prices have gone down." Mr Spence said low prices and low interest rates made this the ideal time to buy property for future profit. "We're trying to underline the fact that this situation is unique and temporary and that in six, 12, or 18 months prices will go up again, as sure as night becomes day," he said.
The future of UK banking?
Independent: Northern Rock to slow mortgage redemptions
Troubled mortgage lender Northern Rock unveiled a new strategy today which will see it slow the rate at which it shrinks its mortgage book. It means the bank will start lending to more homeowners in a bid to help kick-start the economy.
E&Y Item Club Winter 2009 Release
Earnst & Young: Economic outlook for business
Total domestic demand to fall 3.8% this year, 0.8% next year. Output likely to fall by 2.7% this year - worst since 1946. Headline RPI inflation will turn sharply negative. Darling bank plan needs quick reform [happening already]. Base rates must be reduced further. Business investment to fall 17%. Sees house prices falling through to the end of 2010, 1/3 down from peak. Forecasts another 22% reduction in housing transactions in 2009. Possible opportunities for businesses due to sterling's falls.
Manyard Keynes Aint the Answer....
The Renegade Economist: Casino Capitalism
Harrison's latest offering....
Second Rescue Package In Three Months
The Telegraph: Bank bailout plan announced by Alistair Darling
Alistair Darling has admitted he has no idea how much money the Government will need to pour into failing banks to stave off a collapse in the sector that could bring down the entire economy. The Treasury has formally announced a scheme to allow banks to exchange cash or shares for a Government guarantee on their "toxic" debts, transferring any losses they suffer from the banks to the taxpayer.
Government Regulators Aided IndyMac Cover-Up, Maybe Others
ABC News: Government Regulators Aided IndyMac Cover-Up, Maybe Others
Investigators probing how Treasury regulators allowed a bank to falsify financial records hiding its ill health have found at least three other instances of similar apparent fraud, sources tell ABC News. In at least one instance, investigators say, banking regulators actually approached the bank with the suggestion of falsifying deposit dates to satisfy banking rules -- even if it disguised the bank's health to the public. Fraud at this level could have disseminated far and wide - what protections are in place for UK tax-payers in the light of their unprecedented bank bail-outs?
Royal Bank of Scotland (RBS) will this morning unveil up to £25bn of losses for 2008 from increasing
telegraph: RBS suffers biggest loss in UK history
Greece no longer dares sell long bonds to fund its debt. It sold €2.5bn last week at short rates, mostly 3-months and 6-months. This is a dangerous game. It stores up "roll-over risk" for later in the year. Hedge funds are circling. Traders suspect that investors are dumping their Club Med and Irish debt immediately on the European Central Bank in "repo" actions. n other words, the ECB is already providing a stealth bail-out for Europe's governments – though secrecy veils all. An EU debt union is being created, in breach of EU law. Liabilities are being shifted quietly on to German taxpayers. What happens when Germany's hard-working citizens find out?
Homeowners: don't read this and please carry on letting out your high-quality homes at cheap prices!
Telegraph: Buy-to-let: Warning for 'accidental' landlords
It may sound like the easy option, but home owners who think they can ride out the housing downturn by offering their properties to let rather than for sale face a nasty shock. This is a difficult rental market in which only the best properties are letting easily, and those "accidental" landlords who take a less than professional approach to renting out their homes are facing long and expensive void periods. "Contrary to what people might think, the lettings market is not busy across the board," says Tim Hyatt, head of residential lettings at Knight Frank. According to Mr Hyatt, accidental landlords contributed around 25pc of the increase in Knight Frank's stock levels in 2008.
Former official at the Irish central bank speaks out
Telegraph: Help Ireland or it will exit euro, economist warns
"It is essential that we go to Europe and say we have a serious problem," said David McWilliams, a former official at the Irish central bank. "We say, either we default or we pull out of Europe." "If Ireland continues hurtling down this road, which is close to default, the whole of Europe will be badly affected. The credibility of the euro will be badly affected. Then Spain might default, Italy and Greece," he said. Mr McWilliams, a former UBS director and now prominent broadcaster, has broken the ultimate taboo by evoking threats to precipitate an EMU crisis, which would risk a chain reaction across the eurozone. The comments reflect growing bitterness in Dublin over the way the country has been treated after voting against the EU's Lisbon Treaty.
Taxpayers give money to taxpayers
BBC News: Taiwan hands out shopping vouchers to citizens
Taiwan has been handing out shopping vouchers to all its citizens in a bid to stimulate the island's economy and shrug off the global downturn. Some 22.7 million people, regardless of age, are eligible for vouchers worth $107 to spend on a wide range of goods. People queued at distribution points around the country to get their vouchers on Sunday. The initiative, set to cost the government $2.53bn, is based on a similar scheme in Japan in 1999. Taiwan is suffering in the global downturn, hit by plunging exports and rising unemployment.
-1.9% MoM, -7.3% YoY
Rightmove (pdf): 'Prices now within 8% of the bottom'
We forecast last month that prices were within 10% of the bottom of the market, so this month's substantial fall is consistent with the market bottoming out in the latter part of 2009. This is given further credence by a chronic lack of housing supply. The speed with which prices have declined has been worrying, but it does mean we are potentially reaching the bottom sooner. 2009 could be the year of the property deal. The market has plumbed the depths, with agents reporting sales being achieved at a discount of around 25% from peak. The reduction in the number of properties coming to market appears to be aligning supply and demand which will help create a floor for prices.
Sunday, January 18, 2009
Return of the Hush Puppy bruiser
BBC: Clarke in Tory front bench return
Former Chancellor Kenneth Clarke will return to the Conservative front bench as part of a major reshuffle on Monday, BBC News has learned. Tory leader David Cameron has given the role of shadow business secretary to his former party leadership rival. The move will see Mr Clarke, 68, take on fellow returning big-hitter Lord Mandelson, in setting out how to help firms through the economic turmoil.
Surge in Mortgage Enquiries
FTAdvister.com: Surge in Mortgage Enquiries
Advisers across the UK are reporting renewed enthusiasm in the mortgage market, as the New Year gets underway.
Sickening, whether the money is owed or not
TimesOnline: Bank phoned dying debtor 313 times
"BANKS are harassing vulnerable customers in defiance of court orders and official rules, an investigation has found. In one case a dying cancer patient was phoned more than 300 times in less than a year." Targets and comission rule!
22% fall over 18 months predicted
BBC: UK jobless 'to reach 3.4 million'
Unemployment will soar to 3.4 million as the financial crisis deepens, forecasters predict ahead of official jobless figures this week. The Ernst & Young Item Club says the number of those out of work in the UK will pass 3.25 million by the end of 2010, and hit 3.4 million in 2011. "All of the economic statistics are now in free-fall," it said in its forecast.
More Bailout BS
Bloomberg: U.K. to Announce Mortgage, Loan Guarantees to Encourage Lending
[Some detail on what to expect from GB tomorrow] - "The U.K. will underwrite mortgages and corporate loans to spur lending in a plan drawn up with Britain’s biggest banks, three people with knowledge of the situation said. "
Saudi Arabia, housing the largest Arab bourse, lost 56.5 percent in 2008
Islam Online Business: Meltdown Costs Arabs $2.5 Trillion
KUWAIT CITY — As a US-generated financial hurricane is jolting businesses and people around the world, Arab investors have lost 2.5 trillion dollars from the credit crunch. "The Arab world has lost $2.5 trillion in the past four months," Kuwait Foreign Minister Sheikh Mohammad Al Sabah told a meeting of the Arab foreign and finance ministers on Friday, January 16, reported Agence France-Presse (AFP). ~~~~~~~~~~~~~ The biggest loss was an estimated 40 percent drop in the value of Arab investments abroad.
Another £200 Billion Bailout Finalised
Reuters: Government finalises second bank bailout
The government is poised to guarantee "toxic debt" worth up to 200 billion pounds in a second bank bailout designed to boost lending and fend off a prolonged recession triggered by the worst economic turmoil in 70 years. Just think of the future tax implications to Joe Public.
Our money
Guardian: Brown ready to risk billions on debt insurance
Subheading "In a critical bid to revive lending, Labour is to underwrite toxic assets and use Northern Rock to boost the mortgage market." It appears that the housing crash is being revealed as a symptom rather than the cause of the banking failure but that won't stop Brown from trying to get that bubble going again. Whatever the price.
Depression? Maybe
Observer: Banks have been thrown a lifeline, but we've been left to sink or swim
"The situation is reminiscent of, but far worse than, the position in the early 1980s when at the height (or depth) of what I christened "sado-monetarism", good companies were on their way to the wall, the Thatcher government did not seem to understand or care, and the Bank of England rightly embarked on a period of covert rescue operations." That should get you going.
Intrade market in US entering 2009 depression 56%
Intrade: Trade on US economy entering 2009 depression
The market at Intrade is predicting a probability of a U.S. Depression (10% or greater decline in GDP) in 2009 to be 56%.
A little bit of politics
Observer: Don't drizzle your pessimism on Obama's grand parade
This is after all an historic moment so you'll forgive me for posting this. I know a few here think that Obama will turn out to be a spin merchant along the lines of Tony Blair (who in any case did one or two good things) but this article cautions against such cynicism. The peerless Alistair Cooke said about GWB that we should wait and see, despite unpromising signs. We certainly should with Obama, who I suspect will turn out to be a pretty good leader. We can but hope because we are short of pretty good leaders.
Home buyers don't need any help thanks
Times online: Help is at hand for homebuyers, but will it work?
Just imagine if, a couple of years ago, you had suggested that the Bank rate would soon be 1.5% and falling, and that, just to set things up nicely for a recovery, house prices would come down by 16%, pushing them back to their long-term trend line. In the housing market of 2007, such talk would have been regarded as the equivalent of shouting “fire” in a crowded theatre. The market of 2009 is very different. The Royal Institution of Chartered Surveyors (Rics), while reporting the highest level of buyer interest for more than two years, says sales and prices are still falling.
Gulp
Tititudorancea: Iceland Imposes Foreign Exchange Controls
Iceland has war time capital controls in place and the ECB no longer publishes the exchange rate. Which seems to have gone from 60 to 290 against the dollar. Obviously this exchange rate is meaningless with capital restrictions. However, if you assume (for no reason just made up) that the external exposure of the UK relative to the size of the domestic economy is comparable, then potentially our true rate of exchange against the dollar would be 1/6th of the £1:$2 peak i.e. worst case £1 : $0.33 . If we are stuffed in the same way as Iceland. But in that case why is Sterling holding up so well? People are defaulting right left and centre, the government is borrowing, there is talk of money printing, but still reasonably OK?!?
Mwa ha ha ha ha ha ha
BBC NEWS: Addicted to estate agency
"Is Debbie Fortune the bravest woman in Somerset? She is not tracking Exmoor's mythical Big Cat. She is not trying to tame the cider makers of Huish Episcopi. No, Debbie Fortune is opening an estate agency.".......
Brown rages at foreign liabilities
This is money: New £200bn bailout for UK banks
See my previous posted article. "Gordon Brown vented his fury with the banks for lending vast sums to foreign investors who are now unable to pay the money back." So, the problems truly are, as GB originally said, not domestic, because he can fiddle about with our domestic currency. The real risk is, and always was, Iceland.
Is the ECB providing a stealth bail-out?
Telegraph: Monetary union has left half of Europe trapped in depression
Events are moving fast in Europe. The worst riots since the fall of Communism have swept the Baltics and the south Balkans. An incipient crisis is taking shape in the Club Med bond markets. S&P has cut Greek debt to near junk. Spanish, Portuguese, and Irish bonds are on negative watch.
External liabilities, the UK and Iceland
IDEAS REPEC: Why are UK Banks' Overseas Assets and Liabilities So Large?
Basically my comment is lengthy so I am posting it but is a kind of explanation for the panic last Friday.
Are our jobs safe?
Middle East Online: Dubai dream turns sour as job losses mount
I wonder if anyone will leave without being sacked just because they have so much debt? If your employer has to tell your bank they have sacked you so you can be pursued for your debt prior to departure, this will surely prove to much of a worry to many!?
What next?
The National: Slowdown to buffet Dubai
Any ideas what might happen next?
80% of taxpayer-funded bailout to cover losses on overseas debt!
Tgraph: 80 per cent of bank lending 'went overseas'
Futures generations of UK taxpayers will have to foot a huge bill from lending to overseas Ponzi schemes. "Whitehall sources said that they had discovered that some major UK lenders - including RBS, HSBC and Barclays - have had only 20 per cent of their balance sheets made up of "traditional" loans to UK households and firms. Meanwhile, up to 80 per cent is tied up in loans to foreign nationals and companies, bond issues and other investments"
Nearly 79,000 properties were repossessed by lenders in December
CBC: U.S. home foreclosures jump 81% in 2008
More than 2.3 million U.S. homeowners faced foreclosure proceedings last year, an 81 per cent increase from 2007, with the worst yet to come as consumers grapple with layoffs, shrinking investment portfolios and falling home prices. More than 860,000 properties were actually repossessed by lenders, more than double the 2007 level, said RealtyTrac, a foreclosure listing firm based in Irvine, Calif., which compiled the figures.
Plan to use public funds to underwrite debt in a bid to save high-street lenders
Independent: Taxpayers could be liable for £200bn in toxic bank loans
Whitehall officials confirmed last night that a plan to use public funds to underwrite the toxic loans taken on by British banks in recent years was under discussion as Gordon Brown tried another rescue plan to kick-start the economy. ~~~~~~~~~~~~~~~~ The extra protection from huge customer debts that might otherwise have to be written off is designed to offer banks more security and encourage them to begin lending more to business and individual clients. ~~~~~~~~~~~~~ curiouser and curiouser said Alice
Green shoots appearing?
Telegraph.co.uk: Action needed now to avoid depression, warns ITEM economist
The Government and the Bank of England have got "days not weeks" to take action to revive the economy or face a prolonged depression, one of the UK's leading economists has warned.
Oliver says it could even fall to below 60 US cents early next year.
smh: Stay cool as dollar drops
So where are the cheaper destinations? Our dollar has dropped against all the major currencies, but Iceland's is one against which it has appreciated. The krona has fallen against all currencies over the past year. Iceland's three main private sector banks are in receivership, its stockmarket has fallen 90 per cent and its central bank is technically insolvent. Other countries where the Australian dollar is worth more include South Korea, the Seychelles, Indonesia, Brazil, South Africa - and New Zealand.
Tough times for local mining sector as prices sink
australian: THE nation's mining industry has had one of its darkest weeks in years as the global economic crisis bit harder.
More than 1000 workers were axed, or put on notice, and more than $US2 billion ($3 billion) of expansion shelved or slowed.
The survey revealed that German banks possess 300 billion euros ($A592 billion) in toxic assets and
australian: German banks face billions more in losses: report
The survey revealed that German banks possess 300 billion euros ($A592 billion) in toxic assets and have so far only written off the most rotten, which represent a quarter of the total, the report said. "The remainder is still registered in accounts at illusory values," said Der Spiegel. According to the magazine, government economic experts believe the remaining write-downs are considerable and could lead to "very heavy new losses for the banks".The finance ministry estimates the volume of assets at risk in the German banking sector to be in the region of one trillion euros ($A1.97 trillion) ,
Foreclosure problems start to hit Dubai and Abu Dhabi
The National: Spectre of foreclosure hits home
“Today, negative equity and repossessions are becoming increasingly part of the business language. An alarming number of home owners are falling behind on their payments; some are estimating as many as 40 per cent.”
Staff being Shed in UAE continues apace
The National: Emaar subsidiary John Laing cuts staff
More middle East gloom with the loss of more jobs!
Saturday, January 17, 2009
Northern rampers still alive and kicking
Scotsman: Scottish housing market to turn in 2009
THE worst of the house price falls in Scotland will be over before the summer, a property expert has predicted ...
'Bad bank'? That's so yesterday!
Telegraph: Taxpayers face years of debt in bank salvage deal
Taxpayers are poised to take on the "toxic" debts of High Street lenders in a new bank rescue deal that could cost the Treasury billions of pounds. Under the "pay as you go" plan, details of which were still being hammered out on Saturday, the Government will create a new insurance scheme that would see liabilities of up to £200 billion potentially kept on the public books for years. The insurance scheme has won favour at the expense of alternative plans to create a "bad" bank under which the Government would have simply bought banks' existing toxic debts.
Housing minister has her 'green shoots' moment
Sunday Times: Beckett tells first-time buyers: don’t delay
THE housing minister, Margaret Beckett, claims there are signs of an “upturn” in the property market despite official figures showing prices plummeting at an unprecedented rate. She disclosed the government was already worrying about the next housing boom, and was intervening to ensure any recovery in prices does not squeeze people out of the market. She warns would-be first-time buyers not to delay in the hope of further price falls, because “when the upturn comes, there will probably be a mad rush”. She said the government is determined to ensure as many people as possible can buy their own homes. Beckett cannot see the British perception of renting as “second best” changing. “People do feel that if you are just paying rent for years, it’s money down the drain."
Boldest ramping for a while
Times: Why 2009 is a good time to buy a house
Ignore the doom-mongers — this is the year to buy property, especially if you’re trading up. Provided you’re not caught in negative equity, and can put down a decent deposit, now could be a good time to buy. “It’s a cracking time to be buying,” says James Greenwood, of the property-search agency Stacks. “There’s hardly any competition out there at the moment, so you’ve got the field to yourself. Prices have been discounted, there are distressed sellers who have to sell and there are some real bargains to be had, anything between 30% and 35% off peak value. We haven’t seen anything like this for years — it’s probably the best opportunity for a decade.” The message is, if you see something you like, then get on and buy it — because it probably won’t be there in six months time.
Disaster recovery weekend
Telegraph: Treasury to burn midnight oil on 'bad bank' scheme
Apparently big problems have been identified if the Treasury feels the need to produce a plan by Monday. Ominous is "What is clear is that the Government is set to become a major stakeover in banks for the next decade or more. " and the suggestion of a possible plan here makes it look like imminent disaster. Basically money printing to buy gilts, then the gilts get given to the banks, with the final flourish that all defaulting debts are purchased by a taxpayer bank at presumably full price. There is so much talk of quantative easing this looks increasingly likely to happen with all the downsides for a recovery (should one ever come). The UK is staring Iceland in the face.
An irony
Guardian: Bankers told they are too risky for a loan
Financial sector and property workers suddenly find themselves under scrutiny from lenders.
extending the closure, with workers getting 50% of their pay.
Guardian: Honda to extend shut-down at Swindon plant
Honda said this morning it was halting production at its Swindon plant in April and May, extending the two-month closure announced before Christmas to four months.
Clowns wearing suits
Independent: British banks are 'technically insolvent'
'Britains biggest banks are "technically insolvent", Royal Bank of Scotland said yesterday, as the global banking industry was rocked by another day of turmoil, including the announcement of $23bn (£16bn) of new losses from Merrill Lynch and Citigroup, the giant US institutions. Analysts working for RBS, one of several British banks to have received emergency funding from the UK Government last year, told the City that "the domestic UK banks are technically insolvent on a fully marked-to-market basis".' A remarkable achievement for a business that can literally create money as other people's debt.
Definitely out of touch with reality
Times: The £24-million bargain property in London W8 crying out for a makeover
while the City burns... "You may not believe that this £24 million house is a bargain, especially as it is currently divided into four flats and so needs a substantial makeover. The bill for this would be about £5 million"... so maybe it is not a bargain
Then again, they are doing their best to take us back to the 30's!
Telegraph: £200bn to save banks from bad debt
In an attempt to restore confidence within the financial sector, the Treasury will tell the banks of its plan on Saturday. It aims to announce details of the rescue package publicly early next week. The bad bank plan has climbed the political agenda in the past couple of weeks as the Government has become aware of the extent of the lenders' bad debts. Sources said that a bad bank would have to take on about £200 billion of toxic assets. That would take the Government's total commitment to solving the banking crisis to almost £1 trillion in taxpayers' money that has either been spent or pledged.
Putting things into perspective.
Telegraph: What George Orwell would make of our financial 'apocalypse'
As we stagger helplessly into the swallowing fog of financial apocalypse , allow me to float an idea. It's not a solution so much as a palliative. Every one of us, man, woman and child across the land, should read or re-read The Road to Wigan Pier by George Orwell. Urgently. Let us rise as one and buy our copies today. (If we actually go to a shop, rather than ordering it online, we might even save a couple of high street chains in the process.)
Take your time, there's no rush.
FT: Brown orders Britain’s banks to come clean
With speculation growing that the government will be forced to stage another bank rescue, the prime minister told the Financial Times he had been urging the banks for almost a year to write down their bad assets.
Government will do what ever it takes until it finally falls apart
Guardian.co.uk: Barclays shares in new collapse as bank crisis enters second phase
A range of options to kick-start lending, including a scheme ring fence $200bn in toxic assets, will be discussed with the big banks at a meeting on Sunday.
Irish house prices forecast to fall 80% in real terms
Irish Times: Warning that house prices may fall by 80%
'In a presentation that drew several collective intakes of breath, Mr Kelly predicted that house prices would fall by 80 per cent from peak to trough in real terms.' 'Mr Kelly said he had been hailed as being extremely prescient as a result of his warnings in relation to the property bubble, when in fact he and a handful of other “amateurs” were merely stating what was obvious.'
Friday, January 16, 2009
The Devil is in the detail
BBC News: Four-month shutdown for Honda UK
Honda said that there were no plans for redundancies with workers receiving full pay till the end of March and 65% for the next 2 months but will owe the time back to Honda when the plant reopens.
Oooops
Guardian.co.uk: Commercial property 'will halve in value'
Commercial property values are likely to plunge by more than 50% by the end of the year from their peak in July 2007. The unprecedented collapse will heap further pressure on banks' shattered balance sheets and could lead to a wave of property-firm failures
Huge fraud - just the start
Times: Company bosses admit £80m buy-to-let fraud
Five buy-to-let con artists have pleaded guilty to defrauding property investors out of an estimated £80 million in a Ponzi-style scheme. The former directors of three Gateshead-based property companies used their victims’ money to fund a lavish lifestyle in a scam that the Serious Fraud Office (SFO) described as “simply staggering”. The five fraudsters sold about 4,000 residential properties, mostly in the North East, to 1,750 investors through their companies PPP Ltd. In return for an investment of around £25,000, PPP promised to purchase a house in an “up-and-coming area” that would be refurbished, let to reputable tenants and managed on the landlord’s behalf. Investors were also told that an insurance policy was in place to protect their returns during tenancy void periods.
The banking sector needs more capital.
BBC: Bail-out fears hit banking shares
Shares in major UK banks have fallen sharply today amid fears that more financial institutions will need to be bailed out by the government.
Up to 6,000 households will get help - will this change anything?
myfinances.co.uk: Mortgage rescue scheme launched as repossession warnings grow
Seema Shah, property economist at Capital Economics, said: "Thanks to sharply rising unemployment, we expect mortgage arrears to surpass the early 1990s highs.
The words 'tip' and 'iceberg' spring to mind ...
The Metro: £80m fraud of buy-to-let investors
A group of buy-to-let directors defrauded innocent customers of millions of pounds and spent their money on luxury cars and racehorses. John Potts, 60, Peter Gosling, 57, Natalie Laverick, 28, Peter Graham, 62, and Eric Armstrong, 55, admitted fraud offences relating to an estimated £80 million of their customers' money. The five all acted as directors of a group of Gateshead-based property investment companies known collectively as PPP. Between 2001 and 2003 they offered aspiring buy-to-let investors the chance to buy a property, usually in north-east England, in an "up-and-coming area". Customers were promised that the houses would be let to vetted tenants, with building and contents insurance provided and rent guaranteed through an insurance policy covering any periods ... (etc etc)
Former minister calls for half of civil service to be sacked.
Guardian: Brown steps in after Digby Jones calls for half of civil service to be sacked
10 years of rising taxes, and rising government debt, where has all this money gone? Most of it went into government payroll. Now Britain is broken, the tax-payers exhausted, and the private sector crushed, but the civil service remains protected.
Past crises inspire little confidence
The Economist: Economics focus - Drastic times
The tone of this year’s gathering of the American Economic Association (AEA) in San Francisco, USA (January 3rd to 5th), was set on its first morning, when Kenneth Rogoff of Harvard University outlined the results of new research. The paper looks at the aftermath of past financial meltdowns to gauge just how bad this recession might be. House prices take an average of five years to reach their nadir and fall by 36% in real terms.
Nationwide disappointed with dishonest customers
BBC: ATM's 'double your money' error
Is this a secret plan by the government so slip in freshly-printed free banknotes to cash machines? Sorry, it is Friday.
Can you store this toxic waste for me please?
T'graph: Treasury plans 'bad bank' to buy toxic assets
Gordon Brown is preparing a new multi-billion pound rescue package for the banks which is expected to be announced next week. In his strongest hint yet that a "bad bank" is a serious option, the Prime Minister said that "action" on toxic debts, which are blamed for the failure of high-street banks to resume normal lending, is now essential. Ministers will spend this weekend locked in talks with senior bank executives, who are thought to be resistant to the "bad bank" proposal. However, Mr Brown has been warned by City experts that the scheme may have to be quickly introduced to prevent the economic and financial crisis worsening. [so don't ask too many questions]
Brown to pledge £1/5 Bn to housing assocations for rent back schemes
Bloomberg: Brown to Pledge 200 Million Pounds to Limit Home Repossessions
Prime Minister Gordon Brown’s government today will pledge 200 million pounds ($292 million) to help keep property owners who face repossession in England from losing their homes. The money will be handed to housing associations, which will have the power to buy stakes in primary residences and then rent them back, the Department of Communities and Local Government said in a statement. Only people earning less than 60,000 pounds a year will qualify for the program. Brown is attempting to ease the impact on voters of Britain’s first recession since 1991. Repossessions will almost double to 75,000 this year as property prices fall and banks rein in lending, the Council of Mortgage Lenders estimates. “We are determined to do everything possible to ensure that repossession is always a last
Which banks will survive the slump?
MoneyWeek: Which banks will survive the slump?
This has been a terrible week for the world's banks – even by recent poor standards. Record losses, fears over new capital needs, warnings about dividend slashing, nationalisations, job cuts… just about everything that could go wrong, has gone wrong. Apart from another bank going bust, of course, but don't bet on that not happening either.
20% landmark fall in London, says Halifax
Halixax: Regional Q4 2008 figures
Halifax quartertly figs have quietly slipped out, with London's fall from peak figure breaching the 20% mark (20.91%). First time HPC will be able to post a fall in the twenties on its homepage. Roll on the thirties...
Ramp-it Times ahead
Times: The 10 towns beating the housing slump - and the 10 worst affected
Complete dreams - especially if you know people in these so called top towns.
Could this cause the whole 'food chain' to collapse further ?
MSN: First Time Buyers 'Close To Extinction'
Another article from the MSN home page (which most Interenet Explorer users will get to see). On a similar subject I kept wondering what a typical Graduate starting salary is, only for the question to be answered by a Government "Go to University Advert". This says it is £18000. On that basis anything more than £108000 for a first time buyer property (3 x joint salary) sounds overpriced. :- Duncan
What could possibly go wrong?
BBC News: Mortgage rescue plan is extended
Under the scheme, the housing associations will buy homes after the market price at an independently assessed market price. Successful applicants will remain in their property either as tenants on "affordable" rent, or as owners after receiving a loan from a housing association. It is intended that once their financial situation improved, the householder could pay back the loan in part or full.
How much are these bad debts worth? No one knows.
Telegraph: Why is the Government preparing to help the banks again?
Even though ministers have injected £37 billion of public money into the banks' balance sheets, that was simply not enough to cover the huge losses that the banks' are facing from loans they made, based on the value of properties that have since tumbled in price, to people and companies that are now at risk of defaulting. Such losses could cause the complete collapse of major banks, bringing chaos to the financial system and further squeezing the wider economy.
Thursday, January 15, 2009
Another one bites the dust.
BBC News: Anglo Irish Bank is nationalised
The Irish Government has said it is to nationalise the Anglo Irish Bank. The state had planned on pumping 1.5bn euros (£1.4bn) into the bank, but decided that recapitalisation was not the way to secure its future. Ministers had been due to hand over the money in return for 75% shares with an annual fixed dividend being paid to the government of 10%
Some easy reading
InflationData.com: What is Deflation
In common usage deflation is generally considered to be "falling prices". But there is much more to it than that. Often people confuse deflation with disinflation or with Depression (as in "the Great Depression"). These three terms are related but not synonymous. According to Investorwords.com the definition of Deflation is "a decline in general price levels, often caused by a reduction in the supply of money or credit. Deflation can also be brought about by direct contractions in spending, either in the form of a reduction in government spending, personal spending or investment spending. Deflation has often had the side effect of increasing unemployment in an economy, since the process often leads to a lower level of demand in the economy. The opposite of inflation."
Mortgage securitization is a failure so what are they expecting to happen?
TimesOnline: Mortgage lending dives 60% to record low
The lack of mortgage funding is dragging down house prices as sellers are forced to slash their prices to attract a dwindling number of buyers.
2008, land values on the rise…WHAT A JOKE!!!!
Vantage land property letter: Land: a year in review
According to these jokers 'The RICS Rural Land Market Survey, published in July, reported a 24% growth in land prices for the first half of 2008 – the fastest pace in the survey’s history, with a 47% increase year-on-year' ......Optimism for land in 2009… As 2008 drew to a close and the property market continued its decline, farmland proved remarkably resilient by recording a 21.5% increase in value.there is little evidence to suggest an influx of sales during 2009. Conversely, demand for land continues to rise and there are no indications that it will weaken.
There's a limit is there?
BBC News: Will European rate cuts halt the downturn?
There wasn't supposed to be a cut in Eurozone interest rates this January. Jean Claude Trichet, president of the European Central Bank (ECB) had said there was "a limit" to how low rates could go after three successive cuts saw the main lending facility at 2.5%. But that was all the way back in December. It is a sign of just how bad the economic situation is that the rate has now fallen to just 2%. Should have been as transparent as the UK! (Not saying it's more open here,just that they are worse) Two wrongs...............
Get out of equities
Telegraph: Will china lead the world into depression
I think few here at least would disagree that the market rally since Nov has been as a precursor to a further crash, it's just a matter of when. According to Albert Edwards at Societe Generale the next down wave is about to happen and if you are in be prepared to bail.
Depression talk becomes more mainstream by the day.
CNBC: Depression Ahead, Prepare for Stock Rout: SocGen
Societe Generale said on Thursday that the United States' economy looks likely to enter a depression and China's could implode. In a highly bearish note, veteran cross asset strategist Albert Edwards said investors should now cut equity exposure after a turn-of-the-year rally and prepare for a rout. He predicted that the S&P 500 index of U.S. stocks could be set for a fall of around 40 percent from recent levels.
3M foreclosures in 2008
usatoday: 2008 Foreclosures top 2M
Foreclosure filings surpassed 3 million in 2008, setting a record that has Washington, D.C., policymakers calling for more aggressive efforts this year to aid troubled homeowners. Foreclosures last year were up 81% from 2007 and 225% from 2006, according to a report out today from RealtyTrac. One in 54 homes received at least one foreclosure filing during the year, RealtyTrac reported.
Another 'so-called' expert
BBC News: TV Money expert is bankrupt
OK, it is in the currant bun but: TELLY savings expert Lorne Spicer — famed for telling cash-strapped viewers how to stay out of the red — has gone BANKRUPT. The Sun can reveal the Cash In The Attic host — who is also the BBC’s online credit crunch guru — went bust last month with debts believed to be in the “thousands”.
housing uber-bear says we heading for carnage
FT Alphaville: When it comes to UK housing — “We’ve only just begun…”
Alastair Stewart, the Dresdner Kleinwort analyst – and housing uber-bear — published his predictions for 2009 on Thursday and in the words (almost) of another number one single: Things can only get bleaker. So bleak in fact that: Housing starts will hit their lowest peacetime level since 1920. Peak to trough house price fall will be 50%. Several private and quoted housebuilders will face administration. "Housing in general and over-geared housebuilders in particular will lurch from crisis to catastrophe during 2009 and possibly well beyond, in our view."
Harsh truth about life working for the Govt
BBC News: Many civil servants 'deserve axe'
"Frankly the job could be done with half as many, it could be more productive, more efficient, it could deliver a lot more value for money for the taxpayer. "I was amazed, quite frankly, at how many people deserved the sack and yet that was the one threat that they never ever worked under, because it doesn't exist."
Prospect of downgrade for UK debt
Telegraph: Greek crisis deepens as S&P downgrades sovereign debt
Any thoughts on how realistic a downgrade of the UK's AAA rating might be? Given our sovereign debt position , huge exposure to financials and massive housing bubble it must be a possibility. Significant as even whispers of a downgrade would set off a massive further devaluation of our currency.
Property Companies close to breaching bank agreements
Bloomberg: U.K. Real-Estate Companies Need to Raise $20 Billion
The five largest real estate investment trusts -- Land Securities Plc, British Land Co., Hammerson Plc, Liberty International Plc and Segro -- have combined debt of 19 billion pounds ($28 billion), according to their latest reports. About 700 million pounds of loans are due this year, research by Nomura International Plc shows. The banks that granted those loans may now be reluctant to provide more credit. That could spur another year of losses for REIT investors. The FTSE 350 Real Estate Index of 18 stocks fell 46 percent last year, the most since the index was created in 1986. The worst performer was Liberty, which declined 56 percent.
“so bearish they’ve purchased firearms and safes and are stocking their pantries with soups and cann
New York Magazine: Hedge-Funders Are Bullish on Gold, Guns, and Inflatable Lifeboats
During the final months of 2008, as the financial markets imploded, talk on trading desks turned to food and water stockpiles, generators, guns, and high-speed inflatable boats. “The system really was about six hours from failing,” says Gene Lange, a manager at a midtown hedge fund, referring to the week in September when Lehman went bust and AIG had to be bailed out. “When you think about how close we were to the precipice, I don’t think it necessarily makes a guy crazy to prepare for the potential worst-case scenario.”
I hope the devaluation works
Guardian: Business as usual won't halt the haemorrhage of jobs
Our plan seems to be devalue our own currency which will cause an expansion in manufacturing and all export sectors. However, looking around the world you can see a lot of really cheap currencies in countries which don't have booming manufacturing or export sectors. The current plan seems doomed to failure as long as we ignore structural reforms i.e. the bloated wasteful public sector and high taxation, quite aside from price fixing strategies for credit.
Part two of my LVT series at the ASI
Adam Smith Institute 'Blog: Property bubbles, credit bubbles, and land value tax
Concluding that ... If the 7% flat tax were applied to all value in excess of the original bricks and mortar value (adjusted for inflation), i.e. to the bubble element as well as the location value, this would act like a much higher interest rate thereon, and thus dampen down property price bubbles (and hence credit bubbles) as well as sending a "market signal" to existing home-owners that planning permission is being far too strictly rationed.
3-4 years to become 2nd
Guardian: China becomes world's third largest economy
The demand from China will be inflationary in the end, there can be no doubt of that because of finite resources. But this won't be inflation as in an over-expansion of the money supply, this will be goods becoming more expensive through shortage. If China manages to continue growing at 6% a year, perhaps that could be considered a collapse given their previous rate of expansion, but it isn't a collapse. So from this, there is a much shorter wait to the embedded UK inflationary problems than Japan had/has. But although the UK government seems to be under the impression that restoring inflation is good for the economy, it isn't because we will ultimately be left out in the cold as a nation dependant on imports but useless at exports. Exports collapsing as we speak.
could just slash the cost of borrowing and print a load of money to get the old show back on the rd
Telegraph: This crisis is our chance to get off the consumerism treadmill
Remarking in 1959 that the Chinese word for crisis was composed of the characters for danger and opportunity was factually wrong. But his focus on the possibility of positive change emerging from even the bleakest situation was spot on.
Fed vice chairman Donald Kohn gets a grilling from a congressman
Daily Kos: A $1.2 Trillion Slush Fund
This one's a bit esoteric. The Federal Reserve has "increased its balance sheet" (i.e. printed) $1.2trn. However they are refusing to say who they loaned the money to or what they spent it on. We've already talked about how Bloomberg is suing the Fed and Fox is suing the Treasury to find out where all the money went. Now finally Congress is getting in on the act and asking pertinent questions. This probably won't happen in Britain (the dollar's status as global reserve currency causes unique issues), but it's an interesting side show.
Help the ones in arrears will only freeze the market further
Telegraph: One borrowers in arrears prevents up to 80 other customers getting a mortgage
One average mortgage in arrears for an extended period could cost as much as 30 new mortgages. But if the held mortgage has a riskier, low loan-to-value this cost could increase to 80 new mortgages. So the more GB attemps to help those in arrears, the fewer FTB can entre market (with a multiplier of 30 to 80!) and further freeze the market! Great! Please bail out all 75,000 repossesions! That will stop 6 million new buyers!! Then HPC will be really spectacular!!
Wednesday, January 14, 2009
BTL mortgage holders now offered "golden goodbye"
mortgagestrategy: Mortgage Express waives ERCs to help customers leave
Mortgage Express, the broker-facing arm of nationalised lender Bradford & Bingley, is encouraging borrowers to remortgage elsewhere by waiving early repayment charges. The lender has advised brokers that clients coming to the end of their deal between February 1 and June 30 2009 will be able to move their mortgage to another lender without incurring ERCs.
asset prices look like they will continue to decline
Investors Chronicle: Is there a bubble in gilts?
One argument by John Redwood, who I never liked much but his opinion seems reasonable but he doesn't say all that much, with the opposing argument by "David Kauders, partner in Kauders Portfolio Management" who has the interesting point that savings (I guess he means the coin of savings/debt ! :) ) is low historically. I suppose locking a decade of FTBs out of the market might crimp overall borrowing. Poor old kids have had to borrow 80 quid for an ipod instead of 100K for a normally priced house.
Sounds a bit dodgy to me.
Reuters: FSA says government proposes immunity power
LONDON (Reuters) - The Financial Services Authority on Wednesday said the government had proposed giving it the power to grant immunity in criminal investigations, seen as a key tool in successfully prosecuting financial crimes. The proposal is set out in the Coroners and Justice Bill, published on Wednesday, and will make it easier for the FSA to crack down on crimes such as insider trading, the watchdog said.
House prices forecast.
Reuters: Housing market falls seen extending into 2010
LONDON (Reuters) - House prices will fall about 11 percent this year and the market will take up to two years to stabilise despite the lowest base interest rates in the Bank of England's 300-year history, a Reuters poll showed. Average house prices are seen falling 10.8 percent this year after diving 16 percent in 2008 and were set to fall a further 3 percent in 2010, the poll of 37 analysts at UK banks, investment firms and consultancies taken January 12-14 showed. Rapidly rising unemployment and a shortage of mortgage credit to new buyers is seen driving future declines in prices.
It was coming
Bloomberg.com: U.S. Home Prices Will Continue to Tumble Until 2010, PMI Says
U.S. home prices, already down 23 percent from their July 2006 peak, will continue to fall until the third quarter of next year
This is starting to look Real Bad
The Market Oracle: Nouriel Roubini 2009 U.S. GDP Forecasting 40% Home Mortgage Failures?
Last week Dr. Nouriel Roubini's newsletter (RGE Monitor) predicted a peak to trough in US housing of 38% to 44% with a bottom not before mid 2010.
You don't say!?
The National: Moody's says outlook of UAE banks 'negative'
Did you know that HSBC in teh UAE don't have a debit card facility? Yep, that means everyone buys everything on credit. Oh, and cars are pretty much all on credit too (and some banks are kind enough to offer "rent loans" so you can afford your overpriced one bed). I would say that the amount of money borrowed against cars, on credit cards and as mortgages on property is mind-blowing.
I think she may have been smoking some green shoots!
BBC news: Tories blast 'green shoots' claim
Business minister Baroness Vadera's comment that she could see "a few green shoots" of recovery have been attacked by the Tories as "insensitive".
If your waiting for China to save the world economy, this guy reckons; forget it.
Timesonline: A tidal wave of discontent threatens China
The whole world is suffering from an economic crisis. Some in the West, like a desperate drowning man clutching at a straw, have said the Chinese Government has a lot of money, let us beg them to save us from the crisis. But they do not realise that the Government in Beijing does not know how to save itself.
Biggest Bank in the world breaking itself up
Daily Mail: Citi break-up puts hundreds more bank jobs at risk
Hundreds more bankers in London are at risk of losing their jobs as Citigroup moves to break itself up in a drastic bid to secure its future. Citi, the world's largest bank with some 10,000 staff at its offices at Canary Wharf, is preparing to split into 'good' and 'bad' banks to isolate toxic and unwanted assets from the healthy parts of the business. This would shrink the once-mighty banking giant by a third and could also involve the sale of various 'non-core' units, leading to yet more job losses.
The Triffin Dilemma of supplying the world's reserve currency
Reuters: Global imbalances & the Triffin dilemma-John Kemp
First noted by Yale economist Robert Triffin. In a famous warning to Congress in 1960, Triffin explained that as the supplier of the world's reserve currency the United States had no choice but to run persistent current account deficits...The United States is not the first country to discover the perils..The United Kingdom experienced chronic instability during in the 1918-1939 period in part because the large outstanding "sterling balances" overseas. Maintaining sterling's convertibility into gold and the integrity of the sterling area required.."mutually assured destruction" (the United Kingdom would be forced off gold and the Dominions would find the value of their sterling holdings cut)...The United States and China are now locked in a similar embrace.
People sucking up tax resource
BBC News: "Working - what's the point?"
A story of two wasters who live off benefit and see no point in getting work. They managed to leave school with no qualifications at all (bearing in mind GCSEs aren't exactly tricky). If only there was a career in being useless and sucking up state resources these two would be brilliant at it. I guess that's the benefits industry, and they're captains of it.
Dont ask me to explain but it seems important!
Bloomberg: Credit Swaps on Ireland, Spain Rise on Ratings Threat
Jan. 14 (Bloomberg) -- The risk of losses on European government bonds is mounting as the economic slowdown threatens credit ratings in Ireland, Portugal, Spain and Greece. Credit-default swaps tied to the debt of Ireland rose more than seven-fold since September to 217 today, while those for Spain rose about 71 basis points to 122, Portugal increased 80 to 120 and Greece jumped 160 to 238, according to CMA Datavision in London. Contracts linked to the debt of lower-rated Mexico and Vietnam fell in the same period.
Reflecting the collapse in US, UK and European markets.
Maritime Connector: Container shipping rates hit zero as trade sinks
"This is no regular cycle slowdown, but a complete collapse in foreign demand," said Lindsay Coburn, ING's trade consultant. Idle ships are now stretched in rows outside Singapore's harbour, creating an eerie silhouette like a vast naval fleet at anchor. Shipping experts note the number of vessels moving around seem unusually high in the water, indicating low cargoes. It became difficult for the shippers to obtain routine letters of credit at the height of financial crisis over the autumn, causing goods to pile up at ports even though there was a willing buyer at the other end. Analysts say this problem has been resolved, but the shipping industry has since been swamped by the global trade contraction. ~~~~~~~ so house price wise ~ we're nowhere near the bottom
Please Sir, Can I have Some More?
Reuters: FTSE eases as HSBC leads banks lower
HSBC (HSBA.L) dragged the banking sector lower after Morgan Stanley said Europe's biggest bank may have to raise as much as $30 billion (20.5 billion pounds) in capital and halve its dividend as earnings were likely to deteriorate more than expected. HSBC shares were down 6 percent.
And the Knock On Effect Will Be?
reuters: UPDATE 1-US three-month budget gap exceeds FY 2008 full year
WASHINGTON, Jan 13 (Reuters) - The United States racked up a record $485 billion deficit for the first three months of fiscal 2009, exceeding the $455 billion gap for all of the previous year, the U.S. Treasury said on Tuesday. ~~~~~~~~~~~~~~~~~~ The ballooning deficit could constrain President-elect Barack Obama's ability to revive the U.S. economy with a massive fiscal spending program this year.
It's not just me then (?)
Adam Smith Institute Blog: Tax simplification: the case for a land value tax
The ASI have kindly allowed me to give this idea another whirl, backed up with the conclusions of Adam Smith himself.
Chinese demand collapsing
ChinaNewsWire: Tough 2008 for China
Demand led deflation altering Chinese inflation. This article,http://www.chinadaily.com.cn/china/2009-01/10/content_7384686.htm, from the China Daily suggests that 2009 will be 0% inflation as measured by CPI. Which means that the UK has a while before any inflationary problems arise. Which is good I suppose... If the UK savers are really lucky they will be dead before the deflationary period ends, thereby keeping the value of their hard earned coins. But no more holidays or living in Europe ! Sorry.
Evidence of dire state of London market now
New York Times: From a dairy farm to a London row house
I quote: "The central London market has seen prices drop 15 to 30 percent in the last 12 months, according to Lindsay Cuthill, the director of sales at Savills, a real estate agency. “I would say that the coming weeks will show that precious few deals were done at those levels in the last quarter of 2008,” he said. “I think, as sales are completed, we will find that in reality there were price drops of 30 percent and above in the last weeks of the year.”"
Very wrong
Guardian: Bush gives Blair highest US civilian honour
Whatever next? Why didn't they just give awards to each other when they were in power. I find it rather disconcerting that Blair, a former Prime Minister of the UK, is receiving awards from a foreign country. I like America and Americans, don't get me wrong, but considering the current state of the UK... Wrong, wrong and wrong. This is totally wrong. What a git.
Double digit wage inflation required for debts
Scotsman: Bank Loans skewed to Households
"The question is whether the UK consumer can keep up the payments on its collective debt, which starts to look more unlikely as unemployment rises. Nor can employers be reasonably expected to put wages up. Evo estimates it would take double-digit wage inflation to meet payments on debts." Hmmm. On a separate note, I think the Scotsman has really good articles on finance. I often notice them. Perhaps they just lack the vested interests of their southern based competitors, who are usually really unimpressive. Anyway, at the moment double digit wage inflation doesn't look very likely, so 2009 looks like keeping its Year Zero status for defaults.
Ministers are looking at wasting taxpayers' money to kickstart the ailing property market
Guardian: Blue sky thinking to revitalise affordable homes market
Ministers are looking at detailed plans for a multibillion-pound infrastructure fund to kickstart the stricken housing market. Against the worst conditions for housebuilding for more than 30 years, senior Whitehall officials are drawing up a groundbreaking scheme [massive money pit] that would see the public sector inject equity [i.e. taxpayers' money] into social housing developments in an attempt to "lever in" [great, more leverage] insurance and pension funds investment. A decision on whether to proceed with the new fund is expected to come next month. The scheme would in all likelihood be administered by the newly formed Homes and Communities Agency [another quango with gold-plated pensions for its do-nothing employees]. [IT'S ALL about land values! What a bunch of muppets.]
Publicity stunt reveals Aussie desparation
BBC News: How to land dream island job
Given the extent of its own economic woes, is anyone surprised to see Australia turn this fake 'job opportunity' so surreptitiously into world news?
A recession is when your neighbour loses his job; a depression is when you lose yours
Times: Hard times are not yet personal
The recession is still a worrying headline for most voters, not an imminent personal threat. Most people have not yet been directly affected by redundancies. Indeed, many are doing pretty well, thanks to the slowdown in inflation. That applies especially to those with multi-year pay deals in the public sector. Moreover, the state pension will rise in April by 5 per cent, and other benefits by even more. Half of housebuyers with flexible rate mortgages will be enjoying big savings in their outgoings. The position could get much worse for if/when more people lose their jobs. So while Mr Brown is still just holding his own against David Cameron on handling the economy and the recession, the public could easily turn against him.
John Steinbeck - in reverse!
Telegraph: Soaring cost of living drives residents from California
The Californian dream is turning sour for increasing numbers of West Coast residents who are abandoning the Golden State and heading east in search of a better life. Those leaving cite the worsening unemployment rate - 8.4 per cent, the third-highest in the nation - high taxes and rents, rampant foreclosure rates yet property prices still out of the reach of many families. Most businesses are shedding jobs - even in the entertainment industry - and with the state grappling a budget gap projected to swell to over 41 billion dollars in 18 months, higher taxes and drastic cuts to public services seem all but inevitable. [NOTE: During the Great Depression, millions of people moved from the midwest to California. Interesting to see the reverse happening. See Steinbeck's The Grapes Of Wrath.]
Recession = crime
Times: Don't bank on a caring, sharing recession
Some people hope that the recession will make us a less materialistic, more sharing nation. It won't. If anything, it will make us nastier and meaner. For most people, the main effect of recession is not to cause poverty, but insecurity [about jobs & homes]. And when people are insecure and anxious, they care less for others. As Adam Smith said: “Before we can feel much for others, we must in some measure be at ease ourselves.” Recessions mean that we are not at ease - and, as Smith recognised, more selfish as a result. Recessions also make us meaner in another way - some of us turn to crime. In September a leaked Home Office report said that a recession could lead to a rise in burglaries. It might have added that the Pope is Catholic. There is worse. Recessions can also increase racism.
Can't get a loan? Want to support local businesses? Try a pawn shop
Times: Pawnshops take on mantle of banks as ill wind blows in new class of customers
Yesterday afternoon in West London a young family walked into a newly upholstered high street store and pawned some jewellery in return for a loan to help to pay the rent. H&T pawnbrokers announced yesterday that it would make larger profits than expected. It has grown from 59 stores to 105 in the past four years and will add another 16 outlets to the chain in 2009. John Nichols, chief executive, described the current economic climate as “very good for us”. The Hammersmith branch of H&T feels more like a building society or a bank: upholstered in pine, jewellery hanging on blue velvet beneath glass counters and two booths where engagement rings and watches and family silver may be exchanged as security for a loan at 8 per cent interest per month.
If they aren't needed now, why were they needed before?
Times: Councils start to shed jobs in their thousands
Tens of thousands of public sector jobs will be lost across Britain this year as councils struggle to cope with the impact of the recession. Forty councils approached by The Times yesterday were planning a total of 7,000 redundancies, and unions fear that few of the 442 local authorities across England, Scotland and Wales will escape the cutbacks. Although most of the job losses will be among backroom staff, there is concern that services will be affected. The scale of the proposed redundancies is the first indication that Britain’s six million public sector workers will not be protected from the slowdown. Health and education professionals fear that they may be next.
More on bailiffs and their new powers
Telegraph: An Englishman's home is no longer his castle
We will be hearing a lot more of the bailiff in coming months. About 75,000 homes will be repossessed this year and hundreds of thousands of people will face action for unpaid debts. Local authorities are also using bailiffs to pursue council tax defaulters, with more than a million visits last year. If you want a job, here is one that will last while all around are losing theirs. Her Majesty's Courts Service issued guidance to bailiffs about how their powers should be used. "If a person locks himself in their home, it might be reasonable to break open the door, but probably not to smash a hole in the wall," it advises. In 2007, the Government extended these powers to allow bailiffs to use physical force against householders to restrain or pin down them down. [Linked from LewRockwell.com]
Tuesday, January 13, 2009
The Final Solution
MSN: Is printing money the solution to our problems?
What can you do when interest rates hit 0%? The answer, which the government is apparently considering, and the US Federal Reserve is already doing, is quantitative easing. Or, more simply, printing money. Printing money safely - if there is such a thing - requires a government that you can trust to act responsibly with the nation's finances. Judging by the way that both Barack Obama and possibly Gordon Brown are embracing the notion that you can spend your way out of recession, there's little chance of that.
Reluctant landlords are in for a shock
Evening Standard: It costs a packet to be a good landlord
"The front door's the worst bit," I explain as I open it to my prospective tenant. "And the hallway. Looks like a crack house, ha ha!" My prospective tenant surveys the op-art smears of rubber from bicycle tyres on the wall, the lifting carpet, the dangling spiderweb mausoleums. "Deters burglars, you see." I spent the morning in the estate agent's office with a chequebook. "We'll just need a cheque for the Energy Performance Certificate." I wrote a cheque. "Oh yes, and one for the gas certification." The real gobsmacking came, though, when the prospective tenant said: "I'll take it." Then: "Can you be out by February 1st?" Now I'm really sunk. [QUESTION: Are landlords blatantly flouting the law on EPCs? Most advertised properties don't seem to have one.]
We don't need no accountability
LOLFed: Who needs a balance sheet anyway?
The Bank of England has been issuing its balance sheet weekly for the last 165 years, and they have now decided that doing so is just too restrictive and inconvenient. The Government is set to throw out the 165-year old law that obliges the Bank to publish a weekly account of its balance sheet – a move that will allow it theoretically to embark covertly on so-called quantitative easing. The Banking Bill currently passing through Parliament, abolishes a key section of the 1844 law which originally granted the Bank the sole right to print UK money. Some have warned that the move means “there is nothing to stop an unreported and unmonitored flooding of the money market by the undisciplined use of the printing presses.”
It just gets worse.....
BBC: Barclays planning 2,100 job cuts
Barclays is to cut at least 2,100 jobs globally across its investment banking and wealth management businesses, the BBC has learned.
Zero
Telegraph.co.uk: Shipping rates hit zero as trade sinks
Freight rates for containers shipped from Asia to Europe have fallen to zero for the first time since records began, underscoring the dramatic collapse in trade since the world economy buckled in October.
London residential house prices lead the way down
FT: London house prices suffer fastest falls
House prices in London fell faster than anywhere else in the UK last year, with a drop of 13.3 per cent, according to figures from the Chesterton and the Centre for Economics and Business Research (CEBR) . The national year-on-year average decline was 12.8 per cent at the end of December, bringing the average price of a residential property in England and Wales down to £171,348.This figure is also a 1.6 per cent drop from November last year, and brings prices back to levels which were last seen in February 2006, the Chesterton House Price Poll of Polls revealed. December marked the sixteenth successive month of house price falls and recorded the largest year-on-year fall since the Poll of Polls began.
Mortgage products and lending continue to evaporate
mortgagestrategy: Available products drop to new low
The number of mortgage products available in December fell a massive 79% from the same time in 2007, data from Mortgage Brain has revealed. At the end of December 2007, 24,094 products were available to brokers in the UK. This dropped to 5,095 at the end of December last year, amounting to a fall of 79% in the past year. The number of variable rate products went from 6,628 at the end of 2007 to just 381 by the end of last year.
Hang on to your BTL for 20 years and all will be well claim ARLA
mortgagestrategy: Landlords hold firm despite house price falls
A study from the Association of Residential Letting Agents shows that buy-to-let investors expect to hold on to their properties for up to twenty years in spite of falling house prices. The latest quarterly ARLA Review and Index, published today, reveals that the proportion of investment landlords who do not expect to sell during the next year has shot up from 77% to 88%
80% and 10 years - big numbers
IrishTimes.com: Warning that house prices may fall by 80%
Recovery will be slow: “It has taken us 10 years to get into this situation – it will in all likelihood take us 10 years to get out of it.”
Why you can't Borrow and Spend your way out of a Debt Crisis
Comstock: Substituting Debt for Savings and Productive Investment It is a Recipe for Financial Disaster
"We showed that it took $1.50 of debt to generate $1 of GDP for the two decades of the 1960s and 1970s, and then it averaged $2.50 to generate $1 of GDP in the period from 1982 to 1997. Starting in 1997 the debt really took off and this economy wound up taking a little more than $3.50 to generate just $1 of GDP in 2008."
Santander cannot be as rock solid as is led to believe.
Telegraph: S&P threatens to strip Spain of top AAA rating
The move caused fury in Madrid and revived fears in the currency and bond markets about the underlying health of Europe's monetary union. Spanish officials are irked that S&P has placed Spain's debt on "CreditWatch Negative", a notch lower than the "outlook" alert issued on Irish bonds last week. It is the first time that a AAA country has suffered such a harsh verdict since the start of the global financial crisis. S&P? Does anyone still actually listen to a word they say?
Depressing
Timesonline: UK trade gap hits record £8.3bn despite weak pound
Britain’s trade deficit rose to a record level in November as a slump in sales of to the US dashed hopes that the weak pound would help protect exporters from the full effects of the global economic downturn. The trade gap, which occurs when the sum of goods and financial services imported into the country is bigger than those it exports, widened from £7.6 billion in October to £8.3 billion in November as export earnings fell by 6 per cent to £19.8 billion over the month.
The Real Tourniquet: Capital Adequacy and the Mark-to-Market Rule
RBN News: CREDIT WHERE CREDIT IS DUE: THE DIRECT WAY TO FIX THE CREDIT CRISIS
Dear Sirs, In light of recent developments, when you returned my check marked “insufficient funds,” were you referring to my funds or yours? What actually constrains bank lending is the capital adequacy requirement, something that is imposed not by our own central bank but by the Bank for International Settlements (BIS). Called “the central bankers’ central bank,” the BIS pulls the strings of the private international banking system from Basel, Switzerland. a far more important source of the decline in required reserves has been the growth of sweep accounts. In the most common form of sweeping, funds in bank customers’ retail checking accounts are shifted overnight into savings accounts exempt from reserve requirements and then returned to customers’ checking accounts the day.
From our occasional series on house prices...
Metro: Record fall in property prices
They're looking at the DCMS figures that are woefully out of date - "House prices fell by a record 8.6% during the year to the end of November. UK homes lost a further 1.9% of their value during the month, pushing their average price down to £199,732 - the first time the figure has dipped below £200,000 since November 2006, according to the Department of Communities and Local Government." but never mind, it's all grist to the mill.
do not induce excessive procyclicality in the financial system and the economy
Telegraph: Ben Bernanke hints that Basel rules on bank capital should be revised
"We should revisit capital regulations, accounting rules, and other aspects of the regulatory regime to ensure that they do not induce excessive procyclicality in the financial system and the economy."
Local authority cash - now you see it
24dash: Council tax cash to 'guarantee mortgages' in bid to bolster Nottingham's housing market
A new mortgage could be guaranteed by public money as part of a local authority's plan revealed today to encourage lending. Nottingham City Council is in talks with a building society about the possibility of under-writing mortgages with taxpayers' money in an effort to rejuvenate its local housing market. As part of the plan, the authority could also help home-buyers by stumping up equity where lenders are looking for significant deposits. The Nottingham is the only lender that has so far publicly expressed an interest in taking part in the scheme. Councillor Alan Clark, in charge of regeneration at the local authority, said he believed it was one of the first such initiatives proposed.
Local authority cash - now you don't
This is Nottingham: Hundreds of jobs face axe at Nottingham City Council
MORE than 350 posts are expected to be lost at Nottingham City Council to make up a huge funding shortfall. Estimates suggest the council must make £20m of savings to balance its budget for 2009-2010. It is planning to save £12m a year by cutting the posts – because of job sharing, this will affect up to 400 people. In addition, officers expect about 80 vacant positions will not be filled. The council blames the funding gap on increasing costs and the economic downturn. It is struggling to meet rocketing costs in child protection, following recent criticism, while the amount of money needed for adult social care is increasing as young people with severe disabilities reach adulthood. In addition, staff costs are set to go up and fuel costs will be higher.
We have our scapegoat....
Yahoo: Did David Bowie Cause the Credit Crunch?
As implausible as it seems, the Daily Mirror has today accused the pop legend of inspiring ‘securitisation', one of the key factors behind today's economic fallout.
“doubled if not tripled”, so they don't know either
FT com: World Economic Forum warns of rising risks
The risk of serious fiscal crises in developed countries has “doubled if not tripled”, according to the World Economic Forum’s report on global risks ahead of the gathering of government and business leaders in Davos later this month. The report predicts that massive government spending to shore up financial systems will threaten countries such as the US, UK, France, Italy, Spain and Australia, which are already in a precarious fiscal position.
Quick the Market is picking up! Ha Ha
Evening Standard: Estate agents sell 7 homes in three months
ESTATE agents in London dealt with a dwindling number of house sales at the end of last year as the capital bore the brunt of the housing market decline, figures show today.
RICS Report Download
RICS: Housing Market Survey December 2008
The EA's comments are always an interesting read, you can tell how many are still in denial through to capitulation.
If you haven't got an allowance you can't rent!
The National: Housing Allowances Cut
Dubai prices have been driven up by obscene housing allowances bundled onto salaries which have helped fuel greedy landlord's rent rises. Hight house prices are fine if you are an investor and the rent is enormous. However, if money tightens and you can't give these huge allowances there arises a problem. Couple this with retrenchment of staff and low oil prices, investors trying to flee a market with no buyers and boy do you have a problem!
Lawyers getting busier than EAs
The National: Financial storm engulfs property
DUBAI // Ludmila Yamalova, a partner and lawyer at MAC Davidson and Associates in Dubai, spends many of her waking hours in the hectic headquarters of the Land Department and the Real Estate Regulatory Authority (RERA) just trying to find out what is going on. “I basically live in their offices,” Ms Yamalova says. “All of these investors, who are my clients, are in trouble and there is nowhere else to go to find out how it is going to be resolved.”
Sinking in the sand?
The National: Dubai Property Prices Slip
Dubai Property prices have been driven sky high by speculation for years. The problem is, when nobody wants to speculate anymore and end-users can't afford the prices or a 30% minimum deposit, it is hard to make a sale.
They should have measured nose length
BBC: Finger size link to earning power
The length of a man's fingers may predict his success in the City, research findings suggest.
How many more bailouts do the banks need?
Reuters: U.S. bank earnings may be "frightful"
Government efforts to prop up U.S. banks and savings institutions have only partly cushioned the blow from what may have been the industry's worst three-month period since 1990.
Brown should cut taxes and stop spending
MoneyWeek: How Gordon Brown can help the economy – cut taxes and stop spending
"If it really has to, the Government could still do something - it could cut taxes. That would put more money in people's pockets, which they could use as they wished. It could cut spending on unproductive non-jobs to pay for it – there are arguably plenty of people in quangos and in public sector middle-management posts who would cost the taxpayer far less and do far less damage on the dole than in their posts."
The rising economies of Asia are too small and deformed to rescue world growth as America, Britain,
times: Decoupling dies as half the globe hits crunch
The seven pillars of global demand over the last year - measured by current account deficits - have been the United States ($793bn) (£388bn), Spain ($126bn), Britain ($87bn), Australian ($50bn) Italy ($48bn), Greece ($42bn), and Turkey ($34bn). Most are facing a housing bust. All are in trouble.
Bad times ahead, kupo
BBC 'News': UK economy downturn 'frightening'
Business leaders have painted a bleak picture of the UK economy, with a survey suggesting a "frightening deterioration" towards the end of 2008. The British Chambers of Commerce (BCC) said its survey results were "awful" and the worst since records began in 1989. Like-for-like sales in December were down 3.3% on a year ago while total sales shrank 1.4%. This is despite the government cut in VAT. The BCC's chief economist David Kern said that he now expected the UK economy to shrink by up to 2.4% in 2009, rather than the 2.2% he had earlier forecast, making this worse than the 1990s recession. Mr Kern said more rate cuts were likely, but that the authorities would have to go further to avoid a prolonged depression, including printing more money.
Blood bath
Times: Merrill Lynch and Bank of America set to cut 1,900 jobs after merger
Merrill Lynch and Bank of America, its new owner, are preparing to cut about 1,900 staff in London — one of the biggest single staff reductions in the history of the City.
big reductions and more unsold houses
The Times: House sales 'at lowest levels for 30 years'
"The housing market slowed to a virtual halt at the end of last year as the number of properties sold reached a record low, the Royal Institution of Chartered Surveyors (RICS) said. It blamed the lack of mortgage finance for the lowest transaction levels in 30 years." More trouble ahead methinks
"First-time buyers and owner-occupiers are now stuck in a market which does not fulfil their aspirat
BBC News: House sales 'continuing to fall'
Rics found that the number of members reporting sliding prices had eased a little, with 73.5% more of its members seeing prices fall locally than rise - the lowest level since February. However confidence in house prices in the months ahead fell to its worst level since April 2008, with nine out of 10 Rics members in England and Wales reporting a fall in price expectations. Large supplies of unsold properties and the number of buyers able to get access to financing were the main depressing factors, the group said.
Monday, January 12, 2009
Just to follow up my previoys article.
V Mises: The Great Credit-Crunch Hoax of 2008
Remember the credit crunch? Of course you do. We'd never seen anything like it, or so the highest financial authorities and their lapdogs in the news media told us — not in a cool, calm, and collected way, either, but in a breathless delivery that suggested imminent economic doom unless the government immediately undertook to "do something." Which it did, of course, on a scale never before witnessed in US history.
Money is not an issue!
BBC News: Ministers mull £20bn loan scheme
Ministers are considering plans to guarantee up to £20bn of loans to small businesses to help them survive the downturn, the BBC has learnt. The BBC's political editor Nick Robinson said the scheme, which could be announced on Wednesday, was designed to address the severe lack of credit.
Bank of England try to scare us into spending
BBC News: Savings rates hit five year low
The rate of interest paid on instant access accounts from banks and building societies hit a five-year low in December at an average of just 0.81%. The figures, from the Bank of England, also show that interest on notice accounts slumped to the lowest level on record at an average 0.82%.
Highly inflated house prices headed for a huge correction
TimesOnline: Leading economist fears decade of weakness in US
One of the world's leading economists has given warning that the United States is facing a decade of financial misery, with the number of unemployed Americans set to continue to rise for years.
Growth is gone
Time.com: The Last Pillar of the Chinese Economy Falls
What was unimaginable a year ago has now happened. China has entered a recession and it may end up being deeper than the one in the U.S.
No way out - house prices will keep falling for years
The Huffington Post: Sorry, America, There's No Quick Fix
* Even Obama's people project that, if his stimulus plan is adopted, unemployment will remain at the current level (7.3%) for three years. * Consumers still have way too much debt, and they're now losing jobs at an accelerating rate. We're not going to suddenly jump back to irresponsible debt-fueled spending growth, especially with banks and credit-card companies tightening lending standards. * House prices are falling at almost 20% year over year. Markets that big don't turn around on a dime, no matter what you do.
What a surprise!
BBC News: Lloyds HBOS merger gets go-ahead
The merger of banks Lloyds TSB and HBOS has been granted the final legal approval by a court in Edinburgh. Following the decision by the Court of Session, the new Lloyds Banking Group is due to start trading from next week. The announcement came after it was revealed that the Treasury is to own 43.4% of the merged bank after few shareholders bought new shares.
Thats some leap.
BBC News: http://news.bbc.co.uk/1/hi/business/7824666.stm
The collective deficit of the UK's final salary pension schemes shot up in December to £195bn, according to the official pension scheme safety net. The Pension Protection Fund (PPF) said the deficit rose by 43% from the £136bn recorded at the end of November.
At last someone is being optimistic.....
Housing Market 2009 not all bad: about property.co.uk
A UK residential agent, Hamptons International, has outlined why 2009 might not be as bad as we all think. 1. The bank base rate is only 1.5 per cent ..... 2. Prices have already dropped by 20-25 per cent..... 3. Lower prices also enhance affordability.... 4. Vendors are far more acceptant of the need for price realism.... 5. Banks are under extreme pressure to increase liquidity..... 6. Pent-up demand..... 7. Stock of available property is down 25 per cent since May last year .....
Interesting take on Why Prime London Prices Might Have Further to Fall
Exceptional Homes Research: London Rentals Market May be Signalling Big Asking Price Falls in 2009
This piece argues that rentals yields on prime London properties are still much too low (based on asking prices) and therefore that asking prices need to come down quite a lot to bring them into line with what has happened in commercial property.
Cameron cranks it up a notch.
The Independant: Cameron: "New babies born with £17,000 debt"
Rapidly-rising Government debt means every baby born in Britain starts life owing £17,000, Tory leader David Cameron said today as he launched a new publicity campaign. His claim came as the Opposition unveiled a hard-hitting new poster designed to highlight what it calls Labour's "debt crisis". The poster, which will be shown at 260 billboard sites across the country, features a photograph of a baby and the slogan: "Dad's nose, mum's eyes, Gordon Brown's debt - Labour debt crisis: Every child in Britain is born owing £17,000. They deserve better."
Another one bites the dust
BBC: Land of Leather in administration
"Consumers have been cutting their spending as a result of the economic slowdown, hitting sales of items such furniture. " Really?
Superb
Telegraph: This recession demands that we employ logic and spend our way out of it
Solution going mainstream. Also pretty much echoes my own views, and therefore brilliant. There is a rash of this stuff about at the moment.
Punishing savers is no way to help the economy
MoneyWeek: Punishing savers is no way to help the economy
"I have nothing but sympathy for people facing repossession. But I also have sympathy for people who sensibly didn’t buy and are now being penalised for it."
Borrowing difficulties
Times Online: We may want to borrow but will anyone lend?
This article contains the interesting question first proposed by the "brilliant" keynesian Richard Khan in 1937, "is it an increase or a decrease of saving which would stave the crisis off?” Apparently there is no answer. My own admittedly simplistic view is that spending creates jobs so anything that increases spending should be able to do the trick, which leads me to conclude increase disposable income. As far as the original question, either an increase -or- a decrease should do the trick. The status quo is the killer. Ideally both an increase and decrease at the same time from different elements of the population. That money has to keep swirling around. Of course that doesn't help the UK if we don't make desirable goods and have a trade deficit.
Bring me your losses, keep your future profits
FT Alphaville: Handouts For Homeowners
I hope this doesn't come to the UK... Homeowners at risk of foreclosure could refinance their mortgages via the Federal Housing Administration “at a signficant discount.” In exchange they had to share future appreciation in the value of their homes with FHA. This, perhaps unsurprisingly, was a stumbling block for applicants, who weren’t happy at the prospect of ’sharing’ profit (sharing losses with the taxpayer was, presumably, fine).
he said that the Government was leading the world in its reaction to dealing with the global downtur
telegraph: Gordon Brown says he has 'plan' for economic downturn
He told GMTV: - - - - - "We have got a plan. It is pretty straightforward what we are trying to do. When the markets and private sector fail, and cannot invest properly in the economy, the only - 'person' - that can is us, the Government. "We are investing in the economy so that we can actually build up the economic activity, keep people in jobs, create more jobs and of course stop people being repossessed in their homes.
Brown discussed Crosby report with bank chiefs
MyFinances.co.uk: Bank bosses met PM over mortgage guarantees
The meeting at the prime minister's Buckinghamshire country residence Chequers is thought to have looked at bringing government guarantees for new mortgage lending into force. The proposals were first put forward in a report commissioned by the government by Sir James Crosby, the former chief executive of HBOS. A response from the government to the Crosby report was expected last year – but the Treasury has turned to see if measures cross the EU state aid rules. Under the plans the government would guarantee the new issuance of residential mortgage backed securities. It is the collapse of the market for these securities that has reduced the funds available for lenders. In 2007 around £650 billion in lending was funded through the securisation markets. The Royal Institution of Charter
Falls in every region over 2008
Home.co.uk: Fewer Price Cuts Over Festive Season
"Time-on-market indicators are rising and for some worst affected locations the average marketing period for homes for sale is approaching a year. Clearly, vendors in such areas of the country are being overly optimistic and need to adjust their asking prices accordingly. Keenly priced homes are still selling within a reasonable timeframe." Still some denial out there...
Darling to guarantee £100bn of new mortgages
Scotsman: £100bn bid to end home loan misery
ALISTAIR Darling is set to back a £100bn gamble with taxpayers' cash in a desperate bid to kick-start the struggling mortgage market. The Chancellor's plan involves effectively underwriting the majority of new mortgages in the UK to encourage big investors to give badly needed money to lending banks. The proposed scheme means the UK Government would guarantee mortgage bonds, where banks parcel up individual home loans and sell them to investment firms. The new measures, coming on top of a £500bn scheme to guarantee banks' borrowing and the £12bn cut in VAT announced in October, will raise further fears over the extent of the Government's spending.
More silver linings
Telegraph: House price decline 'makes moving from bottom of property ladder easier'
Falling house prices have made it easier to trade up from the very bottom of the property ladder than at any point in the past five years, figures suggest. But because larger properties have held their value better it has become even harder for families in middle-sized homes to move into more spacious houses. The decline in the value of two-bedroom homes has been sharper than any other property type, with such properties losing about 12 per cent of their value compared to a drop of eight per cent in the price of one-bedroom homes, according to the estate agents propertyfinder.com. The difference in price between the average one-bedroom property and two-bedroom house is now some £31,000 - £10,500 less than it was a year ago and the lowest level for five years.
Sunday, January 11, 2009
Free Speech?
yahoo news: Report: SKorean blogger arrested
SEOUL, South Korea – A South Korean blogger pleaded not guilty Saturday to charges that he spread false economic information on the Internet, a news report said, in a case that drew heated debate over freedom of speech. The blogger, identified only by his surname Park, gained prominence among South Koreans because some of his dire predictions about the global economy, including the collapse of Lehman Brothers, later proved to be correct. Known widely by his pen name "Minerva," the mythological Greek goddess of wisdom, the 31-year-old Park was accused of spreading false information on an Internet discussion site last month that the government had ordered major financial institutions and trade businesses not to purchase U.S. dollars
Luckily some home owners are getting help
MailOnline: Public officials boosting their incomes by £40k with 'second home allowance'
Senior public officials are being paid a 'second home allowance' that can boost their incomes by £40,000 a year or more, it was revealed today. Those claiming thousands to maintain second homes on top of salaries that are higher than the Prime Minister's pay include senior NHS figures, Whitehall confirmed. However, the number of public servants claiming the allowances has not been disclosed.
You can't bully a saver into spending money on UK goods
Times Online: You can’t bully a saver into spending
Political view on failure of Conservatives to make any adequate response. Makes the valid point that we suffer from excess savings (same as debt). I think the UK savers do want to spend, and they have been spending. Unfortunately they don't want to spend their savings on goods made by people who owe them the money, aka the UK debtors. Savers want to buy stuff like large LCD screens, holidays in Venice, laptops, fruit, energy. None of which are made in the UK. So the UK debtors cannot work it off in aggregate, irrespective of how many government jobs are made. Unless they move to taxing savings...Hence the impasse and the economic breakdown.
Everyone can see whats coming
Telegraph: The economy: more horrible truths
Look at the majority comments on this article. I don't like the persistent use of "reluctance of banks to lend" though, which you can see everywhere, much better would be to say "banks aren't allowed to price in the high risk of defaults". Also an attack on public sector expansion at the expense of the private sector, although seen here as misguided instead of ideological(also misguided imo). The conclusion is that either international investors will fund government borrowing or the UK will end up with the IMF. I wonder which it will be. Both seem pretty bad. Hope springs eternal etc The main problem with the IMF is that apart from admitting the UK is toast, they won't be able to help us. 2009, here it comes.
'bad bank' solution or 'bad government' solution
BBC: Bank bosses discuss mortgage plan
"The government could be set to step in and guarantee mortgage lending under a plan being discussed this weekend. Some of Britain's top bankers are meeting at the prime minister's country residence Chequers. On the agenda is the possible implementation of the Crosby Report, which was published last November. Among recommendations was a plan for the government to provide guarantees on mortgage securities. " Are FTBs really going to jump into the market at the moment even if someone is willing to lend?
House prices likely to fall for up to six years suggests latest research from Harvard University
Harvard University Research: The Aftermath of Financial Crises
Latest academic study on impact of previous financial crises suggests house prices have a long way to go both in duration and magnitude of fall (average of -36%). Authors say: "An examination of the aftermath of severe financial crises shows deep and lasting effects on asset prices, output and employment. Unemployment rises and housing price declines extend out for five and six years, respectively.”
Time to get angry
Observer: It's got so horrible that we ought to be revolting
An article on where it all went wrong
Does anyone in Westminster has a clue?
Daily Telegraph: Interest rates and the economy: Does anyone in charge have a clue what to do?
It's not just new Labour that hasn't got a clue what to do. Its also most of those in Westminster and Whitehall. While they have their index linked gold plated pensions can we really expect them to care? To start fixing this mess we need to remove their pensions - then they will start to think!
Guardian using the 'c' word
Guardian: Housing crash creates tax black hole
Tax receipts down because of house price crash.
Ashworth: Beigy minimalism is over!
Times: Homeowners, are you crunched or are you sitting tight?
Many of the lightly crunched, unhappy with low savings returns, will be pouncing on auction and other buy-to-let bargains this year. They will also be committing cash to their homes, introducing bright colour - which is “so now”. But, although they know that beigy minimalism is “so over”, they will opt for accessories such as £50 throws from Next rather than the multi-hued makeover. The lore of the lightly crunched holds that, when the market recovers, neutral will still rock for most buyers.
More "Rocky Mountain Oysters" From Mr Smith
Times Online: What do certain house-price figures tell us?
What does history tell us? Principally, that there tends to be one really bad year for prices, followed by lesser declines. So maybe we have already seen the biggest annual falls in this cycle.
Anne Ashworth - She just keeps it coming!
Times Online: Home Owners, are You Crunched or Sitting Tight
Many of the lightly crunched, unhappy with low savings returns, will be pouncing on auction and other buy-to-let bargains this year. They will also be committing cash to their homes, introducing bright colour - which is “so now”. But, although they know that beigy minimalism is “so over”, they will opt for accessories such as £50 throws from Next rather than the multi-hued makeover. The lore of the lightly crunched holds that, when the market recovers, neutral will still rock for most buyers - Can anyone please translate this tosh?
UK government is under a debt delusion
The Market Oracle: Financial Doomsday for All Asset Classes
The prevailing conventional wisdom holds that prices of many risky financial assets have fallen so much that we are at the bottom. Although it's true that these assets have fallen sharply from their peaks of late 2007, they will likely fall further still. In the next few months, the macroeconomic news in the United States and around the world will be much worse than most expect. Corporate earnings reports will shock any equity analysts who are still deluding themselves that the economic contraction will be mild and short.
Hyper Inflation, Hyper Inflation, Hyper Inflation
Daily Telegraph: Reform plan raises fears of Bank secrecy
The Bank of England will be able to print extra money without having legally to declare it under new plans which will heighten fears that the Government will secretly pump extra cash into the economy. News of this increased secrecy will spark comparisons with Weimar Germany and Zimbabwe. Savers face a double wammy with low interest rates and hyper inflation. Another one of Gordon's master plans to make us all dependant on the state and thus keep us voting for him. One day it will all end in tears... the longer it goes on the bigger the tears.
Banks are bust
Times: Gordon Brown calls in top bank bosses
In a secret meeting with Myners before Christmas, senior partners from KPMG, Deloitte, Price Waterhouse Coopers and Ernst & Young warned they might not be able to sign off the accounts of Britain’s biggest banks. The auditors were not certain they could state that banks and building societies were “going concerns” under the terms of international accounting rules.
Saturday, January 10, 2009
Loan Repayment Calculator
ExcelExchange: Loan Repayment Calculator
Spreadsheet to calculate the cost of loans. Has a nice little graph to graphically display how much money is wasted on interest.
Past crises inspire little confidence
The Economist: Economics focus - Drastic times
The tone of this year’s gathering of the American Economic Association (AEA) in San Francisco, USA (January 3rd to 5th), was set on its first morning, when Kenneth Rogoff of Harvard University outlined the results of new research. The paper looks at the aftermath of past financial meltdowns to gauge just how bad this recession might be. House prices take an average of five years to reach their nadir and fall by a third in real terms.
Not much to agrue with here. Telling it like it is
The Independent: Why the smile? This is all his fault
Over the course of the past few weeks, I have been criticised by friends for my pessimistic views on the UK economy, and on house prices in particular. I don't see what good it does to shoot the messenger, but I note that throughout history messengers have often received the raw end of the deal! I also find it increasingly difficult to be politically neutral; investment and politics are now more closely linked than ever. I firmly believe that this government has systematically wrecked our economy over the past 10 years.
a once great power engaging in fantasy to disguise from itself that it is a failed state.
CP: Will There be a Recovery?
Economists will scoff at the question in the title. But that’s because they are trying to fit the present into the past. In the past recoveries were routine, because recessions were temporary restraints resulting from the Federal Reserve putting the brakes on an overheating economy.
My predictions for the coming year, unfortunately, are even more dire:
FP: Warning: More Doom Ahead
Last year’s worst-case scenarios came true. The global financial pandemic that I and others had warned about is now upon us. But we are still only in the early stages of this crisis. My predictions for the coming year, unfortunately, are even more dire: The bubbles, and there were many, have only begun to burst.
The ship is going down
MailOnline: Gordon Brown's second bank bailout 'to be ready within a fortnight'
The deepening crisis has forced a Government rethink amid warnings from senior sources that another injection of cash may not be enough and more could be needed within months.
Affecting House Prices in Edinburgh?
Scotsman: Retailers warned: Brace yourself for financial meltdown
Andrew Murphy, the general manager of John Lewis in Edinburgh, said the flagship store would fall from one of the company's star performers to among the worst. He said this was because the city would suffer disproportionately from the economic downturn, amid concerns over huge job losses in the financial sector.
Taylor Wimpey demands 20% reduction in sub-contractor costs
Daily Mail: Bovis scraps dividend, axes jobs.
Bovis scraps dividend and is reducing even more jobs as house sales drop. To save money they are asking sub-contractors to reduce bills by 15% Taylor Winpey writes to sub-contractors demanding 20% off existing orders placed. Wimpey has debts of £1.9Billion reports the Daily mail.
NIESR: Worst Quarter For UK Since 1980
Bloomberg: U.K. Economy Shrank Most Since 1980 Last Quarter, Niesr Says
The U.K. economy shrank at the fastest pace in almost three decades during the fourth quarter as the recession deepened, the National Institute for Economic and Social Research said. Gross domestic product fell 1.5 percent in the three months through December, compared with a drop of 0.6 percent in the third quarter, the London-based institute, whose clients include the Treasury and the central bank, estimated in a report today. That would be the worst quarterly contraction since 1980.
All props for current high house prices have been obliterated
TimesOnline: Surprise rise in US jobless raises spectre of Great Depression
Fears that the world is sliding into the worst global recession since the Great Depression multiplied yesterday as figures showed the steepest jump in American unemployment since the Second World War and a slump in manufacturing across Europe.
Mostly sensible article on how the BoE has failed
Independent: Cutting interest rates is not the answer
One thing is for sure – relying on the Bank to save the economy with rate cuts is no longer an option.
And so the housing implosion marches relentlessly on
investmentmarkets.co.uk: Bovis and Persimmon struggle as housing market shows no sign of recovery
Bovis Homes is cutting a further 200 jobs as the housebuilding industry grapples with the ongoing housing market downturn. The company has already cut 400 workers since last summer, representing a 60% reduction from its workforce this time last year.
Another business destroyed by bad management
Guardian: After 158 years the end is nigh for Bristol & West
A follow up to Jack Cs comments on Thursday about Bristol and West pulling out from the mortgage market. It says the same on their home page. If you wanted one of their mortgages too late.
House prices headed for prolonged fall
Reuters.com: Economists see longest recession since World War Two
WASHINGTON (Reuters) - The U.S. recession will probably be the longest since World War Two and could worsen without heavy government spending
Ssanyyong Crash
CNN: South Korea automaker files for bankruptcy
Ssangyong Motor Co., South Korea's fifth largest automaker, filed for bankruptcy Friday, citing the company's worsening finances. About 800 unionized workers rally at a Ssangyong Motor plant in Pyeongtaek, South Korea, on December 30. Ssangyong is seeking court receivership and filed its application for protection from creditors with the Seoul Central District Court, the company said in a statement. During reorganization, Ssangyong plans to cut costs through voluntary retirement and paid leave, according to the statement. Ssangyong is the South Korean unit of China's Shanghai Automotive Industry Corp., which holds a 51 percent share in the company. Ssangyong has been battered by the global financial downturn and credit crunch like many other automakers.
Friday, January 9, 2009
Dubious land investment scheme, the next bubble to burst?
Rightmove: Land
I'm seeing these all over the country with the same blurb. A field close to a town split into tens or hundreds of useless plots, whilst the land is idle and not farmed. "Investors" sink their money into the thin plots, similar to feudal field systems, in the hope that planning permission will be sought. That begs the question, with a large plot of land, in multiple, often dubious ownership, how could planning permission ever be co-ordinated? Is this an opportunity for squatters who want to have an allotment, graze animals and grow some food during the coming depression? Get a goat and graze it on a paddock with 50 owners, and how can they co-ordinate legal action against you. Who is monitoring the land? No doubt, the initial organiser of the land washed their hands of it.
A prelude to home loan aid
BBC: Mandelson considers car loan aid
The UK car industry does not need a bail-out but the government is considering help for manufacturers' financing arms.
Let the treatment run its course: recession
Independent: ..I've a small piece of advice to offer
Columnist in the Independent newspaper Andreas Whittam Smith says: "... it would be best to admit that the recession will just have to take its course, long and bitter experience though that would be." He makes the point that all the govt actions since Aug 1997 have so far prevented the worst scenarios (I guess this means HBOS going bust for instance). But we are still in a vicious downturn.
The housing market staring into the abyss
Reuters.com: Great Depression jobs parallel may not be far flung
Figures collected for Reuters by John Williams, from the electronic newsletter Shadowstats.com, suggest that, while we are not there yet, the comparison is not as outlandish as it might initially seem. By his count, if unemployment were still tallied the way it was in the 1930s, today's jobless rate would be closer to 16.5 percent -- more than double the stated rate. "I expect that unemployment in the current downturn, which will be particularly deep and protracted, eventually will rival, if not top, the 25 percent seen in the Great Depression," Williams said.
Casa Dubai goes bye bye
Casa Dubai: Casa Dubai
Casa Dubai has closed down with interesting comments in regards to the state of the middle eastern property market.
Very good explanation of gold backwardation
Market Sceptics: Gold Backwardation that shook World
This article explains gold backwardation in a very good, albeit somewhat scary way. The main idea is of the carrying cost. It costs money to hold gold(vault, security etc) therefore the futures price is inevitably larger than the spot price. The spot price essentially does any collapsing necessary. However, at the moment the holders of gold are prepared to accept the "carrying cost" as their personal cost to remain in possession. Essentially they believe gold will be unavailable soon. But, I am coming to believe that all savers are deluding themselves in their attempts to maintain savings value. There is no way out. Gold will fall in real terms as the various economies fall. Maybe it is the -last- safe resort, but that doesn't make it safe.
Stocks are a screaming bye
Telegraph.co.uk: Merrill Lynch says rich turning to gold bars for safety
Merrill Lynch has revealed that some of its richest clients are so alarmed by the state of the financial system and signs of political instability around the world that they are now insisting on the purchase of gold bars, shunning derivatives or "paper" proxies.
Some nice quotes
Evening Standard: Why we’re plunging into a falling property market
“I had a big deposit, got my mortgage easily and fixed the rate for two years. If I then want to move again, the prices of other properties will have fallen just as much so it will make no difference in the end. You're not losing real money.”
Interesting!!
Findaproperty: The Housing Market In 2009: What The Experts Predict
5%-20% further falls predicted.
Was wondering when Europe would catch up?
Telegraph: Europe's economy contracts at rates not seen since 1930s
German exports and industrial orders have both plunged at the steepest rate since modern records began and Spain's unemployment has surged above three million, capping one of the most disastrous days for Europe's economy since the Second World War.
Denial!, Denial!, Denial!
Findaproperty: 2 bedroom apartment for sale
I just thought I'd post this to remind us all that many vendors and EA's are still in denial. Flats in this block were selling in 2003-4 for 187K-197K, but the vendors want 285K, even though Finoulla at Nationwide has said that average prices are now down to 2004 levels. FYI.
Guess the solution
MSN: Saving the global economy
It is already apparent that a deep recession and a burned-out banking system have combined to produce the worst financial crisis since the 1930s. More worrying still is that, as the global economy dives, the usual monetary and fiscal controls are either not responding or are insufficient for the task of pulling us out.
It's time to sell government bonds
MoneyWeek: It's time to sell government bonds
After dotcom stocks, sub-prime mortgages, emerging markets and oil… are government bonds the next big 'bubble'?
U.S. Non-Farm Payroll falls 524,000 - biggest collapse in employment since the end of World War II
U.S. Department of Labor, Bureau of Labor Statistics: Employment Situation Summary
Nonfarm payroll employment declined sharply in December, and the unemployment rate rose from 6.8 to 7.2 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Payroll employment fell by 524,000 over the month and by 1.9 million over the last 4 months of 2008. In December, job losses were large and widespread across most major industry sectors.
Buy 12 get 1 Free
Times Online: Lettings agents adopt supermarket tactics
“Pay for 12 - get one free”: this is not an offer for tins of beans at the supermarket but the latest in creative marketing from lettings agents. A glut of rental property on the market has forced agents to adopt supermarket-style selling tactics to win over potential renters. “Free” months are one of many incentives that tenants can now choose from. As house prices fall, the increasing number of homeowners who are opting to let rather than sell has given bargaining power back to people who are choosing to sit out the downturn by renting rather than buying.
Moguls now falling like ninepins.
CNN: Real estate power broker dead of apparent suicide
The body of Steven L. Good was found in his Jaguar on Monday. The car was spotted in a parking lot of a wildlife preserve in Kane County, Illinois, just outside Chicago, authorities said. No note was found, and police say they do not know how long the 52-year-old had been in the vehicle. Good was the chairman and chief executive officer of Sheldon Good & Co., a major U.S. real estate auction company. The death comes amid great turmoil in the country's real estate industry. In his role as chairman of the Realtors Commercial Alliance Committee, Good commented on tough conditions last month at a business conference.
Still not to worry sales at JD sports are up
BBC: UK manufacturing declines sharply
UK manufacturing output fell at its fastest pace since 1981 in November, official figures showed, underlining the fragile state of the economy
End of an Empire?
The Trumpet: Prepare for Dollar Collapse, Warns Ex-Bank of England Policymaker
Americans must ready themselves for a massive devaluation in the dollar as international investors dump their U.S. assets, says a former Bank of England policymaker. Relying on the kindness of foreigners to finance our standard of living may be about to be revealed as irresponsible folly
Maybe he can buy me one to?
Bloomberg: Brown Should Buy Britons’ Homes, Ex-BOE Officials Say
"Prime Minister Gordon Brown should buy homes on the verge of repossession to add money to the British economy and save families from being thrown out onto the street, two former Bank of England economists said." “The smart asset to buy would be housing directly,” Gabay said in an interview. “The ideal thing is to go at the core of the problem. This would bring forward the necessary correction. It would to a great extent put a bottom to it.” The government should step in and “set a floor” under house prices, protecting taxpayers by paying below-market prices for houses and distressed homeowners by paying more than “vulture purchasers,” Fathom said.
Next step towards the inevitable
Guardian: Gordon Brown urged to start state bank to save British jobs
"As banks restrict their lending to individuals and small businesses, they risk dooming the economy to an even deeper recession," McFall warns. "This is the economics of the graveyard."
From £99,950 To £124,950
David Wilson Homes: A Huge selection of 1,2,3,4 and 5 bedroom properties
It Looks Like David Wilson Have at last bit the bullet!! £124,950 is still too much for one of their 5 bed boxes though!
More rental supply + less demand = falling rents
Calculated Risk: Housing: Declining Rents (US)
After rising for several years, rents in the Los Angeles area are declining because of the economic recession and depressed home prices, researchers, real estate agents and property managers say. The lower local rents match a national trend, according to a report released Wednesday showing apartment rents fell in 54 out of 79 U.S. metropolitan areas in the fourth quarter of 2008. Softening rents add another obstacle to a housing market recovery, economists say, because tenants with low rent payments feel less urgency to buy a home.
The 'most hated' estate agency on its knees
Independent: Foxtons caught in housing market slump
The future of another one of Britain's most recognisable high street brands was hanging in the balance last night after it emerged that the estate agent Foxtons had breached lending agreements with its banks. The buyout firm BC Partners, which bought Foxtons in May 2007, is reluctant to pump any more cash into the company after worse-than-expected market conditions pushed it into crunch talks with its lenders. BC Partners paid £360m for the company just before the credit crunch hit, borrowing £360m to fund the purchase. They have now acknowledged that the acquisition was ' 'mistake' after a 60-70% slump in sales led the company to breach its banking covenants,