January 2010 Archive
Saturday, January 30, 2010 
Get that Elephant out of the lounge
Times: House price rise set to reach double digits
Everything is cosy in the HPC lounge, everything except for the Elephant in the comfortable leather armchair in the corner. That's right, the one with HPI tattooed on his trunk. Let's just ignore him and hope he goes away...
Wish They Would Make There Mind Up
RTE News: House prices drop by 22% nationwide
Will they make their mind up? One minute they're up the next they're down!
Liam Halligan on the Dollar Carry Trade
Telegraph: Zhu Min, a man worth listening to
Bit surprising as Halligan is usually wrong about everything, but he's warning about the impending collapse of the Dollar Carry Trade and the consequent sky-rocket effect on the value of the Greenback. Hope he's right for once.
There is no foundation for further rapid rises
FT.com: Don’t bet on house prices to continue in January’s fashion
Some words of caution about the recent 1.2% house price rise reported by Nationwide. Essentially, some buyers were unable to complete their purchase before the end of the stamp duty holiday but were too far advanced in the purchase process to abort. Even Stuart Law is downplaying price rises at the rate reported for January!
Banks still going down
Reuters: UK no longer among most stable banking systems-S and P
I was surprised that this did not get reported in any news BBC or SKY or radio. This S & P report states that banks are not as safe as houses.
Friday, January 29, 2010
Worthwhile reading
FT Alphaville: Could UK money supply collapse post-QE?
Take a look.
Default, or bailout
The Telegraph: Greece is the word that should strike fear into all those who love the euro
So now the real fun begins. Traders scent blood. Greece must raise €54bn (£47bn) this year, half of it in the second quarter, or face defaulting on its debts.
Cameron: UK "at risk"
Telegraph: Britain needs to cut or face Greek-style crisis, says David Cameron
David Cameron last night warned that Britain needed to cut its deficit or risk a full-blown fiscal crisis like the one which has engulfed Greece.
Deflation
Fdraoa: Excuse to halt production?
With worldwide auto sales plunging almost 50% from peak, one has to wonder when Toyota powers-down assembly lines for their most popular vehicles. My hunch: The only pedal they want off the metal is massive overproduction. Would you rather halt production for a strangely lengthy recall, or permanently cut auto prices 50%, inline with the rest of the retail market? I think Toyota choose the former; incompetent management gambling that this will blow over with their subprime-era prices intact. Pretty dumb, considering Japan has been in a horrible deflationary Depression for 20 years.
?
BBC News: House prices could rise by 10% a year, Nationwide says
I suppose everything is about expectations. The graph illustrated is fairly convincing. I am inclined to believe that this will be nipped in the bud deliberately by the BoE and is a result of Merv the Swerve too successfully establishing inflation expectations. We will see. Maybe the population as a whole don't realise that the guts of the economy get ripped out when the government stops pumping money. Or maybe New Labour will debase sterling. I think probably the best thing to do, IMO, is to get your savings out of the UK. Admittedly they have taken a nasty shock with the 20% fall in value but I just don't believe that the UK is in a position to expand credit sufficient to resurrect a normal level of housing sales.
Join the credit queue
The Times: Davos: Darling tells bankers to stop the self-pity
Alistair Darling entered into head-on conflict with the City today as he told bankers to "stop feeling sorry for themselves" and instead work with the Government to rebuild the battered financial system. "The banks should do what they are supposed to do: provide credit to the economy."
Land tax being mulled in New Zealand
NZ Herald: Land tax - what it could mean for you
Perhaps the idea will spread....
If you really want to hear about it...
FT: Catcher in the Alps: Caulfield does Davos
One for Salinger fans
How dare they! Won't somebody think of the children?!
BBC News: Luxury barn fraud pair keep home near Potters Bar
A property developer who fraudulently built a luxury home disguised as a barn on green belt land in Hertfordshire has fought off a council eviction bid. Mr Beesley was granted permission to build a barn for agricultural use only but fitted it out as a luxury house complete with three bedrooms, a study, bathroom, lounge, reception area, storeroom and gym. --- [This is absolutely shocking. Can you imagine if everyone built themselves a barn-sized house? The whole country would be living in big spacious houses, and that would never do!]
No HPC under the Tories
Channel 4: Deficit must be tackled - Cameron
Avoid at all costs rising mortgage payments...
World's Largest Economy Roars Back Into Life
Sky News: World's Largest Economy Roars Back Into Life
The world's largest economy is back in business after growing 5.7% at the end of last year, smashing all expectations. It was the quickest pace of economic expansion in the United States for six years. However, even with the pick-up, America's gross domestic product (GDP) shrank by 2.4% overall for the full year 2009, the worst performance since 1946. The US economy expanded between October and December at a rate of 5.7% - a figure calculated on an annualised basis, which means it is compared to predictions based on past performance. The figure was up from 2.2% growth in the third quarter - from July through to September.
Slowing shoots
Bloomberg: Commodities Set for Biggest Drop in 13 Months on Demand Outlook
"“The optimism that led into 2010 has dried up very quickly,” ... “Economies have been running off stimulus packages, not off genuine demand.” The Federal Reserve this week said it is taking steps to prepare investors for an end to stimulus. China started to restrict bank lending this month."
Greeeeen shoooots!
Guardian: Almost missed this
I found this tucked away on the bottom of the page but didn't notice it yesterday - although yesterday was a very busy day!
Bye Bye Buy Buy UK
Risk.net: UK will lose AAA rating in next four years
The majority of respondents to a Risk.net poll believe the UK will lose its triple-A credit rating at some point in the next four years. Of those, 30% think the UK will be downgraded this year; 20% believe its rating will be cut in 2011, while a further 8% say it will lose its triple-A status in 2012 or 2013. “The prize of investor funds ultimately goes to the most conservative and fiscal countries,”
Such firms must now be regulated by the FSA and be run by people it deems to be fit and proper
BBC News: Sale and rent back deals must give five-year tenancies
The companies had been accused of luring people into selling their homes at a discount, only to evict the former owners within months so their homes could then be sold at a large profit.
The ‘end of the recession’ in Britain? An honest debate about how to confront the malaise and restru
Spiked Online: UK plc: a 0.1% chance of success at this rate
Such was the official excitement about the much delayed ‘end of the recession’ in the UK this week that the government’s department of bean-counters – the Office for National Statistics – held their first ever live press conference to announce the figures for British economic output in the final quarter of 2009. Everybody expected that these statistics would finally show some growth, thus breaking the run of six consecutive quarters of shrinkage and technically ending the longest UK recession on record. There were rumours that the ONS might even announce growth of up to 0.5 per cent over the three months to the end of December.
More pressure...
Times: Thousands of homeowners set for big mortgage refunds
''More than 80,000 homeowners in mortgage arrears could receive millions of pounds compensation for unfair charges, an investigation by Times Money has discovered. Customers of Bradford & Bingley, the Derbyshire and Cheshire building societies and a number of other specialist lenders, such as Kensington and Morgan Stanley, could be due refunds of late-payment fees after a crackdown by the Financial Services Authority (FSA).''
+0.1% MoM +2.5% YoY
Land Registry: December Index
Index figure = 258.8 January 1995 = 100
Property Is A One Way bet In The UK
Telegraph: House prices to rise 10pc
With a minor blip of falling prices in 2008 house prices are supposedly set to march on again at 10% a year. It now seems impossible to loose on property. Get on the proerty ladder before you get left behind - Its a one way bet. The government will do everything to maintian growth, and there are plenty of government safety nets - low interest rates, mortgage payements, deferring repossesion, etc. The only way you can loose on property in the UK now under Labour is not to buy one!
+1.2% MoM +8.6% YoY
Nationwide: January Index
Commenting on the figures Martin Gahbauer, Nationwide's Chief Economist, said: “House prices strengthened their upward momentum at the start of 2010, increasing by a seasonally adjusted 1.2% month-on-month in January. The 3 month on 3 month rate of change – usually a smoother indicator of the near term trend – dipped slightly from 2.3% in December to 2.1% in January, but this primarily reflects the smaller price increases recorded in November and December. At £163,481, the average price of a typical UK property cost 8.6% more than a year earlier in January, up from 5.9% in December. Unless there is a fall in property values in February, annual house price inflation is likely to move into double-digit territory next month for the first time since May 2007."
The legacy of New Labour
Independent: Brown faces nightmare of pre-poll credit downgrade
''Standard & Poor's yesterday issued its most strongly worded comments yet on the state of Britain's economy and banking system, raising the prospect of a credit downgrade just before the general election. The loss of Britain's prized AAA rating would represent a serious blow to Gordon Brown in the lead-up to the vote and would almost certainly cause a run on the pound and a sharp increase in the cost of servicing Britain's enormous public-sector deficit.''
Eye of the storm
Market Oracle: Financial Crisis Triggered Shock and Awe Response for Accounting Driven Recovery
This is one of the graphs showing why we are in a lull and the reason for the double dip. We are currently in the eye of the storm. The writer concludes with a simple sentence: "For anyone buying Banking stocks or LONG the market ... Caveat Emptor!"
Irish house prices halved, banks teetering on edge of collapse
Bloomberg: Defaults May Return to Haunt Beleaguered Irish Mortgage Lenders
Standard & Poor's Ratings Services said on Jan. 26 Irish banks were riskier than it previously thought and predicted "high credit losses." S&P also reduced its ratings for Bank of Ireland Plc and Allied Irish Banks Plc. A month earlier, Morgan Kelly, an economics professor at University College Dublin, said banks faced "complete destruction" from mortgage losses as the rate of unemployment and the cost of borrowing rise. "The Irish loan book is going to have big defaults on it," said David McWilliams, a former economist at the country’s central bank. "When those defaults come through, the banks become nationalized, the rest of the shareholders get wiped out." Irish households are among the world’s most indebted after lending more than tripled in the decade through 2007.
As if we needed any more evidence that regulation was essential!
BBC: The private thoughts of bankers
One said there was no evidence that bankers were overpaid, because if that were the case the biggest payers of all would have been damaged as businesses over the years of lavishing excessive rewards on their people. To which the other supremo made the point - or so I am told - that banks are a regulated oligopoly and are not subject to "proper" competition: they are therefore able to pass on the costs of their people to customers. In other words, banks are able to pay their people more-or-less what they like, free from the market disciplines that apply to genuinely competitive industries.
Thursday, January 28, 2010
Recovery getting better and better...
Financial Times: Toyota to cut 750 jobs at Derbyshire plant
Toyota said on Thursday that it planned to cut about 750 jobs at its plant in Burnaston, Derbyshire from August. The Japanese carmaker, which is contending with the fallout from a massive recall of its vehicles in the US and Europe, said the cuts would be voluntary and negotiated with its workforce. Toyota last year announced that it was moving from two production lines to one at the plant from August 2010 to boost its efficiency as the company is faced with slower sales.
Better the devil you know - really?
New York Times: Bernanke Confirmed for Second Term as Fed Chief
''The Senate voted 70-30 on Thursday to leave Mr. Bernanke at the helm of the central bank for another four years. The confirmation came minutes after senators voted, 77-23, to end a debate in which critics excoriated the central bank’s handling of the financial crisis''
A trigger...
Telegraph: Funds flee Greece as Germany warns of "fatal" eurozone crisis
''Germany has caused a near-panic flight from southern European debt markets by warning that there will be no EU bail-outs, even though it fears the region's economic crisis has turned dangerous and could prove "fatal" for the entire eurozone.''
Credit rating agencies verdict
Reuters: UK no longer among most stable banking systems
I'm surprised that this article /issue has not been on any website esp BBC. This would lead to increase of bond rate and first step in the downgrade of UK credit. Bond Rate: lets call it cost of borrowing for UK (Labour) govt. will have to be paid in the form of future taxes and reduced services.
Next Years Repos lining up
Mirror: Greedy Mortgage Lenders
Apparently 400,000 mortgages are in arrears according to the FSA. Angry because mortgages lenders are charging a fee for people not keeping up their side of the bargain. Seems quite reasonable to me, I seem to recall a sentence saying @Your home could be repossessed if you do not keep up repayments'' on the bottom of mortgage applications. A small monthly fee instead seems quite fair, particularly as mortgage rates are so low, the total is still probably less than monthly fee a year ago.
UKIP adds to its coffers
Telegraph: MEPs vote for more money
More gravy for the so-called sceptics. Does anyone really think they want to leave....
Big Bank theory
FT: Volcker has the measure of the banks
Part of the FT "we like Volcker" series. Can you tame the big banks by ruling that deposit-taking banks can't engage in proprietary trading or own hedge funds or banks, or is this just a populist play? Obama has failed to rein in big finance and still supports the Clinton-Bush deregulators, Summers, Bernanke and Geithner, and this move comes on the back of election rejection and Republican boasts that they opposed the 2008 bailouts. What about the other bricks in the Wall St system - regulatory arbitrage, use of shadow banking to evade controls on leverage and balance-sheet expansion, the transformation of money markets from clearing and smoothing operations to supplers funds for major speculation, and OTC credit derivatives with no pricing mechanism except bribed credit rating agencies?
Loads of green shoots today!
Guardian: More job losses amid fears recession will blight Britain for years to come
The news of thousands of job losses follows a stark warning from a group of labour market experts earlier this month that unemployment may continue to rise for years after the recession ends
There may be trouble ahead (song)
Telegraph: House prices double in a decade but there is trouble ahead
House prices doubled during the last decade - even after recent falls and the illusory uplift of inflation are taken into account, according to new research by the mortgage giant Halifax. But homebuyers should not break out the champagne just yet because several warning signs suggest there is trouble ahead. Most middle class families, where wage earners have hung onto their jobs, may feel the credit crisis has been something of a phoney recession – so far. Paradoxically, the recovery could prove much more painful. Quite unlike the housing slump of 1990 – when a thousand homes a week were repossessed – interest rates have remained low and most people have plenty of cash in their pockets. Unfortunately, that is already changing for the worse.
"House prices will soon fall again" by David Blanchflower
New Statesman: House prices will soon fall again
My mind turned to house prices in the UK after looking at the astonishing rate at which they have fallen in parts of Florida, where prices are down by two thirds. I continue to puzzle over how house prices could possibly have increased in the UK last year. The peak-to-trough fall on the Halifax index was around 22%, before the supposed rise of 6% in 2009. Given the fragile state of the economy, prices really should still be falling. Or, at least, they would fall sharply if interest rates start rising any time soon. There remains a glut of houses on the market. The availability of credit is also way down. Lower demand with higher supply tends to lower price. I still remain fairly pessimistic for the UK housing market . I fully expect a peak-to-trough fall of at least a third.
Positive comments from Soros
Telegraph: Davos 2010: George Soros warns gold is now the 'ultimate bubble'
Mr Soros, arguably the most famous hedge fund manager in history, warned that with interest rates low around the world, policymakers were risking generating new bubbles which could cause crashes in the future. In comments delivered on the fringe of the World Economic Forum, Mr Soros said: "When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold."
Who will clear up this mess?
Telegraph: UK gilts 'are resting on a bed of nitroglycerine': so what are the Tories saying about this?
"So much for the Conservatives being the party that can be trusted with the economy. Lord Forsyth’s recent remarks that it should be possible to save £75bn of public spending over a parliament and that taxes should not go up are an isolated voice of reason, suggesting remedies that the markets will take seriously; but they find no echo among the Tory high command. Britain has been bankrupted by its politicians and the current drawing us towards the plughole is now building an irresistible momentum."
Current thinking
The Times: Mervyn King reveals his guru: an obscure US economist with big ideas
Everyone needs a guru, even the Governor of the Bank of England. When Mervyn King mentioned him by name three times during evidence on the future of Britain’s banking sector, MPs were left scratching their heads over the identity of a little-known American economist who, it appears, has been bending the Governor’s ear. “Mervyn is an old buddy. I think he is the finest central banker in the history of the Bank of England. He has more courage than any other governor.
Wednesday, January 27, 2010
Stepping out of the shadows
The Telegraph: Mervyn King rubbishes Gordon Brown's Tobin plan, allies himself with Barack Obama
Gordon Brown’s attempts to cast himself as the architect of financial reform were dealt a humiliating blow on Tuesday after the Governor of the Bank of England rubbished the Prime Minister’s flagship proposal and allied himself with President Barack Obama. Mr King has become increasingly political in recent weeks, undermining Labour’s early election campaign by warning homeowners earlier this month that the next two years will be characterised by economic hardship and rebuking the Government for failing to set out a clear strategy to cut the public deficit. He has been aligned with the Conservatives after George Osborne, shadow Chancellor, said the Bank would take over full responsibility for banking supervision under a Tory government.
No double dip, because UK isn't really going to be leaving the recession
Telegraph: Britain should avoid 'double-dip' recession, says BoE rate setter Andrew Sentance
''Britain should avoid a dreaded "double-dip" recession but fears over inflation remain, Bank of England rate-setter Andrew Sentance said today.''
Back to the Eighties
Citywire: House prices to bounce back Eighties style
Let the good times roll with Kajagoogoo and Co once again. Too shy shy...........
US home sales down
BBC: US new home sales drop sharply again
"Sales of new homes in the US fell sharply for the second month in a row in December, raising further doubts about recovery in the housing market. The Commerce Department said sales fell by 7.6% to a seasonally-adjusted annual rate of 342,000 homes, down from a revised rate of 370,000 in November. Analysts had expected new home sales to increase in December. "
FSA’s Turner Criticizes Tory Plans for U.K. Financial Regulator
Bloomberg: FSA’s Turner Criticizes Tory Plans for U.K. Financial Regulator
The head of Britain’s financial regulator criticized opposition Conservative lawmakers’ plans to disband the agency if they win this year’s election. The U.K. is “in the middle of a financial crisis,” Financial Services Authority Chairman Adair Turner said today in an interview with Bloomberg Television at the World Economic Forum in Davos, Switzerland. “I wouldn’t have done it.”
The jobless recovery continues...
BBC News: Student loans firm closes 150 posts and relocates 45
"The Student Loans Company, still struggling to deal with delayed payments, is cutting 150 jobs." Maybe they can go to University and become students... ahh, the irony.
UK Recovery - postponed?
Mail: Don't invest in Britain: The UK economy sits 'on a bed of nitroglycerine', investors warned
''Bill Gross, who runs Pacific Investment Management Co mutual fund, said the British economy was lying on 'a bed of nitroglycerine'. In his monthly newsletter, Mr Gross said: 'The UK is a must to avoid. Its gilts are resting on a bed of nitroglycerine.''
Now is the winter of our discontent
CBI: Retailers disappointed by weak New Year - CBI
The UK high street reported a slight fall in year-on-year sales in early January, disappointing retailers' predictions and ending a three-month run of sales growth, the CBI said today. Responding to the CBI's latest Distributive Trades Survey, 28% of retailers said that the volume of sales in the year to early January had risen, while 36% said it had dropped. The resulting balance of -8% was weaker than predictions made last month of sales being broadly flat on a year ago (-2%). [Forecast was +11]
Well, what a surprise!
Yahoo: Bank may find it hard to keep CPI on target - Sentance
The Bank of England may find it difficult to keep inflation on target as long as import and services prices keep rising strongly, Monetary Policy Committee member Andrew Sentance said on Wednesday.
Northern prices rose most in 10 years
PropertyPal: Northern Ireland house prices up 99%
Recent research has shown that Northern regions of the UK have experienced the strongest growth in the past decade. The North and North West of the UK has shown strong growth of 120% and 112% respectively during the period – whilst in Wales house prices increased 122% to an average of £137,316.
I demand a recount !!!
BBC News: Yorkshire Building Society members agree to merger
Who votes for a going concern to take over a potentially lemming ? I didnt, did you ? I'm closing my account with them at the weekend.
Labour's Legacy
BBC News: Rich-poor divide 'wider than 40 years ago'
The gap between rich and poor in the UK is wider now than 40 years ago, a government-commissioned report says.
Please sir, can i have some more.
Telegraph: Banks must raise billions to fend off crisis, says IMF
"Even though some bank capital has been raised, substantial additional capital may be needed to support the recovery of credit and sustain economic growth under expected new Basel capital adequacy standards". IMF. The good news was overshadowed by its fresh warnings about the vulnerability of the banking system. Banking analysts recently estimated that Barclays would need to raise an extra £17bn in capital to comply with the new rules, with other banks facing similarly large bills. Pitch fork anyone?
Banking bonuses affect housing recovery?
HIP Consultant: Government Tax Levy on Banking Bonuses will impact UK Housing & Mortgage Market
Is it justified to claim banking bonuses could have a direct impact on the recovery or is this further scare mongering so we believe we could not live without them?
Tuesday, January 26, 2010
According to the political rumour mill, a february election might be announced ... tomorrow
Telegraph: Britain at risk of plunging back into recession
I know I hardly believe it myself but apparently ...
Damned if they do, damned if they don't
Investors Chronicle: Easing off the property rally
Thursday 4 February sounds like an unremarkable date. However, economists fear it will be the day the mini-boom in the UK commercial property market comes to an end. Why? It is when the Bank of England's Monetary Policy Committee is expected to call a halt to its £200bn programme of quantitative easing (QE). There are growing fears that the suspension of QE will stop the nascent recovery in its tracks. "It's important to remember that quantitative easing doesn't just happen and stop - it gets reversed," Prew argues, comparing the process to paying back the principle on a £200bn mortgage. "To do this, the government will have to issue more gilts, or start selling assets. No one knows how it's going to be done, as it's never been done before."
China to lead world in fraudulent research by 2020
Telegraph: China to lead world research by 2020
The whole article is junk save for the comedy at the end. Check it out: "Thomas Reuters called China's Growth (In peer reviewed journal articles) "awe inspiring" although he acknowledged that the value of the findings by its scientists was "rather mixed". When he says rather mixed, he really means fraudulent, but what the heck, this is journalism after all! Its like sure, China is producing more widgets, and its government are paying more men to shovel dirt, but are the widgets any good, and are their government projects producing any value? To date, much of this "production" has been funded by the US Government's borrowing, which has let the Yuan remain artificially low, which is the only way that rubbish Chinese imports have been able to displace quality US and European production.
Now for the real news
Las Vegas Sun: Companies seek payment for work on stalled Summerlin project
Construction companies are agitating to be paid for work on the Shops at Summerlin Centre regional shopping mall -- and one says the mothballed project is losing value as its exposed steel superstructure deteriorates due to exposure to the weather.
Where is this all leading.. I wonder
MarketWatch: The U.K.'s weak fourth quarter isn't even the bad news
Restaurants are doing well! That's one of the rare glimmers from a report showing the British economy expanded at a paltry 0.1% quarterly rate in the fourth quarter - all the more depressing since it was the first expansion in Blighty since the first quarter of 2008. What's more worrying is that there's no obvious route out. The government was one of the main drivers of the fourth quarter's expansion, and the fiscal noose is set to tighten.
6% rise in December lending
BBC: Mortgage approvals 'on the rise'
6% rise in BBA's gross mortgage lending figures for December (before stamp duty holiday end)
Things are about to get worse for the housing market
MoneyWeek: Things are about to get worse for the housing market
Last year was full of surprises. For most of us, one of the biggest was the rise in UK house prices: according to Halifax, they ended 2009 around 4% higher than they started it. But actually, the most surprising thing should have been not that house prices rose at all but that they rose so little. Interest rates were 5% in mid-2008 and 0.5% at the end of 2009. That's important because, in the main, it is not the actual price of a house that determines its affordability to the average buyer but the price of the credit that he can get his hands on to pay for it with.
UK 0.1% growth or 13.6% contraction?
Greg Pytel: UK bogus growth?
Pytel recalculates 0.1% UK growth figure questioning the effect of quantitative easing of £200 billion. The government have a serious question to answer.
First into the double dip?
Ft.com: Germany economy
Caution: Germany's recovery may be stalling. Warning signs are mounting ahead of output figures for last year's final quarter on February 12
God moves in mysterious ways...
Times Online: Church of England counts cost of New York property deal
The Church of England has suffered a £40 million loss on a disastrous investment in a New York apartment complex that was acquired by a consortium in 2006 for $5.4 billion — the biggest single residential property deal in the United States. A spokesman for the Church Commissioners said that it had written off the entire value of its investment and added that the commissioners were “looking carefully” at the lessons to be learnt.
Director General of CBI States recession will not be over for at least another 2 to 3 years
Telegraph.co.uk: British economy will take years to recover despite end of recession claims, says CBI
Richard Lambert, director-general of the business group, said the country is now 10pc poorer than it would have been if the recession had never happened. He warned in a speech last night, "the life chances of a generation of young people will be seriously impaired", standards of living will be compromised, and unemployment will not fall back to pre-crisis levels. "Gordon Brown's promise that Britain would lead the world out of recession lies in tatters. We were one of the first in and now, today, we are the last out. [His] decisions as Chancellor left Britain ill-prepared and his judgements as Prime Minister made the recession even worse."
Amazing what a few trillion fails to achieve
BBC: UK economy emerges from recession
The UK economy has come out of recession, after figures showed the economy had grown by 0.1% in the last three months of 2009.The economy had previously contracted for six consecutive quarters - the longest period since quarterly figures were first recorded in 1955.
Capitalism turned into a pyramid
Greg Pytel: Stiglitz: "US does not have capitalism now"
It becomes increasingly clear that the financial establishment turned free market economy into a global pyramid scheme.
A smoking gun?
The Market Ticker: NUCLEAR: Did Goldman Offer To Tear Up AIG CDS?
Remember, Blankfein testified in front of the FCIC at 10:12 AM on 1/13 that he never got a request to take less than 100 cents on the dollar for AIG credit default swap contracts. Well then what's this that Zerohedge dug up? As everybody knows, AIG got a huge government bailout in September 2008 to help make payments on derivatives contracts with banks, including Goldman. Yet in the previous month, Goldman approached AIG about "tearing up" its contracts, according to a November 2008 analysis by BlackRock, then an adviser to the New York Fed. WHAT?
Momentum appears to be waning
Market Oracle: Stock Market Heading for Black Monday Crash?
On Friday Goldman Sachs and J P Morgan broke down decisively from their Head-and-Shoulders tops, a development that we predicted before the open based in large part on the huge downside volume in these stocks on Thursday. The Put options that we bought in the early trade in GS and JPM soared, some contracts rising by about 50% by the close. This bearish development caused shockwaves to spread through the market which accelerated to the downside late in the day. After 2 days of heavy losses the Precious Metals stocks indices stopped for a breather just above their 200-day moving averages, and closed virtually unchanged on the day.
Monday, January 25, 2010
Some pertinent advice
The Zimbabwe Telegraph: Buying a home in Zimbabwe helps to beat inflation
Inflation and hyper-inflation has characterised Zimbabwe over the last six years. In an inflating economy it makes sense to buy almost anything today, and pay tomorrow. And it is the same with a home, the biggest item of expenditure in most budgets. Look at what has happened to those who bought in Zimbabwe with a mortgage six years ago. The value of that home may have gone up six or seven times. However for those that remortgaged their overseas properties, the monthly cost of the mortgage has remained relatively unchanged. As inflation continues the house buyer will see mortgage payments reducing as a proportion of the capital value of their home going up, while those who choose to rent face soaring monthly payments.
Be careful who you vote for...
Bloomberg: Pound Seen as Diminished No Matter Who Wins Election
"No matter who prevails in this year’s election between U.K. Prime Minister Gordon Brown and opposition leader David Cameron, the loser will be the pound because the next government may not have enough support in parliament to rein in the Group of 20’s biggest budget deficit." Death by hung parliament - lets hope not.
Similar to December CML surge?
BBC: US home sales see steep drop in December
"Sales of previously-owned US homes fell 16.7% in December, the National Association of Realtors (NAR) has said. Sales had risen from September to November as first-time buyers took advantage of tax credits. The decline in December was expected as buyers rushed to complete deals before the original 30 November deadline."
Last week Skipton this week Nationwide
FT: Nationwide increases SVRs on TMW and UCB products
Nationwide Building Society is to increase the standard variable rate (SVR) on its residential, buy-to-let and self-cert mortgages by up to 0.5 per cent from next week. Customers who have residential and self-cert mortgages with Nationwide's specialist lending arms The Mortgage Works (TMW) and UCB Homeloans will see the SVR increase by 0.5 per cent from 1 February. Meanwhile, buy-to-let borrowers will also see their SVR increase by 0.3 per cent.
View point: Obama-Volcker on target, avoid Glass-Steagall
FT Alphaville Blog: Charles Dumas of Lombard Street Research on Volcker
Gordon doesn't like it, but this guy is optimistic. "The furore over bankers’ bonuses illustrates one aspect of current financial market conduct that has wide implications: the casual slippage back to “normalcy”, interpreted as business-as-usual 2007-style...The new plan is well conceived to reduce banking conflicts that the market has shown itself unable to self-regulate, and indirectly to create natural curbs on excessive remuneration..There is an obvious conflict between banks holding own-account positions in key markets where they are also the leading market-makers making prices for clients. It is not just a question of “front-running”, where a dealer positions his own account first, and then moves the price in his favour by putting through a large client transaction...."
High-Profile Manhattan Housing Complex Collapses Under Debt Mountain
Wall Street Journal: Tishman Venture Gives Up Stuyvesant Project
"A group led by Tishman Speyer Properties has decided to give up the sprawling Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan to its creditors in the collapse of one of the most high-profile deals of the real-estate boom. By some accounts, Stuyvesant Town is only valued at $1.8 billion now, less than half the purchase price. By that measure, all the equity investors—including the California Public Employees' Retirement System, a Florida pension fund and the Church of England—and many of the debtholders, including Government of Singapore Investment Corp., or GIC, and Hartford Financial Services Group, are in danger of seeing most, if not all, of their investments wiped out."
UK Governments latest on long-term commitment to affordable housing
BBC: Spending cuts 'could hit affordable housing'
The number of planned affordable homes built over the next 10 years could be halved by government spending cuts, a housing campaign group has warned. The government has promised three million new homes by 2020 - a third "affordable" below market rates. The National Housing Federation said pre-Budget report figures suggested the housing budget could be cut by 17.98%.
Land Securities hedging against property falls
FT: Land Securities to invest in property derivatives
Subscribe or clear cookies to view. FT reporting that Land Securities is intending to invest in property derivatives. Time to lock in the bounce?
You can fool some of the people...
Telegraph: House price rise hopes boosted as recession ends
Sharp upswing in consumer confidence before official figures show economy is growing again. Most Britons believe that house prices will rise this year as the country awaits official confirmation that the worst peacetime recession is finally over. A survey by Rightmove, the property website, found that 53pc in the UK believe house prices will rise over the next 12 months, compared with just 10pc at the beginning of last year.
Investing in property? Forget the UK – look to the US
MoneyWeek: Investing in property? Forget the UK – look to the US
UK house prices may have rebounded during 2009, but we don’t think that’ll last this year. Already there are signs that borrowing costs may rise as inflation picks up. Skipton Building Society had a nasty shock for its borrowers last week, as it warned its standard variable rate was set to jump. With the employment situation still very weak, there are a lot more vulnerable people out there than normal. And that means that the situation could deteriorate rapidly if bills keep rising.
Is this the top?
Market Watch: US Stocks Fall Sharply; DJIA's Worst Week Since March
Dow Jones is almost back to where it was in October, on a week of trading. Did the recent correction in gold correspond with a blow off top in stocks? We've also seen the US Dollar Index spike upwards. Is this traders converting assets into dollars to cover long positions on shares? Also, the second peak in the DJIA during the "Great" Depression tracks about 10,500 on the Dow before it went on the 90% death plunge. Are we there now?
For the deflationists at HPC
Market Oracle: Obama Hits the Banks that Hit Stocks and Commodities, UK Inflation Soars
''Deflationist in the UK have suddenly fallen silent for now though I can see the cogs turning in their heads looking for possible explanations for being WRONG but still being right at the same time! Which means that they DO NOT UNDERSTAND what Inflation or Deflation is i.e. the direction of general prices in an economy which means the Consumer Price Index (CPI). ''
And they're under starters orders!!!
The Independent: Skipton makes first move in a rate rise rush for societies
Mortgage rates are set to soar for hundreds of thousands of borrowers after the Skipton this week announced plans to raise its standard variable rate by almost half – despite there being no increase in the bank base rate for a year. And other building societies are likely to follow Skipton's lead warns Melanie Bien, director of independent mortgage broker Savills Private Finance.
Blimey, the BBC reporting more than spin ? Surely not..
BBC News: Recession has 'deep impact' on jobs
The impact of the recession on unemployment is deeper than headline figures suggest, a report suggests. The Chartered Institute of Personnel and Development (CIPD) say that 1.3 million people were made redundant during the recession. The study says that is double the fall in employment and equivalent to 4.4% of people in work before the downturn. It also says that two-thirds of people made redundant were paid 28% less when they managed to find another job. The report also highlights the difficulty of getting full-time employment. It says that there were 6.2 million fresh claims for jobseeker's allowance between April 2008 and November 2009. That is seven-and-a-half times the rise in the unemployment claimant count during the recession.
Sunday, January 24, 2010
A meeting of minds
Zero Hedge: Chasing Red Liquidity Herrings
Karl Denninger brings up the interesting point that last week's crash may well have been a function of a rapid and premeditated liquidity extraction by the very same Fed, which would thus be sending a political message, as many have already speculated, as to what may happen should Bernanke not be reconfirmed.
Keeping it real
The Telegraph: Goldman Sachs to put £1m cap on bonuses
Although only a few hundred of Goldman’s 5,000 London employees are likely to be affected, the move could alienate staff and risk a rash of resignations at the bank.
So close I can feel it in my bones...
Telegraph: Britain on the brink of leaving recession
Excellent news everyone... "City economists expect figures published this week will confirm that Britain has pulled out of recession, with gross domestic product in the fourth quarter up by 0.3% on the previous three months."
A step in the right direction
Telegraph: Government considers doubling council tax on second homes
Council chiefs are demanding powers to impose steep increases in council tax on properties kept as second homes or holiday lets. Under the plans, bills would rise to DOUBLE the standard rate, leaving some owners thousands of pounds out of pocket.
Questions that the bankers must answer
Greg Pytel: A letter to Vice-Chairman of the US’ Financial Crisis Inquiry Commission, Mr Bill Thomas
In a letter to Bill Thomas, Vice-chairman of the US' Financial Crisis Inquiry Commission Pytel presents succinctly the essence of the current crisis and asks two questions that the bankers must answer. Let’s see whether we get the answers.
Tax take down, consumer spending down
The Times: Public sector faces pay cuts, says Alistair Darling
Alistair Darling, the chancellor, today warns public sector workers they need to follow the example of the private sector and accept wage cuts if they want to hang on to their jobs.
Beware the shill
The Telegraph: Raise your half-full glass to a positive market
Asset prices cannot be in a bubble – when assets are in bubbles almost by definition no-one is saying so. One last contrarian indicator that persuades me that there is life left in the market was the high attendance at a recent presentation by one of the City's most famously pessimistic brokers, Société Générale. They were far too many to count but there must have been 500 or more investors crammed into a London hotel to hear SocGen's gloomy view of the market. That level of interest in bad news never coincides with a real market top.
Preserve your wealth
FDRAOA: How to protect yourself from the federal reserve
With the dumb money still fully vested in stocks, paper gold, and banks, Treasuries at 0% are the opportunity of a lifetime. Every time prices half, safe cash bags a cool 100% return. In order to survive the current and future financial chaos, the most important thing is to convert as many assets into cash as possible. I'm talking about everything, not just your "investment portfolio." Cars, vacation homes, boats, extra furniture, everything you can sell for cash should be sold. Next, figure out a way to protect that cash. In the coming decades, protection of cash will be extremely difficult, much more difficult than it is today. Banks are not a safe option.
Saturday, January 23, 2010
Next week will be interesting: Bernanke could be out.
Zero Hedge: Bernanke: All about the Cloture Vote
I thought all the talk of Bernanke being booted out this month was so much wishful thinking from irate inflationistas, but it seems it might actually happen. Dollars going cheap next week anyone?
Dumb warns Dumber
The Times: Alistair Darling warns Barack Obama over banking reforms
Alistair Darling warns today that President Barack Obama’s proposals for shaking up the banks would not have prevented the crisis and risk undermining the international consensus on reforming the financial system. Darling’s big worry is that Obama’s bombshell proposals, based on ideas set out last year by Paul Volcker, former chairman of the Federal Reserve Board, will shatter the consensus within the G20 nations on banking reform.
For Foxtons' Fans..
Times: Foxtons boss enjoyed 47% pay rise as estate agent slipped into the red
"The chief executive of Foxtons received a 47 per cent rise in pay and perks despite the estate agent reporting a loss of £1.3 million in 2008, shedding 300 jobs and paying £3.8 million on a court case that it lost".
L& C Mortgages Research
Sunday Times: Time to switch to a fixed rate
"For some borrowers it’s worth moving the mortgage".
Gordon Brown is a liability
BW: U.K. Races to Bottom of Economies for Investors in Global Poll
"Global investors are more pessimistic about the U.K. than any other major economy and Brown gets overwhelmingly negative reviews, according to a global quarterly poll of investors and analysts who are Bloomberg subscribers. It shows that 66 percent of respondents are pessimistic about the investment climate in the U.K., which tops the list." So how do we expand?
Interest rate forecast
The Market Oracle: UK Public Spending Deficit Debt that Risks Bankrupting Britain
''if the government continues to run an annual budget deficit anywhere near 8% of GDP in 2 years time i.e. early 2012, then by then we could be looking at UK interest rates at ABOVE 5% by then.''
There isn't enough money
HoweStreet: UK Hits Worst Deflation on Record
Broad money shrank last month despite all efforts. "he UK couldn't settle its obligations today, not even if every saver agreed to give up their cash. Because the total volume of debt is greater by almost one-third than the actual volume of Sterling currently held here in Britain. " Or as Merv the Swerve pointed out, we need to concentrate a tad on exports. There was a nice report I read recently which pointed out that the countries dependant on resurgent exports are 70% of the global economy (i.e. impossible for everybody to be a net exporter). "UK deflation at home is guaranteed," . Hold onto your pants people!
Rise of the Reluctant Tenant
Sky News: Demand Outstrips Supply In Rental Market
"The number of homes available to let is falling while demand for rental accommodation is rising, according to new research. Some 41% of letting agents said there were more potential tenants than properties in the final quarter of 2009... This was up from 24% during the three months to the end of September. Demand for rental properties is increasing because people are struggling to find properties to buy or mortgages that they qualify for. This has led to a rise in so-called reluctant tenants, which is a marked turnaround from early last year." Reluctant tenants? WTF! The article also claims "people who would like to buy a property are struggling to find somewhere suitable, due to the shortage of homes on the market". People can't stay in their homes forever (divorce, job change, death)...
Football team companies tell you all you need to know
FT: Outside Edge: Take sides in the game of capitalism
MU vs MC represent the competing economic models in the world today - the failing debt model vs the succeeding strong net asset vase model.
First Direct mortgage offer
HSBC: Our latest mortgage offers
Five minutes ago I got a card through the door from First Direct offering me a fee-free offset tracker mortgage at BoE base rate + 2.49% (3.0% APR). What a great deal, I thought. No surprise that house price have stabilised if people can borrow at 3%. Unfortunately 1. When base rate goes back up to 5%, as it was at the start of 2008, I would be crucified paying them 7.5% 2. Their offer is only up to 65% loan to value, though you have to look very carefully at the card to find where it says this 3. In any case, although I earn twice the national average salary, I could only borrow half of the purchase price of the house I'm in now, though I can comfortably afford to rent it. My conclusion: once bank base rate starts to go back up (4%-6% 1992-2008), house prices have only one way to go.
"e I de addy oh, we all hate the banks"
The Guardian: Gordon Brown to push for 'Tobin tax' after Wall Street crackdown
Gordon Brown plans to exploit Barack Obama's surprise crackdown on Wall Street banks to step up Britain's campaign for a new global transaction tax on financial products. The prime minister believes the dramatic US move to curb risky activities by major US banks indicates a new-found willingness on the part of Washington to contemplate radical reform of markets.
Friday, January 22, 2010
"Volcker being there was huge"
Reuters: Bank plan highlights Volcker's new clout
When President Barack Obama launched a fight with Wall Street by announcing a new plan to limit banks' size, the man standing at his side was former Federal Reserve Chairman Paul Volcker. The 82-year-old Volcker was one of Obama's most influential advisers during his 2008 presidential campaign and now chairs a panel of outside economic advisers to the White House. He had rarely been seen in Washington since the start of the Obama administration and made no secret of a difference in opinion with the White House over how to deal with the problem of "too big to fail" financial firms.
Myners conveniently forgets about globalism
The Telegraph: UK rejects Barack Obama's bank reforms
Myners, theCity minister, said he saw the President's proposals to break up the investment banks as solutions to "American issues" rather than "necessary actions" for the UK. "President Obama came out with a solution to the idiosyncratic problems that he sees in the American banking system which is around investment banking in particular," he said. "It's worth remembering that proprietary trading, hedge funds, private equity, these were not at the heart of the difficulties that Northern Rock, or Royal Bank of Scotland or HBOS experienced."
Commentary from a property bear
FT.com Personal Finance: Merryn Somerset Webb: House prices should rise...but they won’t
Merryn discusses interest rates, affordability, unemployment and the effect of the election on MPC policy. Closing paragraph: "Bubbles need momentum. The housing market lost its momentum in 2008. It clawed a little of it back in 2009. But it is hard to see where it is going to get any more from in 2010."
If you're going to panic, panic first
FT: Investors fret over Obama’s bank assault
19:30 GMT. Collateral damage from President Barack Obama’s battle with the banks was strewn across the global financial theatre on Friday, as traders feared that similar proposals could be adopted in other trading centres and investors worried about the impact the move could have on fragile market sentiment.
Bernanke's ship begins to sink
Reuters via Yahoo: Bernanke confirmation shakier as more Democrats defect
"Ben Bernanke's nomination for a second term as U.S. Federal Reserve chairman, once seen a sure thing, appeared increasingly under threat on Friday after two Senate Democrats said they would vote against it." "It is time for Main Street to have a champion at the Fed," Boxer said. "Our next Federal Reserve chairman must represent a clean break from the failed policies of the past."
Full economic recovery once again only 6 months away (in the meantime house prices are on the up)
Citywire: Pound falls as weak retail sales throw doubt on UK growth prospects
Data this morning showed a paltry 0.3% increase in retail sales in the key December trading month, a full 1% less than market watchers had been expecting. That comes after a shock 0.3% fall in sales in November and is the weakest year-on-year growth for the crucial Christmas month since 1998. Most of the growth was in food retail showing that people are still reluctant to spend on non-essentials and are trading up on food instead.
What Obama's banking battle means for you
MoneyWeek: What Obama's banking battle means for you
Barack Obama's plan to break up the banks has struck fear into the heart of the financial system. Even if he doesn't get his proposals past Congress, his decision will have a huge impact on the markets.
Of course they are.. because fixed rates are massive markups over base rate
BBC News: Variable rates proving popular
Variable rate mortgages are continuing to prove popular as some of the UK's biggest lenders cut the cost of deals. Mortgage broker John Charcol said that 81% of the home loans it arranged in December were variable rate deals. Meanwhile, the Woolwich and the Halifax have reduced the cost of some of their tracker deals in recent days. The Bank rate has remained at a record low of 0.5% since March 2009 and economists do not expect the central bank to raise rates in the near term. This has resulted in many homeowners paying relatively little on their monthly mortgage bill, which experts have said has fended off the threat of home repossession for some.
Recovery ? Or a rush to beat the stamp duty deadline.. you decide.
BBC News: Property sales hit two-year high
Further evidence of the recovery in the UK housing market has come from figures showing completed residential property sales hit a two-year high in December. Provisional figures from HM Revenue and Customs (HMRC) show 104,000 deals involving properties priced above £40,000 were completed in December. It was the first time since December 2007 that the number has risen above the 100,000 level. Transaction levels had hit their lowest point during the slump in January 2009. In that month, only 41,000 properties were sold. This was the smallest number sold in any month since current records began in 1977.
Do you realise how much a billion is??see comments
Msn news: Borrowing hits record £15.7 billion
The UK's creaking public finances took another hit in December as public borrowing soared to £15.7 billion, official figures have shown.
Take away inflation, and the surge to beat VAT hike..
BBC News: UK Retail sales rise 0.3%
UK retail sales rose by just 0.3% between November and December, according to official figures. The rise in sales volumes in the run-up to Christmas was lower than expected, with analysts having predicted a rise of more than 1%. Rising prices were blamed for the slow increase, with prices increasing at their fastest rate in nine months. As a result retail sales by value were stronger in December, rising by 0.9% compared with November. Sales by value were up 3.6% from December 2008
The Yellow River of money
FT: The Great Piggy Bank of China
"Meanwhile, to the demands that the first priority of a new British government should be to reduce the fiscal deficit, I can only say: “I beg to differ.” As Mervyn King, Bank of England governor, has just reminded us, UK output is some 10 per cent below its previous trend. If the recent upturn in UK inflation turns out not to be a blip but a lasting response to sterling devaluation, the appropriate reaction would be to edge up interest rates but let the budget deficit run. This would be the opposite of the conventional wisdom and so probably correct."
ScamYourGold
Times: Office of Fair Trading investigates the bling buyers
"The inquiry has emerged after a report by Which? Money, the consumer group magazine, described the gold buyers as offering “shockingly bad value”. On average, the postal gold buyers offered only about 6 per cent of the retail price for gold, while high street retailers, such as jewellers and pawnbrokers, paid about 25 per cent." Worse than I thought 6% !!!!
The benefits of deflation
Telegraph: Tax Payers Alliance
Good news for taxpayers in Windsor and Maidenhead this week: the council have announced the largest cut in council tax in Britain - a whopping 4%. You may remember them as the council that has pioneered spending transparency. The cut equates to £41 a year off band D properties, and will be manna from heaven to hard-pressed taxpayers. People across the UK have seen their council tax more than double in the last ten years, and even now when times are tighter than ever we at the TPA have had reports of many councils continuing to increase council tax by the maximum of 4.9%. David Burbage, the council’s leader, told The Daily Telegraph: “We are showing that council tax can go down as well as up. For too long council tax bills have inexorably risen.
... Cause the times, they are a changing
Daneric - my favourite blogman: There is No Contrarian Upside Play to a Ponzi
"The math is simple: We need to destroy the excess debt and break the debt promises at all levels of society. And yes along the way, jail the criminals of which there are many. And yes it will be very painful but if we don't allow it to happen, fascism will surely result. I don't want to sacrifice liberty for the illusion of security. In the end of course we would have neither. And least you think I am anti-capitalistic, nothing can be further from the truth! TRUE capitalism would have washed the excess fraud and corruption and risk from society long before it got out of hand. But our corrupt overlords distorted the system and outlawed true capitalism. Americans are pissed off at "socialize the risks and privatize the profits. We are not dummies."
Inflation / Deflation debate continues....
The Market Oracle: UK Hits Worst Deflation on Record
The unprecedented actions of the Monetary Policy Committee to inject £200 billion directly into the economy – described by some as 'quantitative easing' – have averted a potentially disastrous monetary squeeze," said governor Mervyn King in a speech on Tuesday. Barely 36 hours later, Thursday's money-supply figures said otherwise. And bluntly.
MPC attack on savers continues
FT Alphaville Blog: A still slacking MPC
The minutes of the last MPC meeting indicate that inflation is not a concern despite the recent CPI blip upwards. There doesn't appear to be any indication that the MPC are interested in raising interest rates anytime soon. As well as FT Alphaville's analysis, the full minutes are at http://www.bankofengland.co.uk/publications/minutes/mpc/pdf/2010/mpc1001.pd
Time for Action
The Guardian: UK considers Obama-style banking revolution
US officials will fly to London next week to discuss with ministers how sweeping changes to the banking system outlined by President Barack Obama to fight Wall Street's excesses might be implemented in the City. Top Wall Street banks are to face tough limits on their size and will be ordered to dismantle lucrative chunks of their business after Obama responded to a series of political setbacks by turning his fire on a "binge of irresponsibility" by financiers. "Never again will American taxpayers be held hostage by a bank that is too big to fail," said Obama, who framed his plans in aggressive terms and accused banks of deploying an "army of lobbyists" to block reforms. "If these folks want a fight, it's a fight I'm ready to have."
Obama vs the Giant Squid
Bloomberg: Obama’s Plan to Be Judged by a Goldman Breakup
As we drill down into the details of ideas for breaking the economic and political power of oversized banks, we need this litmus test against which serious suggestions should be judged: Does a proposal, at the end of the day, imply that Goldman Sachs should break itself up into at least four or five independent pieces, with the biggest being no more than 1 percent of gross domestic product, or roughly $150 billion? If the answer is yes, we are making progress in moving our financial system back toward where it was in the early 1990s, when it worked fine (and Goldman was a world-class investment bank) and was much less threatening to the global economy. If the answer is no, we are merely repainting - ever so gently - the deckchairs on the Titanic.
Down?
Times: Where next for buy to let?
Contrary to expectations, new-build city centre 1 bed flats offer the highest yields. Exclusive analysis for The Times from the estate agent Savills shows how the decline in house prices since 2007 has driven up the headline yields in areas such as Nottingham, Merseyside and Manchester. But just as banks are easing restrictions on owner-occupiers, they are increasingly tight-fisted when buy-to-let investors apply for funds. Aspiring investors are being thwarted by banks and building societies, who refuse to lend unless applicants can show a rent that will generously cover mortgage payments. These lenders risk overlooking the new two-tier market in which sought-after homes in key areas have recovered to boomtime highs and will continue to perform well .
Thursday, January 21, 2010
That's quick!... unless they already knew.
The Business Insider: Big Banks Have Already Figured Out The Loophole In Obama’s New Rules
Big banks have already begun poking the holes in Obama’s new rules—holes they expect their banks to pass through basically unchanged
So this is the headline the CML *didn't* shout about today
Building.co.uk: CML - Mortgage lending fell 43% last year
Funny how the boring numbers are never as interesting to the meeja as the soundbite ... that completely contradicts the numbers!
Party of opportunism spots opportunity
BBC: Tories back Obama's bank limit plans
How more Blairite can you get than being the Commander in Chief's poodle.
Gov borrowing up.
BBC: UK government borrowing hits £15.7bn for December
"UK government borrowing hit a new record for the month of December of £15.7bn, less than analysts expected. And total borrowing for the first nine months of the financial year was £120bn - the most since records began in 1946. "
Shame on you Brown and Darling
BBC: Obama pushes new bank regulation
US President Barack Obama has proposed limits to the size of banks to try to prevent future financial crises. "Never again will the American taxpayer be held hostage by banks that are too big to fail." US stocks - especially banks such as JPMorgan Chase and Bank of America - fell sharply as Mr Obama announced the sweeping new rules. The benchmark US Dow Jones industrial average dropped 1.7%. JPMorgan fell 6.6% and Bank of America was down 4%. The US dollar also turned lower against the euro and UK pound.
What's good about the employment data?
MoneyWeek: What's good about the employment data?
When the latest unemployment figures came out, they were welcomed as good news by almost everyone. But look a little deeper, and there are some truly hideous numbers.
Thought unemployment was going down??
REUTERS: Lloyds Banking Group to cut another 585 jobs
Lloyds Banking Group (LSE: LLOY.L - news) is to cut another 585 jobs by March next year as part of changes to its wholesale and retail divisions.The bank - which unions say cut more than 15,500 jobs in 2009 - said on Thursday 455 jobs would be lost in its wholesale sector with the closure of its Black Horse Personal Finance centres across the UK.
Why interest rates could rise sooner than you think
MoneyWeek: Why interest rates could rise sooner than you think
With inflation up and unemployment down, you may be forgiven for thinking Britain is out of recession. But the is another threat. The risk of rising interest rates is growing.
Never as good as it's spun.
CML: Gross mortgage lending up 14% in December
Gross mortgage lending reached an estimated £13.7 billion in December, a 14% rise from £12.1 billion in November and up 3% on December 2008, according to the Council of Mortgage Lenders. This is the first time the annual monthly comparison has been in positive territory since October 2007. However, other than in 2008, this is still the lowest figure for December since 2001 (£13.4 billion). For 2009 as a whole, lending totalled £143.7 billion, slightly above our annual forecast of £141 billion. However, this is down 43% from £253 billion in 2008 and the lowest annual total since 2000 (£119.8 billion).
SVR rise: Who's next?
Daily Mail: Lender forced to order huge SVR rise
It must be a matter of time before Nationwide wriggles out of its 2.5% SVR. It costs it £450m a year.
Rates to go up
City Wire: Borrowers face tough choice
A "warning shot across the bows" of IR rises. Soon the fun will start....
Now That's What I Call a Housing Crash
Irish Independent: €100,000 wiped off the value of average home
Dublin house prices fell by 4.3% in December. There have now been 34 consecutive months of house price declines. Irish house prices fell by 18.9% in 2009, and have fallen 31.5% from peak. The rate of decline accelerated over the last three months of 2009. This is what is awaiting the UK - Ireland have not been able to temporarily postpone the crash by printing money like us.
Their business model is broken
The Telegraph: Skipton finds doors are closed to them
The decision by the Skipton Building Society to increase its standard variable rate reflects the worsening situation for some mutuals. They can't attract retail funds and wholesale markets are closed to them. The only way they can boost capital, as required by regulators, is to boost and retain earnings, which makes them uncompetitive.
Wednesday, January 20, 2010
Another comparison with the Great Depression
FT: US banks see recession easing
US banks have lost billions of dollars since the beginning of the credit crisis as the recession prompted over-indebted Americans to default on credit cards, mortgages and home equity loans Analysts noted that credit costs at the banks remained high as consumers were still reeling from the worst recession since the Great Depression.
Is this a taste of things to come?
Moneymarketing: Skipton to scrap SVR ceiling and hike rate
Skipton Building Society is to scrap the ceiling on its standard variable rate meaning it will rise from 3.5 per cent to 4.95 per cent from March 1, Money Marketing understands.The lender will temporarily remove its ceiling, which meant that customers would never pay more than 3 per cent over the base rate. It is understood the lender is blaming unprecedented market conditions for the move
Danny-boy's latest outburst
Moneymarketing: Blanchflower calls for the MPC to be axed
Former Monetary Policy Committee member David Blanchflower has called for the MPC to be disbanded as he believes it is “not fit for purpose”. Writing in the New Statesman, Blanchflower says the recession has been much deeper than it needed to be because the committee was “asleep at the wheel”......................
Pump it up Darling
Bloomberg: Blanchflower Says U.K. Faces Deflation Risk as Inflation Eases
“The worry is then if you start to pull back the stimulus, there’s the double dip,” Blanchflower said. “You’ve got to make sure that the recovery is strong before you pull back.”
Deleveraging hasn't yet started
McKinsey: Debt_and_deleveraging_full_report
Good slightly lengthy report that deleveraging hasn't begun yet, not for the UK, or any country in fact. Looks at historic examples and suggests austerity will be chosen as the way out. Japan debt not so bad because cancels out to 145% of GDP. Suggests that politicians must grasp the nettle of real estate leverage whether through regulation or deposit requirements. Suggests that there won't be the expected UK economic rebound for some time, more of a tepid style status-quo, growth being limited by debt essentially. Number of points all look bad for housing including suggested cancellation of favourable tax treatment.
Sale by owner websites, the new breed
HIP Consultant: Online estate agency – cure or virus for property professionals?
Sale by owner website are being hailed as the consumer champion with very low fees. Are these really going to help us recover from the housing price crash? some good fresh points
Stat attack
Halifax: The UK Housing Market over the past 50 years (pdf)
The average UK house price has increased by 273% since 1959 in real terms, an annual rate of 2.7% above inflation. House prices recorded their biggest increase in the latest decade with a real rise of 62% during the 2000s (5% p.a.); the worst performing decade was the 90s with a real drop of 22% (-2.4% p.a.). In 1971, 70% of households were composed of a married couple; by 2009 this had fallen to 42%. Government housebuilding has dropped from 128k to 39k.
INFLATION! quick buy gold, buy oil, buy junk bonds, buy a house, buy everything
FT: Short View: Junk bond boom
"Times have never been so good for junk bonds. In the second week of this year, $11.7bn in high-yield offerings came to the market, according to ThomsonReuters, beating the record set in November 2006. This does not sound like good news. November 2006 was right at the top of history’s greatest credit bubble. Previous booms in junk bond issuance, notably the 1980s, are also now remembered as times of unsustainable market excess." I couldn't agree more. I think there is about to be another punishing of risk, better hold cash.
Get them interest rates up!!
Express: MORTGAGE RATES TO RISE AFTER INFLATION SHOCK
“The latest figures will bring an end to the ‘rate complacency’ we have seen over the past year or so,” said Andrew Montlake from Coreco. “Many borrowers have been banking on low rates in the short term, but this is risky.” He adds that more people than ever are on variable-rate mortgages — either because they cannot remortgage, or because they have decided not to.
Unemployment soars by 21.2%
Times: UK unemployment falls for first time since 2008
However, the improvement masked a rise in the number of people in the labour force who are neither working nor looking for work, with the inactivity rate rising to 21.2 per cent in the three months to November, the highest since the three months to August 2007. The number of people who were economically inactive rose to 8.046 million - the highest since records began in 1971.
Tories flogged off Scottish council houses for £14,000 each
Public Finance: Tories hit out at Scots plan to scrap right to buy
"Scottish Tories have condemned plans by the Holyrood government to end the right of all new tenants to buy their council or housing association homes. Chief whip David McLetchie described the decision... as an ‘act of naked political vandalism’. He said: ‘Nearly half a million homes have been bought thanks to a policy which has done more to make housing affordable for working people in Scotland than any other before or since. At the same time receipts from sales, now approaching £7bn, have enabled other rented homes to be modernised and new council houses to be built for those who continued to rent in the past 25 years.’. Isn't flogging off council houses for £14k the "ultimate political vandalism"??
Misleading stats? I wonder how many full time people have been forced to reluctant part time jobs..
BBC News: UK unemployment total falls to 2.46m
The number of people unemployed in the UK has fallen for the first time in 18 months, official figures showed. Total unemployment stood at 2.46 million at the end of November, down 7,000 on the figure three months ago. Meanwhile, the number of people claiming Jobseeker's Allowance fell to 1.61 million, the Office of National Statistics (ONS) said. The rate of unemployment now stands at 7.8%, down from the 7.9% reported last month. The number of 16-24-year-olds out of work also fell over the three-month period between September and November, down from 943,000 to 927,000. But the rise in employment was fuelled partly by an increase in people taking part-time work. The number of people in part-time employment increased by 99,000 over the quarter to reach a record high of 7.71 million.
Halifax affordability survey
Telegraph: Buying a home costs four times as much as 50 years ago, says Halifax
Buying a home costs four times as much as it did half a century ago in real terms, according to research by Halifax. Average house prices, allowing for inflation, have increased 273 per cent in the past 50 years, making homes increasingly unaffordable. A typical home could be bought for £2,507 in 1959, the equivalent to £43,713 in today’s money. Home buyers are actually paying significantly more to buy an equivalent property now, needing £162,085. Despite the recent housing slump, prices rose the most during the last decade with a real rise of 62 per cent, Halifax said.
Tuesday, January 19, 2010
Problem reaction solution
The Telegraph: Bank of England Governor Mervyn King calls for merger of G20 and IMF
The G20 should effectively merge with the International Monetary Fund, under a radical proposal to overhaul management of the international economy issued by the Bank of England Governor. Mervyn King said that unless politicians act to create an international body with the authority to reform the monetary system, the world would be consigned to another crisis in a matter of years.
Why would anyone listen to this man?
FT: King optimistic on inflation target
''Inflation will not rise out of control and should return to target, Mervyn King, the governor of the Bank of England, insisted on Tuesday night after official figures showed the largest jump in annual inflation rates on record in December. Consumer price inflation rose from 1.9 per cent in November to 2.9 per cent in December, far above both the City and the Bank of England’s expectations, but Mr King said the rise was “temporary” and “do[es] not constitute a continuing source of inflation”. ''
Get them interest rates up!!
Telegraph: Savers lose out as cpi rises
Not one instant access savings account beats inflation of 2.9pc
Reuters latest house price poll
Reuters: House price rises to taper off this year
LONDON (Reuters) - The dramatic slide in house prices has ended but economists in a Reuters poll only see them creeping back up over the next couple of years with a recent rally tapering off as sellers return to the market. Average house prices are seen rising 1.6 percent this year and then 2.5 percent in 2011, according to a poll of over 30 analysts published on Tuesday, in line with forecasts for consumer price inflation.
Another 'temporary spike'
Telegraph: Bank of England's 'nerves' to be tested as inflation jumps most on record
So when Mervyn King writes a letter next month to Alistair Darling blaming rising inflation on the price of stilettoes and Jupiter's orbit *again*, does anyone expect the Chancellor to say anything other than "Yes, very good, carry on"?
BoE's ability to fight inflation impaired...
Telegraph: Neutral interest rate 'may be 2.5pc'
"In previous years economists and policy-makers assumed that when the Bank of England's benchmark rate was at around 5pc, it was neither pumping extra energy into the economy or constraining growth. However, Morgan Stanley said the future neutral rate may be closer to 2.5pc or 3pc. In a report on the UK's economic prospects, Melanie Baker and Charles Goodhart said that if banks continue to charge customers a higher premium to borrow, it will mean the Monetary Policy Committee cannot raise interest rates beyond a certain level without risking a consumer slump."
What was shelter saying last week, about ppl paying their mortgagae on their credit card?..
BBC: Credit card bad debt write-offs double
Bank of England figures show that the total value of the write-offs doubled to £1.6bn in the third quarter of 2009. By contrast, the value of mortgages written off in 2008 was just £408m, and has averaged £260m in each of the first three quarters of 2009.
Taylor Wimpey dismisses the Silver bullet
Telegraph: UK housing market can survive rise in interest rates, Taylor Wimpey argues
The boss of Taylor Wimpey, one of Britain's biggest housebuilders, has said the housing market could absorb a rise in interest rates this year without a recovery being impacted. House prices and sales volume have risen over the past few months and this could be sustained through a rise in interest rates this year by the Bank of England of up to half a percentage point, according to Pete Redfern, chief executive of Taylor Wimpey. Central banks and governments across the world are beginning to consider exit strategies from the stimuli used to prop up the global economy, but some economists fear that a premature rise in interest rates will halt an upturn by squeezing consumer spending.
Mortgages next?
Times: RBS ups credit card rate
It is the beginning of the inevitable. Oh dear....
I'll believe it when I see it
Yahoo: Darling - committed to cutting spending
Chancellor Alistair Darling said on Tuesday there should be no doubt about the government's commitment to reducing the country's record budget deficit.
That's me told!
BBC: Inflation rate rises to 2.9%, beating expectations
"UK inflation rose at its fastest annual pace for nine months in December. The Office for National Statistics said consumer prices rose 0.6% last month, taking the annual rate up to 2.9% from 1.9% in November. That was the biggest monthly rise in the annual index since records began and exceeded the City's expectations for an increase to 2.6%. Retail Price Index inflation rose to 2.4%, its highest level since November 2008." But at least them there price rises take a chunk out peoples' budgets that they'd otherwise waste on housing, further, interest rates are more likely to increase with a similar effect.
Danny-boy joins HPC
Citywire: Blachflower: House price rises in 2009 point to unreliable property data
Last year’s house price rises are unbelievable and point to the fact that property data is unreliable, according to Danny Blanchflower, former member of the Bank of England’s monetary policy committee (MPC). Blanchflower warned there was more pain to come for the housing market.He said: ‘House prices have risen by about 6%, thanks to the weak pound. But the markets are thinly-traded, so I don’t believe the data and I think prices will fall a lot.’
You can expect more of this.....
Telegraph: UK inflation expected to rise most in a decade
''Economists surveyed by Bloomberg forecast the Consumer Price Index (CPI) - the measure of inflation used by the Bank of England to set interest rates - to climb to 2.6pc last month compared with December 2008. CPI was only 1.9pc higher on an annual basis in November and the 0.7 percentage-point jump in December would be the steepest since records began in 1997. The Office for National Statistics is due to release the figures at 9:30am.''
Wasabi is hot, but grounded !
Bbc: Japan Airlines to file for bankruptcy protection
Japan Airlines (JAL), Asia's biggest air carrier, is due to file for bankruptcy protection, reports say.
Hopes & dreams...
Telegraph: UK 'to grow faster' than other major economies
"Britain will turn in stronger growth than any other major economy next year, Goldman Sachs has declared, predicting a significantly stronger-than-expected recovery in the coming years." No HPC then, move along, nothing to see here...
China has the right idea
Cnbc: China tightens monetary policy
so china tightens to stop bubbles in loans and property bubbles....seem to have the right idea...infact any o level student could tell you what should be done......how long before it has to be done here Almost all countries have looney low interest rates so bearing in mind that was the problem,I expect a real possibility of another financial collapse
Monday, January 18, 2010
Even higher house prices ? More jobless
Daily Mail: Jobless rate soars to 2.5million
House prices went up despite tens of thousands of people losing their jobs in 2009. So this must mean they'll go up even further !! "The unemployment rate is set to hit the 8 per cent mark for the first time since Tory prime minister John Major was in power, official data is expected to show this week. Labour market figures due on Wednesday will reveal the number out of work reached 2.5million in November, an increase of 500,000 in just one year, according to City estimates. The jobless rate was last this high in 1996. 'We see the potential for unemployment to continue rising through 2010,' economist Peter Dixon of Commerzbank said."
Looking for new England
Guardian: Billy Bragg to withhold taxes in bank bonus row
Billy Bragg stands up for us - good for him. Note the last paragraph: "A Treasury spokesman said: "We can reassure Mr Bragg and anyone else that there will not be big bonuses paid with taxpayers' money at RBS. Taxpayers' capital will be completely protected." " Relief all round then.
From the party of aspiration and social mobility
Your Mortgage: MP hints at buy-to-let tax breaks
"Housing Minister John Healey has highlighted the need for more private rented property in the UK, and indicated his desire to see more Government support for buy-to-let lenders and facilitators. Addressing the Fabian Society he pointed to the fact that fewer Britons are choosing to or able to buy homes, and more are turning to the private rental sector as a result. Healey said: “ It’s not just more rented housing in the public sector that we need, but more privately rented homes too. “I want to expand the number of homes built for private rent and improve the quality and security of the private rented sector. That means supporting new institutions into this market, including through changes to tax support and incentives.”... And the Tories will be worse.
To print or not to print?
The Wall Street Journal: U.K. Tensions Rising Ahead of QE Pause
The Bank of England's £200 billion ($323.31 billion) quantitative-easing experiment is drawing close to an end, with less than £10 billion left in the coffers to spend on government bonds. Policy maker Andrew Sentance says the point is approaching where enough stimulus has been introduced, suggesting the central bank could call a halt to its gilt purchases at its next monetary policy meeting in February. That puts the U.K. in an unenviable position. Of course, the Bank of England might yet decide to extend its purchases in February, seizing on any weakness in U.K. macroeconomic data to avoid taking such a contentious decision weeks before an election.
It was the Foreigners wot did it
Time Magazine: Did Foreigners Cause America's Financial Crisis?
"Much of the fault of the financial crisis has been heaped on Wall Streeters, unscrupulous mortgage lenders and weak regulators. But in a new research paper, economist Ricardo Caballero says there is another major group of contributors to America's monetary mess who are not getting the blame they deserve: foreigners."
Meanwhile....
Timesonline: The end of the Spanish dream as more homes are declared illegal
British expats in Andalucia have three months to demolish their homes before the bulldozers are called in. We report on southern Spain’s new civil war
Banks have no doubt a further slide in prices is due
Reuters: Spanish house prices ripe for further slide
MADRID (Reuters) - Spanish house prices have fallen only modestly in the recession and remain acutely vulnerable to the massive stock of homes that banks have taken onto their books from struggling property companies and repossessions. Spanish house prices fell just over 6 percent last year, government data showed on Friday, and have slipped 15 percent since a decade-old property bubble burst in 2007.
UK faces bright financial future
FT: London will thrive, says hedge fund
“The idea that London is going to be full of tumbleweed in 10 years is not credible,” said Savvas Savouri, chief economist at Tosca. “There are too many aspirational economies that don’t have infrastructures of their own. “We have an affinity with India, with the Gulf, even with China, via Hong Kong. These markets will want a western hub.” He predicts that London will attract at least 100,000 new financial services jobs over the next decade.
Economists Wake-up to Reality
BBC News: UK faces Decade of Painful Readjustment
The UK economy faces a decade of "painful readjustment" as it refocuses from debt-led consumer spending to increased exports, a study has warned... The consumer is completely cashed out!
Perhaps not so rosy....
Times online: Company collapses set to worsen in 2010
''The number of British companies in financial distress rose by 6 per cent in the last three months of 2009, to 140,000, raising fears the worst effects of the recession are yet to come. Begbies Traynor, the insolvency specialist that produced the figures, warned that although these numbers were better than at the peak of the credit crisis after Lehman Brothers, the US investment bank, collapsed in September 2008, they would probably worsen again by the end of this year''
Rightmove says asking prices notched up
Channel 4 News: House prices register 1.2% rise
"House prices jumped by 1.2% during the first week of January as confident new sellers hiked their asking prices, research has shown. The steep rise in asking prices during the early days of 2010 helped the average cost of a home on the market in England and Wales increase by 0.4% during the five weeks to January 9 to £222,261. Property website Rightmove said the housing market had got off to a "buoyant start" this year, as record numbers of people logged on to its website to view property, with volumes up 26% compared with the same period of 2009." The disparity between asking prices and sale prices has been discussed on the blog before but it seems that the taste for debt may still be strong - at leats as long as interest rates are kept so low.
Gulf between rich and poor cities widens
Independent: A tale of two types of city
All cities are suffering in the present recession. But some are suffering more than others: Hull, Barnsley, Stoke-on-Trent, Burnley, Newport and Doncaster have seen a drastic jump in unemployment and a deep decline in business activity. Yet other places, among them, Brighton, Milton Keynes, Reading, Cambridge and Edinburgh have weathered the downturn significantly better and seems well placed to benefit from an economic recovery. There is a trend of uneven economic development in Britain that was discernible long before this savage recession struck. Those cities hit hardest were already suffering before the downturn took hold. They had shed private sector jobs through the years of strong growth, relying disproportionately on the public sector for employment.
Sunday, January 17, 2010
You and whose army?
The Telegraph: Something has to stop the Orient express and its cargo of trade imbalances
As banker-bashing has increased, so China-bashing has receded. But the tensions between China and the West are set to rise. Either Chinese policy is going to change or we are heading for a major bust-up. We may be not far off the point where, if the Chinese don't take steps to make their trade with the West more balanced, then the West will take steps to do it for them.
We've worked hard for our tax-free windfall gains!
Sunday Express: Now Brown plans Council Tax Bomb
.. the Labour Party’s local government manifesto Putting Fairness First, which describes itself as a “blueprint or a red book” for a fourth term, calls for more council tax bands . It states: “The Labour Party remains committed to reforming council tax, and as we enter the second decade of the 21st century it becomes an even more pressing concern, as current tax brackets remain rooted in valuations set in 1991. We think that at the very least, the council tax needs rebanding. The addition of more bands at both the top and bottom of the scale will help to make it a more genuinely progressive tax.” I seldom agree with Labour, but I fail to see what is wrong with this.
Christmas retail sales 'not so buoyant'
BBC News: BBC News, Economy
The widely reported success of the UK retail sector over the Christmas period may not be as buoyant as the figures suggest, a study has warned.Verdict Research said firms had gained £14bn of extra trade that would have gone to rivals if they had not gone out of business over the past year. It pointed out that companies such as Woolworths, Zavvi, Principles, and Bay Trading are no longer trading. Verdict said retailers also benefited from more buying ahead of the VAT rise. With VAT returning to 17.5% from the temporary 15% on 1 January, it said this gave retailers a one-off lift.
David Smith, Economics Editor
The Times: Fears of inflation surge played down
"Nothing to worry about here it's just a temporary blip due to the general cost of living rising by 40% a month, 0.5% Interest rates, money printing etc. etc. no need to raise interest rates for the next 5 years!"
Signs of fatigue on stock and commodities markets
Investment Postcards: Words from the (investment) wise for the week that was (January 11–17, 2010)
With investors’ hopes of an economic recovery that might have gotten ahead of reality, the Dow Jones Industrial Index experienced its largest one-day drop (-0.9%) of the year in a sell-off on Friday – unnerved by China starting to rein in liquidity and cautious earnings guidance – causing the benchmark US indices to register a fourth down-week over an eight-week period. Not surprisingly, VIX Index, also referred to as the “fear gauge” of US stocks, gained 1.2% over the week. Read all about this, together with some thought-provoking news items and quotes from market commentators during the past week, in the weekly “Words from the Wise” review.
Slightly nervous voice of a borrower
Telegraph: Interest rates: the lower the better
"There's nothing like buying a house to concentrate the mind on the future path of interest rates ... At one extreme, Goldman Sachs has pencilled in a two percentage point rise this year and the same again next year to leave UK interest rates at 4.5pc by the end of 2011. Ouch ... In the opposite corner sits my fellow Telegraph columnist and economist Roger Bootle, who predicts a Bank Rate of less than 1pc for the next five years. Wouldn't that be nice?"
Who's in charge here?
The Telegraph: Sterling could collapse while our MPs are still pussyfooting around
If there isn't genuine action soon, or at least a rock solid and credible commitment to action, traders will lose patience and bid-up gilt yields sharply. In a crippling ripple effect, borrowing costs would spike right across the economy. Sterling could even collapse.
Saturday, January 16, 2010
What's so scary about deflation?
Zero Hedge: What the Deflationists Are Missing
An interesting article by Ambrose Evans-Pritchard came my way the other day. It’s worth a read, if for no other reason than that he paints an appropriately dark picture of the current state of the U.S. economy. While I very much share Mr. Evans-Pritchard’s view that the global economy is far from out of the woods, our views diverge in that he sees devastating deflation speeding our way down the tunnel. Casey Research readers of any duration know that we see devastating inflation.
Entertaining diversion
BusinessWeek: Obama Tax Prompts Put-Upon Bankers to Break Out the Violins
The money will go toward defraying the cost of the $700 billion Troubled Asset Relief Program (TARP), which used taxpayer money to prop up a tottering U.S. banking system at the height of the financial crisis.
Jobs for the Boys
The Times: ‘World’s worst banker’ Sir Fred Goodwin quietly returns to business
He became the public face of the biggest banking crisis in a century: unashamed, unloved and, ultimately, unemployable. Or so it seemed. Sir Fred Goodwin, the former Royal Bank of Scotland chief executive dubbed “the world’s worst banker” for his role in bringing the City to its knees, has quietly returned to corporate life in Edinburgh after more than a year in virtual hiding.
What next for first-timers?
Thisismoney: House price rises hit first-time buyers hard
A remarkable rebound for house prices in 2009 was particularly bad news for first-time buyers, despite claims property is getting more affordable. House prices are rising much faster for first-time buyers than those moving home. Official statistics for November 2009 show that first-time buyers were forced to pay 3.9% more for their house than a year previously.
"The financial oligarchy" rules
Greg Pytel: "The Quiet Coup"
Simon Johnson, ex-Chief Economist of IMF, wrote: "(…) recovery will fail unless we break the financial oligarchy that is blocking essential reform". It is clear there are other than Pytel, serious experts, who point out that the current financial system operates as a scam. Yet mainstream media keep ignoring this in their coverage.
More BS from GB for GB
Scotsman: Brown will pledge more middle-class jobs in drive to win back Tory voters
Gordon will today state in a speech that; "A fair society is one where everyone who works hard and plays by the rules has a chance to fulfil their dreams, whether that's owning a bigger house, taking a holiday abroad, buying a new car or a starting a small business." Followed by; "This is the next project for New Labour, our next generation project… The coming decade will provide the UK with more middle-class jobs than ever before." So more bull, more interference and more pointless state jobs paid for by magic money all round then as he polishes up the big lump of the Brown stuff!
Luckily, estate agents are there to help
The Times: Don’t trust the house price surveys
"What goes up must come down, right? Except, it seems, house prices. The gravity-defying performance of the housing market over the past year has left many experts baffled. How can prices keep moving upwards when unemployment has been rising and loans for first-time buyers have all but disappeared? Well, there are some credible economic explanations — the restricted supply of property being the one most widely touted. But perhaps it is also worth examining the credibility of some of the market surveys and indicators that are constantly churned out." Coming from The Times who have been accused of ramping by this blog, this article is a welcome change.
Friday, January 15, 2010
Why does it take so long for the stats info to be updated?
HPC: NONE
I have viewed this site for several years, and deem it to be an excellent source of factual, and very diverse information from many participants and industry sectors, giving insight that I would not normally be exposed to. Although the debates continue to please, I am a little frustrated as to why the site info is not being services/supported as it should be. Leaving me to feel that the site has lost/is loosing its professional edge. I hope I am showing unnecessary concern, and I can continue to value the site in the way it was intended.
Sales up but prices down - rejoice!
Telegraph: Bovis Homes sees reservations rebound but remains cautious for 2010
Bovis Homes saw reservations rebound more than 82pc last year but warned that the restricted mortagage market will keep sales below their historical average this year. Bovis had 1,801 private reservations in 2009, up from 989 in 2008, although the average selling price slipped to £165,500 from £181,000. However, the homebuilder cautioned that the requirement for large deposits, particularly for first-time buyers, will remain a drag on the housing market this year.
WOW! FTBs driving the housing market are putting down at least £40k deposits!
Times: Questions over recovery as mortgage demand slips
They're not really likely to be FTBs then are they! IMO the housing market has been kept alive by capitulating STRs and people with wealthy parents. 'The housing market recovery suffered a slight setback in November as the number of mortgages extended to homebuyers fell by 4 per cent, according to figures published yesterday. Compared with the previous month there was a 2 per cent decline in lending to first-time buyers to 19,300 and a 5 per cent decline for other home movers to 33,600, amid what the Council of Mortgage Lenders (CML) described as a seasonal dip in demand. However, the CML said that, despite the monthly decline, numbers were up by an “emphatic” 66 per cent when compared with November 2008.'
New fears for unaffordable housing?
Timesonline: New fears over funding for affordable housing
Government-funded affordable housing schemes are regarded by many first-time buyers as their only hope for getting a foot on to the property ladder. Yet funds for shared ownership, shared equity and rent-to-buy schemes cannot be guaranteed after the election as the new government slashes spending to tackle Britain’s record £178 billion budget deficit.
Deleveraging
FT: Deleveraging out of the debt mire will be an unsavoury task
Article which may as well say our problems are just beginning. Conclusion for the UK is "outright default, inflation or belt-tightening.", but generating inflation isn't really possible during a recession so perhaps stagflation would be a better description.
More Goldman frontrunning?
Telegraph: Sterling to enjoy rally against dollar, Goldman predicts
"The prospect of the Bank of England raising interest rates will help drive sterling up to $1.85 in three months, according to strategists at Goldman Sachs. " Surely this is nonsense? I thought most analysts thought the dollar will appreciate against sterling during the election campaign?
Insane in the Membrane!
Daily Mail: Labour to 'guarantee jobs for all of Britain's 2.5million unemployed' in bid to reduce Tory poll lead
minimum wage £5.80/hr x 40 x 2.5x10^6. or £580 million/week
Secret squirrel
FT: Short View: Mystery Treasury bids
Here's an interesting bit of news from the US bond markets. Secret direct bidder(s) buying treasuries, implies that someone is expecting yields to stay low, i.e. economic troubles ahead
Please help explain this!
BBC News: Home alone: Buying without the Bank of Mum and Dad
Can somebody please explain why it is "impossible" to get together a deposit when earning as decent a salary as these people are? I earn less, am younger, and still have managed to save more than enough for a reasonable deposit. They don't seem to have kids, so is it huge rent, or the expense of running a car?
Irish Commercial Property Market Struggling
Newsletter: Commercial property faces challenging year
LAND values in Northern Ireland's commercial property market slumped dramatically last year, a new report has revealed. In their annual Outlook Report, Property consultants CB Richard Ellis reveal that a combination of a lack of bank funding and sharp declines in the value of the end product led to land values in Northern Ireland falling by as much as 60 per cent from its peak.
Place your bets
Telegraph: 'Significant chance' of second financial crisis, warns World Economic Forum
Where do they get these probabilities from? The way things are going I would have thought that this is odds-on. Also a warning of another asset price collapse and China going the way of Japan.
So is that it? Is it back to boom now?
Business Week: Britain Finally Escapes Recession
Britain's worst economic downturn since 1921 is finally over, a leading economic think-tank said yesterday. The National Institute of Economic and Social Research (NIESR) said Britain had contracted by 4.8 per cent in 2009 and described the downturn as "a depression". That contraction is the worst for 90 years, and more severe than in any single year of the Great Depression.
Mervyn King: Didn't understand inflation, didn't understand financial crisis, don't understand QE
Telegraph: Economists question success of Bank of England's £200bn money-printing plan
The Bank of England is coming round to admitting that it doesn't really understand what the effects of QE might be. It just can't say for sure. They know what they're doing though. Always. no really, they do.
Our whole economic system is endangered anyway
Telegraph: Why a debt jubilee is not the answer to Britain's prayers
It is an enticing prospect: wiping the slate clean could liberate so many people from the constraints of those monthly instalments that it would trigger a momentous economic recovery. But while such a move has the virtue of simplicity, it is hardly practical. For one thing, ancient kingdoms tended to be creditors, and so could forgive as much debt as they fancied. Western governments today are largely debtors. Moreover, a wholesale debt jubilee would so scare investors that in the future they would demand excessively high interest rates in exchange for loans, causing a lack of credit which would endanger our whole economic system.
Thursday, January 14, 2010
Shocking Complacency
Money Marketing: Wall Street chiefs admit to not stress testing a fall in housing market
Bosses of some of the biggest Wall Street banks have admitted that their banks did not consider that the US housing market would ever fall before the sub prime crash of 2007. When questioned about risk management, all the chiefs said that their banks had always gone through regular “what if” stress tests in all areas of their business, but all admitted that they failed to test what would happen should house prices fall. When asked directly whether his bank had stress tested for a house price fall, Morgan Stanley chairman John Mack said: “Erm no, that one we missed”.
Boom on boomer!
Times: Women to live to 120
You now need to save 500 quid a week if you have any hope of a decent pension. Lots of people aren't saving so income tax will be 70% for basic rate and 103% for higher rate in 2021.
What the big boys have to say
Financial Crisis Inquiry Commission (FCIC): Hearings & Testimony
Notably: -- 1) Blankfein (Goldman Sachs), "We believe this housing-led downturn has had at least four distinct parts."..."U.S. residential mortgage crisis."...."the broader credit markets"..."pressure on global equity markets and other assets"..."Current phase is the consumer credit cycle." -- 2) Dimon (JP Morgan), "The mortgage market meltdown occurred for a number of reasons, but new and poorly underwritten mortgage products were a significant contributor that proved costly for consumers, the entire financial system and our economy." -- 3) Zandi ( Moody’s Economy.com )The fallout from the financial crisis will likely weigh on the [U.S.] economy through the coming decade. GDP and employment will be lower and unemployment higher for years to come. The sources of growth will also shift.
Gordon the Moron strikes again
BBC: Obamas bigger rod for banks
What strikes me is the last paragraph "Gordon Brown and Alistair Darling will be cock-a-hoop. Their bonus tax doesn't any longer look as though it will massively harm the City's competitive position in relation to Wall Street." So the politicians are happy because they will be encouraging banks to go to the UK to be reckless rather than anywhere else. So next time the global financial system needs bailing out we'll do it on our own?
Councils scrap plans to provide mortgages due to lack of funding
FT: Councils are forced to ditch mortgage plans
Authorities in Hackney, Lambeth, Portsmouth, Manchester and Liverpool had supported a campaign launched by the New Local Government Network in August 2008 to persuade the government to allow councils to offer mortgages to those struggling under the credit crunch. But more than a year later all have put plans on hold as a result of budget cuts, the economic climate and a shift in government support toward areas such as the Mortgage Rescue Scheme, which aims to protect homeowners from repossession.
We Get a Fee for Managing the Fund Whatever Happens
FT: British Land to run buy-to-let homes fund
To raise up to £300m, which would be bolstered by debt. Most will be invested in homes worth £500,000 to £800,000. The fund could buy up to 500 properties, which would be let to provide a target rental income yield of 3.5 per cent (before costs). Most of the returns, targeted at 14.5 per cent a year, are expected to come from capital growth of the properties. !!! Further explanation from the manager at FT Advisor, "He said in the long-term there could be a shortage of properties thanks to the effect of the credit crisis on building and lack of liquidity for borrowers, fuelling rental demand." Errr? So borrowers won't be able to borrow so they can't buy and must rent, therefore target of 14.5% a year coming from rising prices is because all those would be buyers are renting??
Record number of foreclosures
CNN Money: Record 3 million households hit with foreclosure in 2009
Almost 3 million homeowners received at least one foreclosure filing during 2009, setting a new record for the number of people falling behind on their mortgage payments.
UK heads for 'lost decade' but not to worry say the economists as house prices are rallying
Moneymarketing: UK economists warn of British ‘lost decade’
UK economists have warned that the UK faces its own ‘lost decade’ as it comes out of its longest ever recession......................Other participants disagreed and were confident of a turnaround in consumer activity - they argued that most savings over the recession had been channeled into a further accumulation of housing assets, a fact corroborated by the recent rally in house prices. But the optimists conceded that this would not be a speedy process.
Let's all borrow a lot more!
Telegraph: Mortgages 'most affordable' since 1996
'People buying their first property are finding their mortgage payments the most affordable for 13 years, according to research.'
Seasonal dippy
Phdinbubbles: Mortgage lending sees 'seasonal dip'
There has been a "seasonal dip" in mortgage lending, according to the Council of Mortgage Lenders (CML). The number of new mortgages granted to home buyers fell to 53,000 in November, a 4% drop from the previous month.
Irish Developer Loses Shirt
BBC News: 'Broke' Irish developer Bernard McNamara has £1bn debt
At least this guy concedes it is right for him to lose his exclusive family home. Unlike Liam Caroll who transferred his family homes into his wife's name just before he hit the wall (I hope a court realises it was an illegal move in an attempt to defraud creditors) or Bovey who was given the money with no questions and no personal guarantees.
Flattering to deceive?
Timesonline: Barratt sales prices jump 4 per cent
Barratt Developments, the UK housebuilder, said today that a switch to building more houses rather than flats has led to a rise in average sales price of 4 per cent over the past six months. The group, which is one of the UK's three largest housebuilders, said that its average sales price was now £167,000 as a result of the change in focus, which has followed a slump in flat sales as first-time buyers and buy-to-let investors are unable to secure mortgages. Houses made up 65 per cent of sales in the past six months, compared with 50 per cent for the same period last year
When it happens in China, it's bad news
BBC: China Property Prices Accelerate
"Real estate prices rose by 7.8% from a year ago - up from the 5.7% annual rise seen in November and renewing fears that an asset bubble is developing." So a 7.8% rise renews *fears* about a bubble. When UK prices rise 15%, the BBC reports it as "good news". Good grief...
Wednesday, January 13, 2010
Repossession Figure 'is Bogus'
Daily Express: REPOSSESSION FIGURE 'IS BOGUS'
TWICE as many families have lost their home in the recession than official figures suggest, the Tories claim.
The only thing that can drive up house prices
MoneyWeek: The only thing that can drive up house prices
If you want the price of your house to rise, you should hope for a real recovery in the banking sector. But with our big banks not much more secure than they were a few years ago, that's looking unlikely.
You know you love it
FDRAOA: Goldman Sachs About To Go Bankrupt
Remember how quickly Goldman Sachs went bankrupt the first time? A hungover kid clinging to the toilet bowl, they promised taxpayers who bailed them out that they would never touch investment banking again, and would instead turn into bank holding company with consumer retail locations. Today, Goldman Sachs losses are much worse. They've got over a $trillion in mega-leveraged liabilities. They've marked-up, instead of written down, a $53B ultra-leveraged, completely worthless subprime portfolio, and have lost hundreds of billions in diving commercial real estate which they continue to book as more valuable than 2005.
UK Interest Rates Forecast 2010 - 2011
The Market Oracle: UK Interest Rate Forecast 2010 and 2011
The primary message from my accumulative analysis of inflation, economy and in this article is that the Bank of England WANTS to swim in the warm waters of Inflation after the deep freeze of Deflation, which strongly implies that the Bank of England will IGNORE soaring inflation early 2010 and instead DELAY raising interest rates until it sees actual evidence of a strong economic sustained recovery which my analysis suggests should transpire during the first half of 2010. Therefore the BoE will be focused on the quarterly GDP data, first Q1 to be released at the end of April 2010 and then Q2 to be released late July 2010. Which means that there is a high probability that the first rate rise may not materialise until August 2010.
Prepare for the long haul
FT: What we can learn from Japan’s decades of trouble
Some important thoughts in this article. QE will not lead to inflation, unwinding of debt will take a long time, China may be heading for trouble. (Delete FT cookies if you can't read it.)
When optimism overwhelms intelligence
The New Ledger: America and the Danger of Positive Thinking
A critical review of the book - "Bright-Sided: How the Relentless Promotion of Positive Thinking Has Undermined America" by journalist Barbara Ehrenreich. "It’s in the spirit of optimism that a person blithely builds up credit card debt on optional expenditures, takes out a second mortgage, or agrees to a mortgage with an interest rate that will escalate over time. And the ideology of positive thinking eagerly fanned this optimism and the sense of entitlement that went with it."
Speculators try to wriggle out of debt
City Wire: Homebuyers battle developers
Why oh why do these folk get called "investors"?
Keeping the pig fat
Times: Competition fuels mortgage cuts
''Santander and Yorkshire become the latest lenders to reduce rates as RBS reveals that it is approving 90 per cent of applications. Homebuyers are benefitting from the return of competition in the mortgage market as Santander and Yorkshire Building Society become the latest lenders to woo borrowers with cheaper deals. ''
The alcoholic Lady of Threadneedle Street cured herself - with a big bottle of whisky!
Guardian: Inflation lurks in wings as recovery gets going, warns MPC member
... but she's still not very keen on moving to black coffee ...
So interest rates win't stay low forever then
CNBC: Fed must raise interest rates
Interesting that China tightened its credit yesterday and now Fed says interest rates must go up as economy improves... I remember the Telegraph recently saying basically we live in economic fairyland and I think chickens could start coming home to roost.
Analysis of RICS latest
ThisIsMoney: Is the house price rally starting to crack?
"Looked at in detail, Rics' survey reveals that the recovery may be more fragile than many property reports suggest."
Roll up
Daily Mail: House prices on a roll after crash
We all feel good if the value of the house we own increases. Thank goodness, then, that despite forecasts of a housing crash, prices have proved resilient. In fact, they continue to rise, helped by record low interest and mortgage rates. They have rebounded an impressive 8.9% since the trough in February 2009 but are still 12% lower than the October 2007 cyclical peak. Nevertheless, almost to a man, analysts are forecasting stability ahead.
Tuesday, January 12, 2010
Forced into it by low savings rates?
Independent: More OAPs using homes to clear debt
"The number of pensioners unlocking money from their home to repay debt has tripled during the past year, research showed today. Around 35 per cent of retired people who released equity from their home during 2009 did so to repay non-mortgage debt, up from just 11 per cent in 2008, according to Key Retirement Solutions. But the most popular use for the money was to carry out home or garden improvements at 56 per cent, down from 60 per cent in 2008, while 33 per cent used the money to go on holiday and 25 per cent used it to treat or help family and friends".
Russian chimpanzee outperforms 94% of Russian bankers in investment choices
Daily Mail: Lusha the chimpanzee outperforms 94% of Russian bankers
We know where to turn to once all our bankers have fled abroad for tax purposes. I propose Twycross Zoo as the new world banking hub
You don't say...
Sky News: RBS Boss: Banks Will Take '10 Years To Fix'
RBS boss Stephen Hester has warned that it will take 10 years to fix Britain's battered banking system. Mr Hester told MPs there were a series of fixes that were being carried out to ensure the collapse of one bank did not put others at risk. The Turner Report in March outlined the measures needed to help banks weather any future financial storm. They included requiring banks to hold higher reserves and to reduce rewards for excessive risk taking among their staff.
"you never want a serious crisis to go to waste" - Rahm Emanuel, White House chief of staff
FT: Bankruptcy could be good for America
"As Britain discovered in the 1970s and India found in 1991, looking over the edge can create the atmosphere of crisis that allows governments to win the arguments for economic reform. An actual sovereign default, however, can destroy confidence and trust among citizens and investors for years."
"Going for growth is the government’s number one priority this year. It is more than a sound bite"GB
Telegraph: BCC signals no end to recession in fourth quarter
A survey of 5,400 businesses by the British Chambers of Commerce (BCC) concluded that while improvements were evident in some parts of the economy, momentum was not sufficient to drive a recovery in the final three months of the year. "These figures indicate that we are not yet out of recession," said David Frost, director general of the BCC. "A lack of demand is at the heart of it. Domestically we are not seeing the level of demand required to haul us out of it."
What housing recovery?
MoneyWeek: What housing recovery?
One way of gauging whether property is at 'fair value' is by looking at the ratio of house prices to the income they produce, ie, rents. It's like the price/earnings ratio used by stock analysts. So the latest Economist round-up of global house prices and rents has produced more ammunition for UK property bears. Despite falling some 12.5% from their peak, British house prices are still almost 30% overvalued on this basis. Indeed, houses look good value in very few countries around the world, as the table shows. As The Economist says, with the notable exception of Germany, "Europe's housing correction seems far from over".
Old garden shed for sale - £40K
Dailymail: Run-down and boarded-up beach hut goes on sale... for staggering £40,000
Even the estate agents selling the hut in the genteel resort of Southwold, Suffolk, have warned that it is run-down and in shabby shape.
What do you think will happen to house prices in 2010?
Guardian: What do you think will happen to house prices in 2010?
Yawn
Reality of overpriced housing for all to see
Guardian: Flatline not crash
Slowly the media are coming round to the fact that property prices are not going to go up anymore. Sooner or later they will start to print stories about them going down.
Well what about bankers then?
Telegraph: Middle class professionals such as doctors, dentists, lawyers in tax evasion crackdown
Doctors and dentists were unveiled yesterday as the first group being targeted by HM Revenue and Customs inspectors. Other professional classes such as solicitors, barristers and accountants are expected to be come under the spotlight in coming months in the crackdown, which is being dubbed the “professionals campaign” by tax inspectors.
RICS monthly
Timesonline: Figures show blots on the landscape for house prices
House prices fell in the North and the West Midlands in December as market activity dampened, exposing those regions where the recovery has been weakest. According to the Royal Institution of Chartered Surveyors (RICS), last month’s figures showed 5 per cent more surveyors in the West Midlands reporting prices falling rather than rising, and 7 per cent more in the North. The industry body added the East Midlands and Northern Ireland to its list of areas at risk of further immediate falls. The overall proportion of surveyors reporting a rise rather than a fall in prices remained positive but slipped slightly, from 35 per cent to 30 per cent, and was below analysts’ forecasts of 36 per cent.
Monday, January 11, 2010
The story of a crime scene
The Real News: Plunder, a Wall Street story
house bubble a crime against humanity? trailer for the new documentary Plunder by Danny Schechter
Somebody should mention LVT to China
BBC News: China orders low-cost housing against property bubble
China's city governments and ministries have been told to build more low cost housing. They have also been ordered to push property developers to complete projects more quickly in order to help ease property prices. The directive has come from the country's cabinet, the State Council, amid fears of a property bubble.
Sign of the times
Yahoo: Poundland Eyes Growth After Xmas Boost
A number of HPC regulars sneer at Yahoo articles, they probably have a superior attitude to people who use Poundland as well.
JD Forecasts 40-50% to bottom
Sky News via armstrong-davis.com: JD Forecast in July 08
"like kids in a candy shop" ? when can I expect my sugar rush JD ?
Errr....no it's not...says everyone else !!!
Northampton Chronicle and Echo: £197,000 pay is fair says council boss Katherine Kerswell
"The chief executive of Northamptonshire County Council has defended her £197,000 wage, claiming residents who criticise her pay do not realise how big her job is."
From top to bottom - it's rife.
Guardian: White-collar fraud up by 76%
Reported fraud smashed the £2bn barrier for the first time last year and could top £5bn within a couple of years with managers uncovering more theft as they clamp down on costs and cashflow in the recession. The startling amount lost by businesses and the public sector to larger frauds last year is up 76% on 2008 levels. The figures have been collected by BDO, the accountancy firm, which has one of the largest fraud investigation teams. Simon Bevan, the group's head of fraud, said: "2009 saw the steepest increase since our report began seven years ago, with the average value of each fraud now over £5m compared to £1.8m in 2003."
It is essential to distinguish between the position of the government and the position of the countr
Telegraph: Financial problems are easily solvable, provided recession is conquered
From the article: There are two key things to look at – the country's net external assets and the current account of the balance of payments." UK: net external liabilities 7pc of GDP. (Ireland, Greece and Spain 55pc, 70pc and 75pc respectively). 30pc of the UK's government bond market is foreign-owned (US: 60pc) UK's current account position: 1% of GDP (Greece: 11% Spain: 5%)
Even worse in Scotland
Scotsman: 128,500 'desperate' Scots use credit cards to pay for housing costs
8% Scots using Credit Card to pay mortgage or rent
Rob Peter to pay Paul
BBC: Many homes 'using credit cards to pay mortgage'
Up to one million households have borrowed money on a credit card to pay their mortgage or rent over the past year, a charity's study suggests. Housing charity Shelter said this figure represented 6% of UK homes. Shelter said people in lower social groups had been most likely to need to use their credit cards, but that the middle classes had also been affected. The charity said the figure was a "shocking discovery". Its survey questioned 2,022 people.
Shares and housing to fall 80%.
This is money: Get out of shares says prophet of doom IFA.
David Kauders, UK investment manager, believes we haven't seen anything yet. Shares and housing in thhe UK could fall by 80%.
Sunday, January 10, 2010
A New Depression
The Telegraph: America slides deeper into depression as Wall Street revels
Defaults and repossessions have been running at over 300,000 a month since February. One million American families lost their homes in the fourth quarter. Moody's Economy.com expects another 2.4m homes to go this year. Taken together, this looks awfully like Steinbeck's Grapes of Wrath. The stock market has become a lagging indicator. Tear up the textbooks.
Worth a good old read
Cnn: 5 centuries of bubbles and bursts
History is replete with financial frenzies that seem ridiculous in hindsight, but were viewed as anything but at the time.
Property cheerleader Brendan O'Connor feeling sorry for himself
Irish Independent: There's no use cursing the day we mounted the property ladder
House Price Indices used to be much more fun. Every month some agency or other would put out a press release saying that prices had gone up another 10% or so. Some years you would discover that you had made more money just by owning your house than you had earned by working. Indeed, some people took that thinking to its logical conclusion, decided to stop doing anything productive in their working lives and just fooled around with property, making millions. These days we curse the day we ever got on the ladder. Most of us lost more money on our property last year than we earned through work. The new reality is that house prices are not going to "recover" to previous levels in the near future. We can only hope that when inflation does come, it will wash all our debt away with it.
Are we revolting?
Financial Times: Funding and the patriotism test
I came across this on Max Keiser's YouTube channel. The rating agency Moody's have been thinking about creating a 'social cohesion' index. Basically, the idea is to try to quantify the risk of a popular backlash against sovereign debt repayment. Considering the rating agencies track record in recent years, I doubt they'll produce anything of use to gilts investors but the perspective on debt repayments caused by bad banking seems to be changing. As we've seen in Iceland, there has to be a limit to how much money you can expect to squeeze out of people.
GDP is yesterday's measure
Observer: Economists start to consider that money can't buy happiness
Everyone out sledging today? Article about the damage of economic growth to environment and our well-being.
Risky assets leap into new year
Investment Postcards: Words from the (investment) wise for the week that was (January 4–10, 2010)
Back from the festive season break, traders pushed stock market indices to new highs for the rally, logging a full house of five up-days for the S&P 500 Index and pushing the CBOE Volatility (VIX) Index down to levels last seen pre-Lehman in 2008. Pundits shrugged off Friday’s unexpected decline in non-farm payrolls, focusing instead on the Federal Open Market Committee (FOMC) maintaining its “extended period” stance for easy monetary policy, i.e. more “juice” for risky assets.
Saturday, January 9, 2010
Record QE = Record Bank Bonuse
FT: Record bonus pot at JP Morgan
JP Morgan Chase is set to defy calls for constraint over bankers' bonuses this week when it delivers an expected $29bn (£18bn) compensation pot for its executives. Day light robbery?
Cold comfort
The Times: City confident UK will avoid ratings downgrade
LEADING City firms, including some of the biggest dealers in UK government bonds - gilts - say a downgrade of Britain’s AAA sovereign debt rating remains unlikely this year. “There is a 50% chance of a hung parliament, but even in this event the rating agencies would give the new coalition government at least a month to agree on sufficient fiscal measures to retain the country’s AAA rating,” said Stuart Thomson, chief economist at Ignis Asset Management.
Result of the "miracle economy"
Money Expert: Consumers 'still seeking help with debt' - 06/01/2010
This isn't the way Gordo planned it.
Private V Public Pay Shock
Guardian: Public v private sector pay: the figures don't add up
This should get some of you going. Interesting discussion on the invalidity of the statistics proferred by the the recent rash of articles on the subject. Conclusion: which sector is paid the most cannot be determined with data currently available. But of course we all know the private sector is paid far too much, don't we chaps?
Going European?
Guardian: Home buying has peaked. Is it time for a rental renaissance?
Could happen I suppose.
Racing Green minis - photo
Telegraph: BC Partners counts £100m cost of buying Foxtons at peak of house prices
"BC Partners ill-timed acquisition of Foxtons has cost it close to £100m after it was forced to put in new cash to retain a stake in the estate agency business following a rescue deal after it had written off its original investment".
Masters and Servants
Telegraph: Banks restrict best mortgages to current account customers
The proportion of home loans which require borrowers to have a current account with their lender is four times higher than a year ago, according to exclusive research for The Daily Telegraph. Experts said bank customers could end up “trapped” in substandard deals, leaving banks to profit from so-called cross-selling, which entails selling new products to existing customers. The figures produced by Defaqto showed the number of mainstream mortgages limited to current account customers has risen from 2.6 per cent last year to 10.1 per cent today. It said there were 36 such deals out of a total of 1,370 mortgages in January 2009 compared with 213 deals out of 2,099 now.
Recipe for Depression
The Wall Street Journal: Big Deficits Cloud Britain's Future
Even as Britain recovers from recession, it faces one of the largest budget deficits in the world at more than 12.5% of gross domestic product. That's nearly twice the deficit level it faced during the last major economic crisis of the early 1990s. Paring it down will drain billions of pounds from the economy, as the government boosts taxes and squeezes spending at a time when British consumers face mountains of debt.
Deflationary pressure
Miami Herald: Consumer borrowing falls sharply in November
Americans borrowed less for a 10th consecutive month in November with total credit and borrowing on credit cards falling by the largest amounts on records going back nearly seven decades. The dramatic declines raised new worries about whether consumers will cut back further on spending, making it harder for the economy to mount a sustained rebound. The Federal Reserve said Friday that total borrowing dropped by $17.5 billion in November, a much bigger decline than the $5 billion decrease economists had expected.
Bob Doll’s crystal ball into 2010 and the next decade
Investment Postcards: Bob Doll’s crystal ball into 2010 and the next decade
Bob Doll of BlackRock, the world's largest asset manager, has been putting out annual predictions for 15 years. Eleven of the twelve predictions he made for 2009 were on target. He has just released his ten predictions for 2010, as well as for the next decade.
But there is no resemblance between the late 1920s and the noughties!!!
EWI: A Tale of Two Charts ... ... With One Message
so which is which? and yes very simplistic view..... or is it? Apologies since this is a marketing piece - i have no affiliation and no financial interest in a subscription blah blah
A bond bubble? A gilt bubble?
Daneric - my favourite blogman: The Bond Bubble
we shall see - interesting comments at the bottom of the article. Its not loaded with technicals.
What Gordon Brown didn't want you to know.....
Times online: Britain faces ‘toughest cuts for 20 years’
''Alistair Darling has warned that Britain faces its toughest spending cuts for 20 years if Labour continues in office. The Chancellor, indicating a dramatic shift in his party’s election strategy, tells The Times today that severe spending restraints are “non-negotiable” if he is to bring down the £178 billion budget deficit''
"But it's crazy! Communities need nurses and teachers!"
Satire from Yesteryear [Monkey Dust. 2003-2005]: Blair promises "houses people can actually afford"
Monkey Dust was an excellent satire, running from 2003 to 2005, which sadly ended when its co-creator Harry Thompson passed away. Its satirical leanings hold strong now. Check out the link from approx 5:52 onwards depicting Tony Blair's Manifesto with regard to houses... with a great offer by an estate agent at the sketch's end... These writers were on the money and are sorely missed.
Friday, January 8, 2010
The only time consumers win is in a Grisham novel
Guardian: Bonus time as banks pay out £40bn
"The world's biggest investment banks are expected to pay out more than $65bn (£40bn) in salaries and bonuses in the next two weeks, reinforcing the view that it is business as usual on Wall Street and in the City barely a year since the taxpayer bailout of the banking system".
Yet another warning
Telegraph: UK more at risk than ever of losing AAA rating, top investor Neil Woodford warns
Neil Woodford, head of investment at Invesco Perpetual said that there was a “high probability” of Britain losing its AAA credit rating, something which has never happened since a rating was first put on UK debt more than three decades ago. In a call with analysts from around the City, he compared Britain today with the mid-1970s, when it was bailed out by the International Monetary Fund, but pointed out that “the rating agencies did not really exist at that time.” “I would argue that there is a high probability... a decent chance that we will be downgraded, and it is a near certainty if we do not, in the wake of the next election, properly deal with the deficit." Mr Woodford said: "I do not believe we have the ingredients for a sustainable economic recovery."
Still doing God's work?
Counterpunch: How the Teamsters beat Goldman Sachs
A trucking company in the US with 30,000 employees was going bust unless bondholders swapped debt for equity. But those bondholders had bet, thro' CDSs, on the company's going bankrupt - and the gain on those CDSs was going to outweigh any losses on the bonds. The company tried to restructure its debts only to find all this was going on. The shedding of 30,000 jobs was just another day's work GS and its buddies. This practice, known as "basis packaging," is thought to have been a major factor in several big US company bankruptcies. This time, however, the union fought back, identifying and threatening to name and shame the vampire squids. GS et al caved in and started bending over backwards to do the right thing. Lesson - Find out what they're up to and where they're vulnerable.
That's right
The Telegraph: Time is running out for make-believe economics
Today’s bizarre combination of exceptionally low interest rates, strongly rising asset prices and spiralling budget deficits is not remotely sustainable. Unless something is done soon, there will eventually be an even worse crisis than the one we’ve just been through.
Richard Branson gets into retail banking
Market Watch: Virgin Money enters retail banking with Church House deal
LONDON (MarketWatch) -- Virgin Money on Friday took its first step into the U.K. retail banking market with the acquisition of small regional player Church House Trust for around 12.3 million pounds ($19.6 million). The deal gives Virgin founder Richard Branson the foothold he has been looking for to begin offering mortgages and deposit accounts in direct competition with the country's more established banks.
More bailouts for people who over extended themselves - where will it end? What about moral hazard?
Bloomberg: Principal Cuts on Lender Menus as Foreclosures Rise
Some lenders may be coming around to the idea of principal reduction. “If you can right-size the mortgage and return to an equity situation, the incentive is to stay,” Not content with record low interest rates, homeowners now look set to have their principle loans reduced!
Men happy to be free from owning houses
New York Times: Men Who Jump the Picket Fence
Married couples make up the largest group of new home buyers. Next are single women, who represent 21 percent of home buyers; single men were just 10 percent. That gap has opened up in the last decade. The behavior of single men and women hints at divergent gender attitudes toward homeownership. Younger single men may be more likely to change jobs and cities; They may be more willing to squeeze into an apartment with two or three buddies; Or they may be cowering in the nest with Mom and Dad. “I was perfectly content to be in a rental, but I thought it didn’t make financial sense. Now that I’ve sunk in all this money and taken out a mortgage, the main reason it made sense for me is gone.”
Some fund managers anticipating 1.5% interest rate rise
Moneymarketing: Woodford: “High probability” UK will be downgraded
Invesco Perpetual’s Neil Woodford believes there is a high probability of the UK seeing its AAA rating downgraded if the government does not address the Budget deficit. Speaking in a conference call for investors this morning, Woodford said a downgrade by the ratings agencies could lead to serious consequences, including downwards pressure on sterling.......“The consequences would be pretty tough as we would end up paying more for our borrowing, and there is the external perception of the economy. Some pressure would be brought to bear on the currency - it has already taken a knock but it could fall further.”
Oh deary me
ES: Banks take over Foxtons in emergency debt move
"Foxtons, the famously aggressive London estate agent known for its fleet of racing green Minis, has been taken over by its banks as part of an emergency refinancing."
Inflation Rising
BBC News: UK producer prices up in December
The UK now is completely painted into a corner. It is a net importer, with inflation and thus interest rates at the mercy of the global markets. As a nation we're so highly geared I reckon that base interest rates rising to just 2% will be enough to put us back into recession, we'll see. Interesting five years ahead, and not a period of time that you want to be a home owner.
Foresight and Flair
The Times: Lloyds faces £200m loss as property company withers into receivership
Not a big story in the scheme of things but this quote caught my eye: 'In October 2008 Mr Wotherspoon, who founded the company in 1996 and was on the Sunday Times Rich List by 2008 with an estimated wealth of £75 million, said that Kilmartin owed its existence to HBOS’s “foresight and flair”. He added that it was a “tragedy to contemplate losing the Bank of Scotland, who have been integral and at the cutting edge of most of the property sector in this country”.'
Markets will believe anything
Economist: Bubble warning
The markets are beset by a series of contradictions. They are dependent on extraordinary amounts of government stimulus. But that stimulus is in turn ultimately dependent on the willingness of markets to finance governments at low rates. They should be willing to do so only if they believe that growth prospects are poor and inflation will stay low. But if they believe that, investors should be unwilling to buy equities and houses at above-average valuations. At some time—maybe in 2010—those contradictions will have to be resolved. And that will trigger another nasty bout of volatility.
Foxtons In Icu?
FT: Lenders win control of Foxtons
Foxtons, the estate agent that epitomised the London property bubble with its aggressive selling tactics and fleet of brightly coloured Minis, has been taken over by its lenders following one of the private equity industry’s most ill-timed deals.
Thursday, January 7, 2010
Shhh! Wait till after the election!
Daily Mail: Rate hikes looming amid inflation fears
Fears of interest rate hikes intensified after reports showed the UK is running one of the highest inflation rates in the developed world, fuelled by rising energy prices - and that households are braced for further acceleration. Britain's Consumer Prices Index is the highest in the G7 at 1.9% and nearly quadruple the euro area's 0.5%. The CPI could leap to 2.8% this month, according to estimates from Henderson Global Investors - in part thanks to widespread increases in prices of commodities including food and fuel.
Funding gap 2012
Australian Business WSJ: Banks dash for cash as refinancing deadline looms
Australian banks are rushing to acquire funds now because globally 5 trillion needs to be refinanced (US, UK, etc) by 2012.
The noose tightens
The telegraph: Tim Geithner's NY Fed told AIG to keep quiet about $105bn paid to banks
Tim Geithner's Federal Reserve Bank of New York urged American International Group (AIG) to remain silent on $105bn (£65bn) of payments made to banks including Goldman Sachs and Deutsche Bank at the height of the financial crisis.
Sweet reading
Mail online: Homeowners stung as mortgage lenders hike charges by £1,400 a year - despite Bank of England holding rate at record low
An increase in the SVR is an expensive headache for homeowners, who are already struggling to pay their mortgage and all the other household bills. Many are struggling on salaries which have been frozen for a year, with the majority of bosses warning of a second pay freeze this year. . 'We fully appreciate that current economic conditions continue to impose unwelcome financial constraints on all our borrowers. 'However, events in the economy over which we have no control have left us with no alternative.' Mr Quinton said part of the blame lies with the difficulty of competing for mortgage and savings customers with banks which have been helped by the taxpayer
Social impacts of housing bubbles.
Shelter: Exes forced to stay together by housing costs
In the week where most couples separate and divorce proceedings are started, Shelter is today launching new research showing how the lack of affordable homes in Britain is forcing couples who have split to remain living together. In our survey, nearly a quarter of people – the equivalent of 9.9 million adults - said they or someone they know have had to stay living with their partner because they cannot afford to live on their own.
Journalism's independence for sale
The Huffington Post: I'm canceling the Washington Post_b_412535.html
Bemoans the decline of the Washington Post from the days of Woodward and Berstein, who blew the lid off the Watergate cover-up. Says it was still a great newspaper 20 years ago but since then it has become the opposite of a democratic beacon - close ties with the powerful; censorship; gung-ho editorials for the invasion of Iraq; a politically correct, incestuous and opaque hiring regimen favouring supplicants and incompetents. A recent Guardian article also claimed the WP was compromising its independence to resue its finances -'news' articles by well-funded advocacy groups paying to have their 'findings' published (but not attributed to their source) and selling to lobbyists access to WP reporters in 'informal salons'. As newspapers become economically unviable are they becoming whores?
Conway starts to get it
The Telegraph: Bank of England: the calm before the storm
Roger Bootle, says the following: “Not only should the Committee extend QE further, but I think that it should consider going the whole hog and cutting interest rates all the way to zero. In the end, the Bank’s decision might be less about the wider economy than about the financial system. Looked at through one prism, the problem at the moment is that banks are still not lending as much as they could and should.
Plus ça change
Guardianunlimited: Interest rates and quantitative easing on hold
Let's have a sweepstake gang - put our (cyber) money where our mouths are; Where's the the HP index going to be Dec 2010? Any ideas on a prize for thye winner? I'm going -6.5% y-o-y
Base rate held at 0.5%
BBC: Freeze on UK interest rates continues
UK interest rates have been kept unchanged at 0.5% following the Bank of England's latest meeting. The cost of borrowing has been at a record low since March 2009 and economists do not expect the central bank to raise rates in the near term. The Bank's Monetary Policy Committee also maintained the quantitative easing (QE), or asset buying, programme at £200bn. The UK is expected to have exited recession in the last quarter of 2009. Manufacturers said they supported the Bank's decision.
Too much homeownership destroys labour mobility, causes unemployment
Bloomberg: Job Growth Erodes as Housing Bust Pushes Mobility to Record Low
The ability to relocate for employment, which helped the U.S. recover quickly after previous deep recessions, is the latest victim of the housing bust. About 12.5pc of Americans moved in the year ended March 2009, the second-lowest ever; after a 60-year record low of 11.9pc the previous year. Some households are staying put because they owe more on their mortgages than their properties are worth; others have trouble selling houses in depressed areas. “One of the hallmarks of America’s labor market is a high level of mobility,” said Joseph Stiglitz, a Nobel Prize-winning economist, at a recent economics conference. “We are about to lose that.”
I wonder how many of the traders were buying on behalf of BOE?
Telegraph: UK gilts sale sees 'good demand'
''Britain sold £4bn worth of five-year gilts in a sale of 2015 bonds that saw "good demand" according to traders. ''
Interest rates will stay below 1% for five years
Citywire: Bootle: Interest rates will stay below 1% for five years
Bootle predicts that interest rates could stay below 1% for five years.
'Double Dip' Warning
Sky News: 'Double Dip' Warning Ahead Of Rate Decision
Money Panel is divided on the future of the economy - with one expert warning of a "double dip" recession and a major housing crash.
+1.0% MoM +1.1% YoY
Halifax: December Index
Commenting, Martin Ellis, housing economist, said: "House prices increased for the sixth consecutive month in December. The 1.0% rise between November and December was slightly below the average increase over the previous five months. Prices increased for the second successive quarter following falls in both the first two quarters of 2009. Prices in December were 1.1% higher on an annual basis, marking the first rise since March 2008. House prices have risen by 9.4% since reaching a low in April 2009."
Wednesday, January 6, 2010
Tax dodgers aren't scared!
Guernsey Press: Tax Experts predict less impact
HMG are powerless in the face of rich people who can't be bothered to pay tax
Does Jack Straw give election night date away?
Crown blog: Does Jack Straw give election night date away?
Jack straw lets slip 16 weeks from today
UK behind Lithuania, Czechs and Hungary
Mail: Britain falls to 25th best place to live in the world...
"Even former Communist countries where unemployment is still rife are considered better places to live. The Czech Republic and Lithuania were not even accepted into the European Union until 2004". "The U.S.A dropped from third to seventh place this because of last year's economic collapse. 'Sustaining the American Dream has escalated out of the reach of many,' said a magazine spokesman". Germany, which comes fourth in the overall survey, is widely praised for its efficiency and leisure facilities. The survey notes: "In Germany, everything works and works well. Its houses are built to last, and their legendary autobahns are still mostly without speed limits".
Will Hutton humiliated
Plenty of cash to invest in UK houses?
Telegraph: 10,000 admit to offshore tax dodge
"Just over 10,000 people with untaxed income hidden in offshore accounts have taken advantage of the Government's latest amnesty".
Bet house price keep rising
Guardian: Construction falls for 22nd month
No comment. I feel sick.
Oh no he doesn't! (He's behind you! etc.)
The Times: Mandelson outlines plans to reduce UK deficit
He said that government spending was providing vital demand at a time of low private sector activity. "Pull away that prop for the economy and you reduce the tax take, push up spending on unemployment and make the deficit worse. This is the paradox of government thrift. We learnt it in the 1930s. It seems to be totally lost on the Conservative party."
Loading the silver bullet?
Telegraph: Interest rates 'could rise in March'
Signs of an economic recovery and sharply rising inflation could force the Bank of England's monetary policy committee (MPC) to consider raising rates early this year, an analysis by Henderson New Star indicated. The company's "MPC-ometer" – a statistical tool for forecasting interest rate decisions based on the latest economic and financial indicators – predicts that the MPC will shift to a "tightening bias" in early 2010. The MPC-ometer has a good record of predicting the Bank's decisions on interest rates. It has correctly signalled the month and direction of 12 out of 13 rate movements over the past two and a half years.
Tax speculation
The Real News: Tax the speculators and create a public bank
Robert Pollin: Tax speculation, create a public bank and a public rating agency - these are a few of the necessary reforms
MP's fear the Silver Bullet
Moneymarketing: MPs fear house prices are unsustainable
Treasury select committee MPs have warned that current house price levels could be under threat if interest rates increase. In the committee’s feedback on the pre-Budget report, the MPs warn that while house prices now appear to have steadied themselves, they have done so at a level which is still relatively high compared with earnings, leaving them vulnerable to further potential shocks. In its report on the PBR, the TSC says: “House prices appear to have stabilised, but at an historically high price to earnings ratio.
Lemmings
The Telegraph: Bad news for the stock market: retail investors are flooding back
The reason this could be interpreted as bad news for the stock market is that retail investors are invariably late to the party. When the private investor starts, lemming-like, piling into equities you basically know it’s all over.
The scientific brain drain
The Business Insider: How the housing bubble destroyed our future
Interesting piece on just how much the flood of boffins going into investment banking and finance in recent years has held back technological and scientific innovation - for a generation at least. High house prices really are bad for mankind...
Big rally in a bear market
FT: Short View: Awaiting the bear
The technicians amongst us may find this interesting. Both technical and fundamentals are suggesting a stockmarket fall.
Budgetary problems
Telegraph: Greece's day gets off to a bad start
An interesting start to Wednesday with the ECB effectively saying that there will be no ‘bail out’ of Greece. This rather puts the cat amongst the pigeons as, without help, Greece is rather up the swanee. Ireland, Spain and Portugal are in a similar (although not quite so bad) situation as Greece and dealers can be forgiven for starting to believe that, with no ability to throw out the bad apples they might start to affect the entire crate.
Don't mention the war - or the debt!
This is Money: Debt denial 'is worse than appeasing Nazis'
"The Government's refusal to cut debt more aggressively is as bad as the failure to combat Nazi Germany before the Second World War, a former minister claimed last night. Frank Field said the Government was living in 'cloud cuckoo land' and adding to the illusion that all is well by printing money to buy up its own debt". Mr Field made his extraordinary attack during a Commons debate on the Government's fiscal responsibility bill, which makes it legally binding for ministers to halve the size of the deficit within four years. He said it would have little effect when City firms are threatening to downgrade the Government's credit rating.
Commonsense at last?
BBC: MPs urge '70m population cap' in party manifestos
A cross-party group of MPs and peers have called on the main parties to make a manifesto pledge not to allow the UK's population to exceed 70 million.
Interesting graphs
The Economist: House prics - After the crash
When The Economist last took stock of house prices across the globe, prices were falling in all but two countries. Three months later, prices are now rising in a total of six countries. Hong Kong is experiencing double-digit growth. Our interactive house-price tool allows you to chart the ups and downs of house prices for 20 of the most important economies over several years. In addition, the chart lets you compare house prices in real terms and against average incomes, providing ample fodder for that next dinner-table debate.
Crash course in Authoritarianism through the ages
Legendary Leg-Iron: Fear The Witch, For It Is You
"The real fear, the ultimately brilliant part of it, is that nobody is actually scared of the 'witch' most of the time... Nowadays, people are not afraid of racists. They are afraid of being labelled a racist. They are not afraid of paedophiles. They are afraid to go anywhere near children in case they are labelled paedophile. It's not smoking they fear, it's the idea that if they let the smoker get tobacco scent on their clothes, others might think they smoke too. It's not alcoholism they fear but the perception of others that maybe they are drinking too much."
Tuesday, January 5, 2010
When... not if
Wall Street Journal: Pimco Executive Sees Risk of U.K. Downgrade
The U.K. government faces an 80% chance of a credit-rating downgrade if its deficit reduction plans remain as they are, according to Scott Mather, Pacific Investment Management Co.'s head of global portfolio management.
Rosy consensus v Rosie Consensus
Zero Hedge: Belief in the Tooth Fairy
Some excellent obsservations from Mr Rosenberg including that the stock market has managed to become a classic lagging indicator and is rallying on predctions of S and P earnings of $80 when we got $56 last year on a Jan 2009 estimate of $77. What R doesn't include are the "surprise" earnings from banks which I reckon will push us up to S and P 1250 this quarter and Dow 12000. I see GS and WFC are already rallying on the hope.
When the prop is kicked away, then what? US housing totally reliant on FED life-support!
Bloomberg: Pending Sales of U.S. Existing Homes Dropped 16%
The number of contracts to buy previously owned U.S. homes fell more than forecast in November as Americans waited for a first-time buyer tax credit to be extended. The index of signed purchase agreements, or pending home sales, dropped 16 percent after a revised 3.9 percent October gain that was more than initially reported, the National Association of Realtors said today in Washington. It was the first decrease in 10 months. The figure shows housing may be at risk of weakening when homebuyer incentives, which were extended in November, expire later this year.
As first comment says"myth is spelt wrong it should be LIE"
Express: LABOUR'S GREEN JOBS ‘ARE MYTH’
The Engineering Employers Federation said over 90 per cent of the £2billion earmarked for the world’s biggest wind farm – the London Array, off Kent – is being spent overseas. One investor, German power company E.ON, said only £180million is being spent here because there are no suitable suppliers
Global house price valuations
Economist: Ratio rentals
House prices are still far above their fair value in many countries—though no longer in America ( for 'Britain' +28.8% )
Byron Wien’s ten surprises for 2010
Investment Postcards: Byron Wien’s ten surprises for 2010
Dead on target at the beginning of the new year, 76-year-old Byron Wien again published his annual list of surprises for 2010. He was amazingly accurate in 2009; read on for his new list.
You can't get blood out of a stone
Times: Iceland blocks repayment of £2.3bn to Britain
Last year UK investors in Icesave were compensated with money from the UK Treasury. Last week Iceland's Parliament passed the "Icesave bill" - which would have allowed the repayment to the UK government to be made over 14 years. "However, Iceland’s Olafur Grimsson, Iceland's president, today refused to sign off the bill after fierce political pressure from the country's opposition party and a petition against the bill signed by nearly a quarter of the country's voters. Under Iceland's constitution there must now be a referendum on the issue."
A little more pressure on interest rates
Telegraph: Pimco move to sell gilts raises spectre of a UK sovereign debt crisis
Fears that Britain may be heading for its first sovereign debt crisis since the 1970s hit a new intensity after Pimco, the world's biggest bond house, declared that it is starting to sell off its holdings of gilts. The American investment group said it will be a net seller of UK Government bonds this year, at the very point when the Bank of England brings its £200bn programme of purchases to and end and the Treasury attempts to raise unprecedented sums through the capital markets.
Inflation? Nope.
Channel 4: ASDA to cut prices
Long term price cuts from Associated Dairies.
Gordon applies for emergency funding from Northern Rock using number 10 and 11 as security
Times: Bankruptcy hanging like a cloud over Labour's election campaign
An impoverished Labour Party will be unable to return fire against the Conservatives’ pre-election advertising blitz for months, amid fears that it could emerge from the campaign bankrupt. David Blunkett, the former Home Secretary and chairman of Labour’s election development board, said the party was going into an election at a greater financial disadvantage than any time since 1983, when it suffered a landslide defeat.
Dwelling on building.
Telegraph: UK construction contracts for 22nd month
The Chartered Institute of Purchasing and Supply/Markit construction PMI index rose to 47.1 in December from 47.0 in November. The commercial and civil engineering subsectors both declined in December. However, residential construction expanded for a fourth month running and at its fastest rate since August 2007.
A more productive Britain
Telegraph: Freeze minimum wage to help Britain's youth stay employed, says CIPD
The seeds are being sown to move Britain towards a more balanced economy. The first step was devaluing the Pound. The next step is to lower the average wages of our workers. It is quite easy to do this. First you lay off a few high earners. Then you replace retiring high paid workers with young low paid workers. Then you freeze everyone else wages and let inflation do the work. A reduced Pound and lower wages will make us competitive enough to actually produce goods. Many of us have campaigned for a shift like this but perhaps we forgot the ugly side of the coin?
A roaring mouse
The Times: Mortgage demand at new heights
More mortgages were taken out in November than at any time since ... wait for it ... drum roll ... March 2008. Still way down on historical norms of 100,000+.
Who do you agree with?
FT.com: Property: Are residential property prices now fairly valued?
The following economists’ answers appear in no particular order.
Monday, January 4, 2010
Yes this is folly
Times: We’re picking up the bill for right-to-buy
The new system is fundamentally unfair to the taxpayer. The 1.2 million housing benefit claimants who live in privately rented accommodation receive a payment based on the median rent for an appropriate property in the area. Why are the lowest-income groups — nationally, 15 per cent of families receive some sort of housing benefits — paid to live in average properties, when surely they should be living in the cheapest homes?
Interesting title by Ray, no spin
Mortgage Strategy: Nationwide's Real House Price Index ends year with a 0.4% fall
December is usually the month when Nationwide’s widely reported seasonally adjusted House Price Index shows the largest upward adjustment from the real figure and this year was no different. Thus a real fall of 0.4% in December is translated into a seasonally adjusted rise of 0.4%. This is the first real monthly fall since the market bottomed out in February and leaves the index 5.9% up on the year. Over any 12 month period the Real and Seasonally Adjusted figures must agree and so 5.9% is the annual rise on both bases.
Government budgetary crisis danger signals
FT: UK deficit warning from City economists
Britain is in danger of succumbing to a budgetary crisis this year, with the economy likely to stay in the doldrums until at least the end of 2010, a Financial Times survey of economists warns. Asked to name the three biggest risks to the economy, 37 of the 79 economists polled said the UK was threatened by a fiscal crisis that could derail any revival. Howard Davies, director of the London School of Economics and a former member of the Bank of England’s monetary policy committee, said: “The major risk is the loss of confidence in the government’s ability to get the public finances back under control.” Sir John Gieve, former deputy governor of the central bank, said that inadequate plans for addressing the fiscal deficit could result in sharp rate rises and a fall in the pound.
Passing on the hot potato
Telegraph: Pimco cuts holding of UK and US government bonds
Pimco, which runs the world's biggest bond fund, is cutting back its holdings of UK and US government debt as the two countries grapple with record deficits. In an outlook for 2010 published on its website, Paul McCulley, a managing director at Pimco, said that "we are currently cutting back in the US and UK because, as mentioned before, supply and demand dynamics are likely to be negatively affected as borrowing rises and central bank buying declines." It was a view echoed on Monday by Mike Amey, who oversees UK fixed income at Pimco in London. "Those areas of the bond market that have had greatest support from central banks will be most vulnerable as that support comes to an end,” said Mr Amey.
Happy new year everyone!
BBC News: Markets gain on new year optimism
New year optimism on the financial markets, together with rising commodity prices, has nudged share indexes higher on the first day of trading of 2010.Positive economic data from China, Europe and the US also added to the optimistic mood. In China, manufacturing data showed the sector growing by the biggest margin in five years, while UK manufacturing saw the fastest pace of growth in two years. That picture was echoed in the US, where data from the Institute for Supply Management showed that the manufacturing sector grew for the fifth straight month in December, and at the fastest pace for more than three years. The corporate picture is looking a lot better for 2010, and the market is still undervalued," he said.
Meanwhile, closer to home ...
Irish Times: House prices down 40% since 2006
The average cost of a second-hand property in Dublin fell by a further 4 per cent in the final quarter of 2009, bring the total drop in prices to 21.5 per cent for the year. According to new data from estate agents Sherry FitGerald, prices in the capital have fallen by 45.7 per cent in real terms since the peak of the market in 2006 and are now at 2003 levels. Overall, the average cost of a second-hand property in Ireland declined by 4 per cent in the fourth quarter of 2009, bringing the total yearly decline to 20.3 per cent. Nationally, house prices have fallen by 40.2 per cent over the past four years.
Where is the first economic tsunami of 2010 going to come from?
BBC Economics Blogs: Intriguing economic questions for 2010
Stephanie Flanders writes about the likelihood of 1) Plan B being needed for quantative easing (direct BoE cash to business), 2) UK Bond Market Showdown (before or after the election?), 3) US private sector recovery, and 4) Eurozone deflation (and other Euro topics). Putting my bets a relatively quiet Jan-April, with 1), 2), and 4) occuring after the UK election, and 3) never.
Telegraph
Telegraph: 2010 Japan to lead world in sovereign bond crisis
Happy new year all. The consensus is way too rosy, and way too like 2006/2007, except now manic and paniced at what was revealed in 2008, and all the more desperate to get back to our rightful business of endless growth. Sadly there are few places, here being no exception, that offer much in the way of reasoned middle ground.
Get them interest rates up!!
Times on line: Home loans market is ready to expand, but at a higher price
Stephen Noakes, head of mortgages for Lloyds Banking Group, the country’s biggest lender, said: “If you look at the markets there is a prediction that the Bank of England will first raise interest rates in the middle of the year and that the base rate will end up at 1.5 per cent by the end of 2010.” Costs could also rise as banks and building societies pass on the cost of offering better rates to savers. But lenders have signalled that the availability of new home loans will improve.
Responsible thinking - refreshing.
Timesonline: Recovery should not come at a cost to our children
Conclusion: "It is sometimes helpful to see these political forces through an intergenerational lens. Like higher house prices, like the collapse in private-sector investment, the rise in government debt represents a transfer of resources from young to old. Public borrowing isn’t a free lunch, it’s simply taxation deferred. Politicians have few incentives to cater for the young, still less those unborn. But if we, as electors, care about the longer-term future of the country, we must do our best to hold their feet to the fire. We must ask what they intend to do, not just about government spending next year, but to support productivity and national income well beyond that."
Property still vulnerable
City Wire: The Housing market is as vulnerable as its ever been
The truth is that we enter 2010 with the property market just as vulnerable as it was two years ago. Tottering like a binge-drinker on heels – it could go either way.
Cheap money may not have been "The Problem", but it must have helped!
Bloomberg: Bernanke Says Regulation Came ‘Too Late’ to Curb Housing Bubble
Federal Reserve Chairman Ben S. Bernanke said low central bank interest rates didn’t cause the housing bubble of the past decade and that better regulation would have been more effective in curbing the boom.
Crass cliche of the year awards
FT: Good year for management guff
A bit off-topic but a, like, reality check for the private-sector-is-beautiful boys here. See the link to the Gazprom song - it's a gas all right. A game of two halves.
Fresh banking blood
Telegraph: New banks to debut, as bidders race for Northern Rock
"Mr Chen, whose business will focus on lending sums of about £5m to smaller private enterprises" A vigorous new banking sector is taking root. They will have solid capital bases, sensible underwriting policies and more importantly, they will target growth industries and promising new businesses. We'd have got here sooner if they had let the decrepit old banks die but there is no point looking backwards. This is good news.
Class war by the rich on the workers
Before Its News: How Average Americans are Lured into Debt Servitude by Promises of Mega Wealth
What has happened in America is now happening in the UK. The top 1% of Americans own nearly half of all assets and the gap is widening. We are slowly turning back into a Victorian society. where the poor live in debt servitude with no assets. The rich just need to own assets and live off the monopolistic exploitation of those assets. The elite control government policy and have systematically lowered their tax burden and transferred it on to those who have to work for a living. And for those thinking Dave Cameron will help - you can forget it, he is going to increase the transference of the burden of taxation onto those that are productive in society and give tax breaks to those that exploit monopolised assets for a living.
The American and British government are rigging the system
Zero Hedge: Who Is Responsible For The Non-Stop Market Rally Since March; Gives Some Suggestions
An article speculating on how the market is being rigged by the US government and no doubt by ours.
Optimism - to anticipate the best possible outcome
Telegraph: House prices face decade of 'sobriety'
''According to the upmarket estate agent, while inflation-adjusted house prices grew 68pc in the Noughties, prices will grow just 40pc in the next decade. This compares with -14pc in the 1990s, 43pc in the 1980s and 49pc in the 1970s. "The Noughties will be remembered as a decade of polarisation – its legacy a residential market split, possibly irrevocable, between the equity haves and have-nots," Lucian Cook, director, Savills residential research, said.''
Bashir Aden relaxes in his wife's home, rented by taxpayers at £1,600 a week
DailyMail: The £20bn handout: Housing benefit bill soaring as recession bites
See pictures. Another claimant, in Hackney, East London, has received £207,000 and some 550 families receive more than £30,000 annually
Sunday, January 3, 2010
Interest rates and the housing bubble
CNN Money.com: Bernanke defends Fed record
As such, Bernanke said the more effective way to have averted the problem was through smarter regulation. "That conclusion suggests that the best response to the housing bubble would have been regulatory, not monetary," Bernanke said.
Slow but steady...downwards
Northampton Chronicle and Echo: Housing market 'slow but steady' next year
"House prices in Northamptonshire rose in the past year but at only half the rate of the national average, according to new figures" According to the last available land registry figures Northamptonshire is down 5% yoy. November 2008 : 140,827 November 2009 : 133,989
Halifax ramping as previously posted,but worth reading the comments.
Msn news: Property 'now more affordable'
PeterPan3#5 03 January 2010 13:55:42 I agree with getemoutahere, house prices are more than double what they should be!! and who the hell can afford a 25% deposit nowadays!! Only those with crazy parents who are prepared to give away all their hard earned savings. and then I should add, if you lend somebody 10 times their salary, anybody can buy any house at any price, which feeds price increases and increase the leval of debt!! Lets build a lot more reasonable quality houses and regulate the whole industry a lot more and maybe in time prices will come back to where they were 10 years ago and then the average person can really afford a house!!
Finally the truth begins to come out
Timesonline: Bovey to pay back £1 million
So despite being in a property boom,the companies made no profit just losses,so in the last 2 years they paid themselves £4.3 million in loans then bovey waived them effectively giving them free money....is it me or is this so outrageous its unbelievable....and HBOS must have known too
But ... but I thought we were heading for the sunny uplands of ever-rising house prices in 2010?
ThisIsMoney: Lenders prepare to hike mortgages rates
'Lenders are doing little new mortgage business compared with previous years and they have no choice but to offset some of the low margin business they have written in the past by hiking up their standard variable rates.' Well, they have to make money somewhere ...
No surprises here
Guardian: First-time home buyers at record low
Basically, in 61% of areas, houses are unaffordable for first time buyers. In 2007, the average age of the first time buyer was 36 too - and that was when house prices were still rising! Wait till you see how the BBC reported on this data though ...
Helping people makes things worse
Cnbc: Did mortgage relief program make things worse
You cannot live in a market economy and stop the markets from working,this article sums up the problem imo.If you cannot let the markets work then you are basically in communism with bubbles!..In hungary during the warsaw pact,russia used to send coal to hungary to be refined then sent back to russia....just to keep people employed....look what happened to them.
Sand castle maybe
Observer: An Englishman's home is his castle
A good article about why HPI is bad in the newspaper for Islington flat owners with a place in Devon for the weekend.
Great news - if you're "average"
BBC News: 'More areas' affordable for first-time buyers
Property is now affordable for first-time buyers in nearly four out of 10 areas of the UK, research indicates. Someone on average earnings could now afford the average first-time buyer property in 39% of local authority districts, the Halifax bank said.
The price that's paid to pay the price
Telegraph: Housing benefit bill rises to nearly £20 billion
The Government estimates it will pay out £19.6 billion in housing benefit during the 2009/10 financial year, according to figures slipped out on the Department for Work and Pensions' (DWP) website. The year-on-year rise, of almost 15 per cent, is the steepest for more than 15 years. In 2010/11 the bill is expected to rise still further, to £20.8 billion.
Sounds like Zimbabwe........
Times: Public sector pay races ahead in recession
''Public sector workers earn 7% more on average than their peers in the private sector — a pay gulf that has more than doubled since the recession began. Official figures show that staff employed by the state are enjoying bigger pay rises, working fewer hours and receiving pensions worth up to three times as much as those in the private sector.''
Give up trying to predict house prices
The Independent: Julian Knight: Predicting house prices? It's like herding cats
Apparently, I don't make "good" radio. I had a call from a radio station and was asked the question I always get asked at every dinner party as soon as the guests find out what I do: "What will happen to house prices?" The presenters could barely disguise their disappointment that I turned out to be that most annoying of guests – a "fence sitter".
Saturday, January 2, 2010
Florida still leads the way
NYT: Real Estate in Cape Coral, Fla., Is Far From a Recovery
Our guide, Marc Joseph, stalks wildlife of the white-elephant variety. A real estate agent, he specializes in houses that proved financially disastrous for someone — the banker, the homeowner, the American taxpayer, often all three.
Ozzie investors face polar opposite position to UK's
Sydney Morning Herald: Financial crisis may yet have a sting in its tail
I quote : "THE big winners in 2010 could be self-funded retirees and, maybe, even pensioners. A deposit war has flared up between the banks, which are offering term deposit rates of up to 7 per cent for three years. Even a 12-month deposit, which would still be government guaranteed, is paying up to 6.8 per cent."
Fake footsie rebound
Telegraph: Developing nations emerge from shadows as sun sets on the West
FTSE100 rebound seen as a sign of recovery despite being 20% lower than 2000. However, this article points out that this is due in part to large international mining companies which are listed in the UK ("for now").
Insiders view on the american finacial system
The Real News - youtube: The crash can happen again
Robert Johnson, George Soros's business partner explains that there has been no reform of regulations and the next crash is on its way: - you can watch his previous interviews and is explanation of his own and Soros's views on the current state of the American and global economy
Let the campaigning begin!
Reuters: Conservatives put deficit cuts at heart of election campaign
The fast-growing national debt was "the greatest single risk to sustained economic recovery," Cameron said. "That's why we've been clear about our intention to cut public spending."
Gold bubble? - Should other trading markets worry?
FT: Vietnam to put an end to gold trading
Vietnam has ordered all gold trading floors to close by the end of March, putting an end to a business which turns over $1bn a day but which the government feared was spinning out of control.
China house prices are 80x earnings. Makes the UK look quite affordable....
Bloomberg: China Property Bubble May Lead to U.S.-Style Real Estate Slump
Millions of Chinese are pursuing property with a zeal once typical of house-happy Americans. Some Chinese are plunking down wads of cash for homes. Others are taking out mortgages at record levels. Developers are snapping up land for luxury high-rises and villas, and the banks are eagerly funding them. Some local officials are even building towns from scratch in the desert, certain that demand won’t flag. And if families can swing it, they buy two apartments: one to live in, one to flip when prices jump further. In Beijing, a typical 1,000-square-foot apartment costs about 80 times the average annual income of the city’s residents.
Lest we forget (how much they're costing us)
Guardian: Taxpayers make £26bn loss on stakes in Lloyds Banking Group and RBS
Sorry if this has been posted before. The taxpayer begins 2010 with a loss of more than £26bn on its stakes in Lloyds Banking Group and Royal Bank of Scotland, which were bailed out at the height of the banking crisis, illustrating the scale of the problem the government faces in selling its holdings in the two banks.
Falling £ unlikely to boost City Centre flat prices
Times: Country homes forecast to rise 10%
"Continued demand from foreign buyers will push up the price of country homes by as much as 10 per cent this year but the outlook for the property market as a whole is more mixed, according to leading estate agents". "Rob Bruce, head of research at Hamptons International, is among those tipping country homes to outstrip the market, partly because of interest from Middle Eastern and Asian buyers"
What shortage?
The Press Association: One in ten consider selling homes
More than one in 10 homeowners would consider selling their home and renting after seeing house prices dive during the past two years. But 13% of people who rent a home said they stilled hoped to buy a place of their own and they had not been put off by the house price correction.
Friday, January 1, 2010
Read this, you might learn something.
MSN: Dear Mr. Geithner, Let Me Teach You Something
Mr. Geithner, let’s start your education by simply looking at the number of zeros in $100 trillion. Are you ready for this? You better sit down because it should blow your mind away: $100,000,000,000,000. I’ll now give you another frightening number, and that’s $1.144 quadrillion, which is the approximate notional value of all outstanding derivatives. This $1,144,000,000,000,000 is a number that will only continue to grow since you and your helicopter partner firmly installed a moral hazard framework into the whole financial system with your global bailout.
So many ways to stealth-transfer taxpayer wealth to the banksters
Counterpunch: Lining up for the Wall Street gravy train
He sketches the process of the complete de-coupling of finance from the real economy. Fewer jobs, more billionaires.
Front cover headlines new years day!
Daily Express: HOUSE PRICES DOUBLE
The housing market has defied gloomy predictions to end the year with prices up by nearly six per cent. And in a clear sign that bricks and mortar remain a sound investment, the price of the average house has more than doubled over the past decade, it was revealed yesterday.
Threats from banksters' moll
The Guardian: * Business * Banking Leave bankers alone, says BBA's Angela Knight
"There are literally tens, if not hundreds of thousands of British jobs directly and indirectly related to banking - bringing billions of pounds in tax income. Some of this is now at risk and, although many are well aware of it, decision makers increasingly either wish to ignore it or - even more dangerously - choose not to believe it," said Knight.
One for Estrader and MG really
Investors intelligence: Apologies but this looks important to me
My new year resolution is not to post any market related stories but only comment on them. However as i have said a while now i do think the easiest - but even thats not that easy - way to determine the change in HPs is to assume the correlation between HPs and equities will continue. On that basis calculating the top of the bear market rally in equities, seems a good place to look. This is a link to investors intelligence. I draw your attention to the Bull / Bear [BB] ratio chart in particular. I will also (for those that are interested) copy a rather long article by a blogger - who i think is pretty good (apart from the spelling mistakes i could have wrote it). It gives you a feel for how market people think, and how difficult it is to go against the herd. Lots of angst!!
Extend and pretend
The Times: Money printing scheme is working, Bank of England says
Lending to households and businesses continued to pick up in the final three months of last year and is expected to rise further in the coming months, the Bank of England said yesterday, boosting hopes that its scheme of quantitative easing is working.
Fox shows cunning insight
FT: House price forecasts for 2010
List of forecasts from a range of familiar names. Interesting not for the usual bluster from the VIs at the top but the winner of last year's forecasting efforts - a fox. Reminds me of the 3-year-old who most closely forecast the FTSE a few years ago. Happy New Year
Bankers are like trade unionists: only richer:-)
Greg Pytel: Angela Knight: an Arthur Scargill of the British banking
A parallel between downfall of the British industries in the 1980’s and the current state of the banking sector, and the bankers behaving like trade unionists believing that the taxpayers owe them support.
35% down and still falling
Cnn money: 3 reasons home prices are heading lower
anyone thinking the uk will escape a housing correction/crash are delusional,its a bit like the nasdaq hitting 5000 when they were already grossley overpriced....36-44 year olds staying with mum,ftbuyers disappeared from the market...the only thing keeping it up is people who think it will keep going up..i.e 'investors'...I think house prices could actually fall for 20 years like oil and gold from 1980 to 1999
Can't pay / Won't Pay... same difference
The Telegraph: US housing market waits for 'homeborrowers' to walk away from mortgage payments
Why bother? That's the question more underwater Americans are asking themselves about their mortgage. Trapped in the abyss of negative equity, more will decide to quit paying. As they should Lenders do what they can to keep the disease of economic rationality from spreading. They try to "extend and pretend" with lower interest rates, extended terms, and the pretence that eventually the borrower will make good. Anything, really, to avoid the hit to capital that comes from a writedown of the principal.