Chicken

we were short way before then - around 14 euros - when most of the financials were still pretty cheap to borrow. Were worried when it squeezed from 9 to 12 but held our nerve and covered at 5 - not because we thought it was good value but you get the "winners curse" with shorting. You can only ever make 100% on a short, no matter what price you got in at, unless you reload. What's it worth? Fundamentally, zero in my opinion - its liabilities outweigh it's assets. However, shares can't fall below zero so there's always some option value for them. Not worth getting involved now unless you are treating it as a straight up bet.

You can't initiate new short positions in them so it is only those that are maintaining pre-existing positions that can still be short (although you could create an indirect synthetic by shorting the Irish market and buying CRH, Ryanair and Kerry). It was also getting very difficult to locate stock. We covered a previous Anglo short (see here http://www.housepricecrash.co.uk/forum/ind...=65061&st=0 ). When we tried to short it again (before the ban came in), it was unborrowable. Short-sellers are popular whipping boys in this environment but markets are down double-digits since the ban came in place so who's to blame now? This forum, of all places, should be sympathetic to those that believe in over-priced assets.

You're welcome. I'm in London but moving to NY early next year and I've spent a lot of time there. Looking around is great fun - check out Trulia and cross-reference with Google Maps. All of NY is available on streetview now so you can stroll around the neighbourhood to see what's there (looks like the photos are only about 3-4 months out of date). You can get crime statistics online for every part of NY but you won't get the true picture until you actually live there. Like every major city, there's good parts and bad. Even somewhere that looks good on the paper might make you uncomfortable depending on your circumstances. eg I hate Brighton Beach but you might love it if you are russian. Overall though, crime is way down on what it used to be and there's not really anywhere that is a complete no-go area for me. A St. Reatham man should feel the same! Even though we've narrowed down the general area where we want to live, NY can change from block to block so we aren't rushing into anything. Also, I can't expect the bottoming of prices to coincide exactly with my moving so we're renting for 1-2 years until we find the right place. If you find you get to the City to Canary Wharf part of London regularly, I'd be happy to meet up for a drink to discuss further.

"A few colleagues have been looking at places and telling me that the prices have now bottomed out." Not even close to bottoming out yet. I've been tracking a few areas of NY for the last 18 months and significant cuts are only just starting to come out of the woodwork. Transactions take an eternity to complete over there so the marks we are seeing now relate to deals initiated anywhere back to the start of the year. Trulia, Zillow and Propertyshark are very useful sites if you want to track. I think another 30-40% down from here across the board. I would be particularly interested in the Upper East Side but it still seems quite expensive." I'm sure you have your reasons for looking there but it's overpriced relative to the rest of NY in my opinion. My two cents on the areas I know: - Midtown is still pricey but cheaper than UES and more convenient. This is the area for the quintessential NY experience. - Lower East Side. Funky, cheap (relatively), up and coming - think Soho in the late-70's/early-80's. - Battery Park City. Cheap but for a reason. Sterile (like Canary Wharf 10 years ago) and obviously linked to the fortunes of Wall Street. - Chinatown. Cheap. Excellent if you want to pretend you are living in Hong Kong. An acquired taste otherwise. FWIW, I'm looking in Victorian Flatbush in Brooklyn - 20 mins from downtown Manhattan. A 6 bed / 3 bath 4,000 sq ft house with a garden is the same money as a two bed apartment in Midtown.

Spot on. Unless all of the desirable characteristics came in after you bought then they were factored into previous transaction prices.

bring back Ali

Might be "For God, Country and Coca Cola"?

the market doesn't like it because it was hoping the previously rumoured banks (suspected to have the biggest default exposure) are not digging into their own pockets for the bailout. Who in their right mind is going to subscribe to the issue if they don't have to?

The reason I know about that vault is because I performed an inventory check on it in 1999. As well as the pallets of gold, silver, platinum and palladium bricks, there was a lot of coins under individual accounts. This is not to say that a fraud couldn't/hasn't be perpetrated but it's hardly a no-brainer.

well I can't say whether it's all accounted for but there's a big ass vault about the size of a football pitch in the middle of Zurich that has a lot of it.

I was at the pre-xmas meet and enjoyed it, despite having to leave earlier than most. From memory, I was the only non-white (apologies if not) although a couple of guys were from abroad. I'll talk to almost anyone about almost anything. If I don't like the conversation, I'll leave (unless it's BoomBoom, whom I'll punch and then leave - I'm vindictive like that). So how's about it? drinks and a curry somewhere around brick lane?

111 replies, over 7,500 views and no-one has pointed out their biggest mistake. If you can borrow enough to buy 700 new houses, you shouldn't be buying from the secondhand market - you should be building them yourself. It's like McDonalds buying their "meat" from the high street butchers.

I'll have a pint of whatever Particleman's drinking.

Not that this is confirmation but Goldman Sachs has a short note out this morning called "Strategy Expresso! Equities to re-couple with Credit". Here's the front page blurb. Equity and Credit markets have disconnected... Over the past three weeks credit spreads have widened significantly with little or no reaction in equity markets. ... and in the near-term, equity markets are likely to weaken We do not believe this disconnect can last, at least not to the degree so far. In the near term, equity prices are likely to weaken again and re-test their previous lows.

My point was not on whether equities are cheap or expensive but more on the disconnect between the credit and the equity markets. If you think that equities are cheap, then you should be thinking that the credit market has been beaten up too much. On your comment, I would like to pick up on one point. You say that property, bank and insurance shares have been beaten up but that is only referenced to the equity values, not the enterprise values - the latter has not really been taken down at all and certainly not in line with the deteriorating of the credit market.

Same here but I've had a couple of conversations with former colleagues (including one involved in 20% Dog and PONY show recently) on this in the last week. The bond market is in complete gridlock - the likes of which the most seasoned market operators have never seen - and hardly anything is moving. One major FI player is in the process of combining their investment grade and high yield desks with resulting redundancies. Either the bond market is pricing incorrectly, or the equity market, or both are wrong. But they can't both be right - something is going to give, and very soon.

At a ML fixed income conference a few days ago, Yell said that if they had to refinance their debt today, they would have to pay an extra £260m a year in interest - which would probably mean it won't generate a profit again until the company gets recapitalised (debt for equity swap).

What you are describing are the actions of a commercial bank, not an investment bank, and certainly not the job description of Mrcitytrader. A simple definition of a commercial bank is the taking of deposits and the issuance of loans. This group includes the tellers at your local branch, the branch manager that approves your loan, and the guys that structure multi-billion dollar loans for companies. Contrary to popular belief, commercial banks are not particularly profitable - typically generating around 1% return on assets - and it is the size of their balance sheets that makes the returns look large both in absolute terms and relative to their equity bases (and it is the latter that is taking down Northern Rock). Commercial bankers are paid considerably less than investment bankers - although many of them still fairly high relative to the general population - so your question looks like it might be two-fold. Why are commercial bankers paid more than the general population? and why are investment bankers paid higher still? I'll try to answer that tomorrow but just wanted to get the distinction out of the way first. If you want to read more on the differences then look up the Glass-Steagall act.

It's not that high house prices are inevitable, it's that it has already happened. Conducting a post-mortem so that a similar situation can be avoided in the future is not without merit but I doubt it will ever be effective because it's always "different this time". This goes back to my Moses point - I'm not commenting on the morality of what has/will happen. It may surprise you but we probably hold similar opinions on whether what has happened is right or wrong. The difference is that I am not trying to change anything myself. I'll let the changes work through themselves and try to benefit at the opportune times. ie buying low and selling high, and it's almost inevitable that someone will be disadvantaged by my actions. That has been a contributing factor but it boils down to the buyer seeing value in their purchase at that price. On top of this, house prices are determined by the marginal transaction. If you bought your house 10 years ago, you paid what was probably a "reasonable" price. But you only realise a profit when you sell. Many will have seen houses on the same street sell for more than they bought and, as a result, felt themselves richer. When the prices come down, they will feel themselves poorer. What proportion of the population has actually traded up or bought property in excess of their needs in the last, say, 5 years (I'm using this as a proxy for the time in which property prices has exceeded my proxy for fair value)? The vast majority have not so they are in the same net position as they started unless they drew down on phantom equity. Again, I am not passing judgement on whether inflation is right or wrong - I am saying we have it and you should deal with it as best you can. If I succeed in being a beneficiary from this then someone else must be a loser. Your definition of prudency seems different to mine. I do not consider it prudent to save solely in an asset (cash) that is subject to devaluation through inflation. I do consider it prudent to spend less than you earn though. I disagree with this in a discussion on the Polish graduates thread ( http://www.housepricecrash.co.uk/forum/ind...c=64690&hl= ). Mr City Trader gets paid what he does because that is what his employer can pay and still make an acceptable return on his investment. Let me know which bits on the thread you disagree with.

Yes. Unless you are Moses, I see little gain from pushing against the tide - better to go with it as it comes in and goes out. Sorry, I don't follow how you thought that from my comment? I'm just saying house prices are very high right now and I think they are going to be very low at some point in the (fairly) near future. To address your point, inflation (as I see it) is the growth in money supply relative to the growth in productivity. Since the former is very high and the latter is fairly low, inflation looks to be very high. Some segments of society will benefit from this, others will lose. That's your opinion and it's your to give. I have a different one. Sorry if that disappoints. I'm not sure where you're going with this. Are you upset because someone else (that you deem less productive) gets paid more than you? I can't help you.

errrr....unless you want to rent a room in someone else's house, aren't you by definition going to be living in a BTL house?

That just happens to be the multiple at this point in time. It has overshot upwards beyond affordability or rationality and it will likely overshoot on the downside. Houses will become "affordable" again - how long it will take is subject to opinion.

Sorry to make you jump around between lines of thought injin but it moves on faster than I can browse or type In a closed system this is true. The current limit is the global economy but even that could be argued not to be the case as the world is constantly adding more people. When someone defaults the loss is borne by the lender, offsetting gains it has made on other loans. There is no job on earth that does not have a negative consequence for someone else (admittedly to different degrees). Some win, some lose. Your logic points to prices spiralling up forever, which cannot happen. By your line of thought, I can borrow even more money than the first river guy and buy a bigger river that I can divert to the people (for which I will charge more). Then someone else will do the same to me. My point was that the banks are not independent of the BoE but they are also not branches. In your example, the Don has a choice whether to save the miami section by deploying the New York boys. This will cost him so he weighs up whether it costs him more to send them or risk the upstarts in miami spreading out to take over other parts of his empire. The BoE is your "enemy" and the banks may be your "enemy" too but it should not be for the identical reason. Agreed.

Is it not a question of degrees though? If he borrows £2 then he is only slightly oppressed. If he wants to shake off the oppression then he pays back the £2 with the product of his labour. I don't agree that having the ability to borrow provides an unassailable advantage in the purchase of assets. For producing (income-generating) assets, the price paid depends on what the buyer is willing to pay for that income. For non producing assets, it comes down to the utility (enjoyment) provided by the asset. Borrowing will give you the capacity to buy more expensive things than you could otherwise buy but the absence of borrowing will not make things affordable for everyone. Although I would class Northern Rock as an "affiliate" or "ally" or the BoE rather and a branch or subsidiary. Who is actually being bailed out? It's not necessarily the shareholders - the guy that owned shares at £12 doesn't feel too happy. It is more to do with bailing out the system as the consequences of allowing the failure would be much worse (although I don't want to go too far down this path as it's a separate debate in itself. As someone else said earlier in this thread, not everyone in the City wants a Rock bailout). In summary, I think no lending would be a bad thing (or at least not a good thing) and too much lending is a bad thing - somewhere in the middle there is a balance.

Injin, I follow your posts with interest. I don't always agree but they are always considered. In your example, are you are suggesting that Bob must be a "slave"? He still has his £10k savings that he can choose to invest in an income generating asset or a house. If he wanted, he could also borrow £2 and outbid John. His position is only weaker than John's in your example because of his reluctance to borrow. Similarly, someone has taken the decision to lend to John. At what point does the lender become reckless with his risk parameters? He has lent John 1,001 against an asset that is worth £10,001 - as debt, it has the first call in a forced liquidation so the value of the house must fall 90% before he does not get his money back. That would seem fairly prudent. Finally, at what point does John take on excess risk? Your example doesn't state how long it took him to save £9k but lets assume that he can cover the interest and repayments - a relatively safe bet, no? He also gets the benefit of the use of the house now, rather than having to wait until he has saved another £1,001. The situation because less clear cut when you get a more extreme example more approximating reality (eg Bob has £100k savings, John has £10k savings and borrowing £90,001). The current situation has encouraged recklessness on the part of various parties. I do, however, disagree that this has always been the case, or always will be the case. The system will likely overshoot at both ends of the spectrum but there will be an equilibrium period in the middle where the risk matches the reward.