Chicken

md23040, you have obviously given some thought to the situation and I have no issue with anyone taking the other side - in fact, we need it in order for a market to be made! My "Irish Northern Rock" comment was too inflammatory. For most people, the NRK situation is about the customer queues outside branches. For me, it is about liabilities being greater than assets - with the withdrawal of customer deposits exacerbating the situation. The analysis of banks should focus on the balance sheet, not the income statement. I don't ignore it but it plays a secondary role for me. Like a mortgaged house, most banks are hyper-leveraged entities. When the market is good, the return on equity is dramatically enhanced by the leverage - and vice-versa. At the end of September 2007, Anglo had gross assets of eur96.7bn and equity of eur4.1bn. If the assets are overvalued by 4.2% then the equity is wiped out. Despite already falling a long way, the current market cap of Anglo is eur7.1bn so the market is saying that the assets are undervalued by 3.1%. The difference between being a buyer or seller should centre on which of the two positions you believe in.

I applaud your sentiment on this issue. If only you believed it yourself... Is it real value if the scientific developments produces efficiencies that result in the displacement of jobs and the hardship of others? No - they are paid what their employers are willing to pay them to ensure they can retain their services while still providing the required level of profitability. Sounds like you are also not in favour of performance-based compensation. Only if their developments require the investment of others to come to fruition. You can ask your employer for a share of profit generated from your developments. If they say no then you have the option of setting up your own company where you will enjoy the rewards of employment AND ownership.

The company has made investments to get to the point where it has the clients that it does. Employees are free to invest in their own new companies where they can enjoy the rewards of both employment and ownership. If you disagree with this then you are arguing for all companies to become cooperatives.

You're not stupid so why can't you understand this point? There is the payment to the employee for the work and there is the residual profit that compensates the investment. The burger flipper cannot flip burgers unless the McDonalds they work at has paid for a grill. You will not be able to create your next generation materials without advanced and expensive machinery. In many lines of work, the investment required for the job to be performed is relatively low eg plumbers. For the price of some tools, they can get the rewards of being an employee AND being the owner of the business - that is why many of them are self-employed. I ask you again. Please give me all your money for my new business. I will draw a salary and I will keep all of the profit. If the business fails, you will lose your money. Deal? Your pedantry would appear to have inordinately wide boundaries relative to your comprehension. You said "Your second point drips with all the sanctimonious ire of someone who has spent far too long being overpaid to prognosticate about financial matters in the most nebulous terms." Your implication is that someone who gets paid too much (in your opinion - I still refute this. see above) for doing that will have a tendency towards hypocritical and zealous anger. I asked what your basis for saying this was. Have you extrapolated empirical results to a statistically significant level? Have you made logical inferences? Or are you just making it up as you go along? I'm calling your bluff. Nowhere have I praised the City to the extent that you are making out. All I have done is respond to your Pavlovian denouncement of it. Your verbiage does not confound me but your commitment to reduce your dictionary diarrhoea is pleasing. You seem to want to take issue with everything that I write on the grounds that I work in the City. You don’t place any value on what I, and other City workers, do. That’s your opinion and that’s fine by me but you are saying that no-one should place any value on what they do. This is clearly nonsense since someone is willing to pay for their services (and indeed, by incurring debt during your studies, you are one of those people). I have no need for a stairlift so Stanna has no value to me but I appreciate that it has a value to its customers otherwise it would not exist. Whether there is a market for the City’s services in the future is debatable – horse-drawn carriage manufacturing used to be a booming industry – but that is not the same as saying there is no market for it now. Right at the beginning of this post, you complained about Polish graduates “stealing” jobs that are rightfully yours because they are willing to work for less than you are. Presumably, what they can make here is more than they can make in Poland for an equivalent job. How is what you have done different? You have seen an opportunity to make more money in another country and taken it - I applaud that. But if you refuse to take a job in the City because of hypocrisy then maybe you should turn the opportunity down.

What have I written that leads you to believe that I don't know how business works? Correct me if I am wrong but, since you are complaining about the pay for a graduate level position, what experience and training do you have that qualified you to make this judgement? I do refute it and I explained it in my first point. The overall worth of the job would lead to zero profit. However, unless the employee is also the owner of the company they are only entitled to the pay, not the profit. Investment requires a return - this is the profit generated - or the owner will redeploy their capital elsewhere. Why is this so difficult to understand? If you still don't get it, why don't you invest all your money into a business I am starting? I will pay myself a salary and I will keep all of the profits. If it loses money then I'm afraid I won't be able to pay you back. Why would being overpaid and prognosticating lead one to raise their ire? You may have swallowed a dictionary but your words seem to come out of your backside. And my point was exactly the opposite of what you wrote. I am neither talking up my own worth or demeriting the worth of others - I am saying you are already paid what you are worth. The conditions dictate the price of labour. You don't like it? Do something else. Yes - the market rate. That will fluctuate as market conditions change. If I feel I am underpaid relative to the market rate, I will try to join a competitor. If I goes below how much I want to make, I will look for other work. You made an investment in your education and it would not have paid off financially in this country at this time. Either the cost of getting a Masters degree will come down, or the pay for that job will go up, or both. Unless you are quite slow (which I am sure is not the case), I guess the first three years were to get your undergraduate degree and the final year for your Masters. What made you decide to go for the extra year? Was it the hope of more money after graduation? If so then I really don't think you should be on a forum dedicated towards the downfall of house prices. (ST beat me to this point) And my basic point is that the market has set the price based on the current conditions. As the conditions change, the price changes. Footballers get paid more than most City workers. Is there an intrinsic worth to being able to kick a ball into a big net? Probably but not very much. Their pay is determined by their employers ability to make a profit from selling their product to ticket buyers and TV channels. The skills requirement argument is not one that I have made. My "spurious claim" is that there is a price for each job that is determined by the market. If you don't believe me, why don't you go to Burger King and demand £50k to flip burgers because you have a Masters degree?

It is a self-balancing system. The rewards attract the people. At a certain point, so many people are attracted to it or their employers' profitability falls enough that the rewards are pushed down. Some people will feel they can do better in other fields and leave (a lot of City folk went off to join dot-coms for example). Some will be forced to leave. At different points in time, different jobs will be better rewarded. At various points in the past it has been soldiers, sailors, members of the clergy, engineers, etc. Right now, it is the financial community and professional athletes. In the future it will be something else. Like most people in the City, I am an employee (although I am a part owner of my employer). If I don't like what I am paid, I can ask for more or seek alternative employment. Define "work". This may be true You are particularly sick for wishing for this.

That's a ridiculous comment. You employer has invested capital in the business and the profit is the return to them for that. The employee is paid the amount needed to get that job done, which is determined by (among other things) the availability of alternative employees (other applicants with the required skills), the "buying" power in the industry, the price that the market will bear for their products (one of the reasons why the Pimlico Plumber on the programme last night makes three times more than the standard income), and the return the employer would like on their investment. Okay, you're unrealistic - in this country anyway. Either you didn't look hard enough or that was the highest paying job for your skills (or at least the ones you were willing to employ). If no-one with those skills wants to do the job for that money then the job goes unfilled. The employer can either leave the job undone, create an alternative position requiring "less valuable" skills that will achieve an acceptable compromise, or raise the salary until someone will do the job. Unfortunately for you, it seems the potential UK employers either went with one or two (or found a competing applicant that was willing to do it for the money). Fortunately for you, your german employer decided to go with three. I have been a delivery driver, a motorcycle courier, a fruit & veg sorter, a waiter, a bartender, a barrista, a short order cook, an estate agent (sorry, it was only for one day), an inspector of ladies underwear (quality control, like), an accountant, an english tutor, and a financial analyst. In some cases, I pushed to get paid more but I have never complained when I did not get it. The choice has always been mine to either take more than one job or to seek alternative employment to achieve an acceptable income. I am a financial analyst now so I get paid pretty well now. If I lose my job and the only work available is making coffee, I'll do it and I will get paid the going rate - I can't say "this is what I used to make, you'd better match it". The world does not owe me a living, I owe it to myself. Saying that just because you have a Masters degree you should be paid £XXXk makes you just as bad as the Tarquins from rich families you like to mock.

I doubt they'll be there much longer. The index constituents get updated at regular intervals and it was still big enough to qualify at the last one. Note that entry and exit from a major index can also influence a share price - both before (from active funds) and after (from passive funds). As for TUI, it's pretty easy to construct a bear scenario; 1) house prices falling and rising consumer staple prices leaves less to spend on holidays 2) package holiday demand falling as more people choose to make up their own packages from cheapy-jet and emailing hotels directly 3) TUI has to commit to getting customers for the hotels on the off-season in order to be able to get exclusives on hotels during peak. If they haven't done that then they may lose the exclusives. I don't have a position - just a curious bystander.

Share prices move on expectations - higher earnings, lower earnings, changes in the market environment are just a few factors influencing it. Yes, things are no better than they were last month - and arguably worse. You would have been rewarded with a 33% return if you had shorted Taylor Wimpey over that period. However, this same strategy would have lost you 25% in the preceding month as market expectation improved. That the housebuilders are in trouble is not news to anyone in the financial markets so it's now a game of expectations. As the Sainsbury results this morning showed, a company's results may be bad but if they are not as bad as expected then the shares breath a sigh of relief. So housebuilder results are going to be very bad going forward but what is in the price? Interestingly, if you had shorted the TW shares at the peak last March you would have made less (30%) over three months than you would have over the last month - even though the earlier trade would have been the more original idea. Shorting stocks is not the cakewalk it might appear to be - and is subject to the winner's curse.

Sorry - nearly let this one slip by. Thanks for trying to put words into my mouth but I will tell you that I am worth exactly what I earn. If I think I am underpaid relative to my abilities then I will try to find alternative employment that will pay me what I think I am worth. If I succeed then I am worth what I think I am. If I do not, then I am worth less than I think I am. The pay is for the job, not the person - I would make the same minimum wage as everyone else if I decided to pick leeks for a living. You, on the other hand, think you are worth at least three times more than the market rate for your abilities. So much so that you moved to Germany to prove the point.

Okay then - it's the one that begins with Anglo and ends in Bank ALLEGEDLY! For full disclosure, we hold a short position in the above stock. This is neither an offer nor the solicitation of an offer to sell or purchase any investment. My view is based upon information obtained from sources believed to be reliable but I make no representation and accept no responsibility or liability as to its completeness or accuracy. Do your own research.

10% daily move in any micro-cap stock should not be surprising in this environment.

thanks - have put in request. Just heard from a contact that our fears may be about to be confirmed - Ireland will have its own Northern Rock...

I get the message "You are not allowed to use the messenger feature on this board" so I can't PM you. The three main listed ones move as a pack anyway - take one down and they'll all come tumbling.

How do they apply here? You have no more right to decide here than you do on how much the government spends of your tax payments on hospitals and schools. If you don't like it then it is incumbent on you to elect a government that will act in accordance with your preferences. (and I'll stress again, I am not making a comment on whether it is right or not to bail out NRK)

Well it's already been "in play" for a few months now. NRK is technically insolvent and the shares have a zero fundamental value since the value of its loan book is undoubtedly lower than the value of its outstanding debts. ie 100% downside. Countering this, the cost of borrowing the stock is very high (in the region of 60%) so the most you can make if you don't currently have a short position is around 40%. The shares do have optionality of a takeover/bailout which is why they are trading above zero. If you have a view on the probability of a takeover/bailout above the current price then you can decide whether it is worth the risk buying at the current price (and also whether you can afford to lose it all). This will have been the calculation that they made when they decided to buy into the shares. Remember that they have also changed the odds in their favour by buying their stakes - without their activism the probability of a $4 bailout would be zero, with them it is more than zero.

as it is yours. If you think they are onto a winner then you should buy some NRK shares in the morning.

It certainly would be - but they can't hold a gun up to the heads of the other banks. Maybe the BoE asks the others to chip in in return for keeping their licences? I don't think these activist shareholders care who pays them as long as they get paid. Maybe that is what ends up happening. Before the assets can be passed on though, NRK has to officially go bust. The activists know there is a decent chance that their investment goes to zero but it can't go below that so their downside is limited but their upside is not - hence asking for what looks like an unreasonable premium to the current market price. As I said, not condoning just explaining.

Because it's a game of financial poker they are playing. Their investment came after it was known that NRK was in trouble, the BoE had already stepped in and the share price fall already reflected this. They know they have a rubbish hand but they are betting on the government blinking. To continue the poker analogy, the gov is already "pot-committed". If the gov does not step in, NRK goes bust and they lose their investment in NRK. When this happens though, the creditors step in and sell off the assets. Dumping that many mortgage assets onto the market in one go will put further strain on the market than is already there - forcing the prices down further and providing marks for a load of other assets held by other banks. This will lead to further writedowns by other banks, causing them to fall below their tier 1 and 2 ratios. This has a high probability of bringing down the whole financial system. These activist shareholders are therefore betting that the government will prefer the least damaging of the two options (at least in the shorter term) and pay up - and that the risk-reward ratio is in their favour. Please don't take my comment as in any way condoning what they are doing (it is way outside our investment parameters anyway). I'm just explaining what they are doing.

Alleged position or alleged doo-doo?

We have a good sized position on that one of them is in big doo-doo...

I guess it's alright for you to get paid well, just not those layabouts in the City?

Hey, it's "let's bash the City" time again! Two points (to start with); 1) (to OnlyMe) How exactly does this work: "the hedge fund industry is busy trashing the smaller upcoming companies with trading strategies that are designed to undermine and ultimately bankrupt as many companies as possible"? Do they send armed goons to stand in the doorways of shops so customers can't get it? Do they have an army of Indian hackers on the payroll to take down the online presence of their victims? Do they send in spies to steal company secret, photocopy them and staple them to the doors of the competition? Bandwagonism at its very best. 2) ICI has not disappeared, it is still there doing what it does. It is merely under new ownership. It was owned by a long list of investors and now it is owned by a company (which also, coincidentally, is owned by a long list of investors). Is it bad for this country? Maybe, maybe not. Do you think that the Akzo board woke up one morning and collectively thought "here's a wheeze - let's go and destroy British industry"?

that's been the biggest problem of the push to get more people university educations. There are masses more people "graduating" now than 20 years ago but broadly the same number of graduate-entry jobs. Simple demand and supply says that the market price is going down.

that's the one - the first part of the bberg description is "A Zimbabwe-based holding company for a group of businesses in the financial services industry." The shares are up 3.3 million percent year to date. I've not bothered to do a screen but I'd imagine that is up there with the best performers of all time. Of course in the same timeframe the ZWD has lost 99.2% of its value (on the official rate - the unofficial rate is worse) so the return in USD/GBP/Euro is dramatically reduced. Even so, a $100 investment at the start of the year would have turned into $29,800.