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The Inside Man

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  1. They don't have a licence so they cannot lend, but they can guarantee. Are they able to assess the risk? No. Do they have systems to support this? No. Do they have any experience in this area? No. Have they been advised by the banks on this? You bet. Shouldn't a council be focused on delivering key services to people in the area, not underwriting financial risk? Is that what we would expect to be a good function of a council? One question is, does this represent a good use of Council Tax payers' money? Another question is, does this exist in their charter as a Council - i.e. does this represent a service you could expect them to provide? Third question is, do they fully appreciate and accept the risk that they are transferring upon themselves, and are they happy to stand by this risk? What happens if the risk materialises... will they resign as they have squandered money that could have been more usefully spent on schools, roads, refuse and other services? The other options is to threaten to sue them for any materialised losses. That might focus their minds as to whether they are able to assess the risks. I am sure there will be precedent for this - look into the US and how the councils "invested" in pension funds - a similar financial instrument, but at least one with more chance of a material gain than an underwritten promise. T.I.M.
  2. I am really surprised how the focus of the credit easing by the central banks has been interpreted as a good thing, with the markets shooting up and the press doing their best to create an illusion of "yay, we're all saved". I suppose they are all playing their part. However, if you look closely at what has been done, where the money has gone, and what the central bankers have been saying there is a clear clue as to why this has been done. The Euro is now toast and the overwhelming expectation of all central banks is that it is game over for the single currency. The credit provided to the banks will enable them to "weather the storm" of the imminent break-up, the shockwave of which will impact most of the major banks with a number of defaults, write-downs and asset price adjustments. The lack of credit during this period would likely break them, so in step the central banks to ensure they all remain afloat. The experience of last time has led them to believe that acting pre-emptively may well keep things from going completely ballistic... they hope. In reality they don't really know whether it will or even if it will be enough, but there is a palpable sense of fear amonst those in the know now. Brace yourselves, we're nearly there. I'd be surprised if it made it beyond January. T.I.M.
  3. Oh I see, sorry, I didn't get from your earlier posts that you are a troll. Never mind, was nice exchanging messages with you for a while. I'd better get back to running my business and helping my clients now. Cheers.
  4. Agreed. Half of our business is trying to help clients build this capability in house. Quite often they don't have it. The other half is doing it with them... we aren't an IT firm so we sit alongside the client and deal with the IT firms. Might also be worth looking at why projects fail. I'm biased, but most often is is because the requirements were so badly written that the estimate was poorly formed, and the contract was written so tightly that it leaves both sides with nowhere to go. We see that ALL the time. Very rarely is it becuase a technical solution doesn't work (since most things can be made to work, even if they aren't 'optimal').
  5. Problem is, the private sector generates money and contributes to GDP. Public sector soaks it up and spends it. You might not agree with the state of the world, and how things are run, but the profit motive does tend to keep people in jobs that they pay taxes on so the public sector can be funded. I guess posting on here that I work for a big-4 fim as akin to saying I'm a banker. Again, you might not like the description but it's a statement of fact rather than opinion or boast. I'll keep my head down...
  6. +1 And here too (North Cheshire). What I can't understand is that properties coming on the market here are getting more and more expensive, with prices that would make people in the Surrey commuter belt feel like they were being mugged. There is no good reason that prices here should be comparable with the home counties or Greater London, yet they now are. The end result is that most of what is on the market has been stuck there for a long time, and won't sell at anything like that price, and what is coming to the market is WAY overpriced and will do the same. The market is stagnant, and the transaction rates are awful. The odd ones that do go SSTC also seem to come back on a few weeks later, albeit at the same (or higher!) price. I suspect the chain or finance proved too much. At the price point we're looking at there is absolutely nothing interesting, or even worth looking at. A couple of years ago when we started looking (nervously) there would be 2-3 a month we would investigate further. Now there is nothing, and there hasn't been all year. Like you, I'm rather sick of trawling Rightmove as a result.
  7. Sorry, that's twaddle. The office of government commerce (OGC) agreed rates with the IT vendors for the provision of different grades of staff, including architects. This comes under a contractual framework called Catalyst. Catalyst rates for a typical architect are around 750 pounds a day. The fully loaded cost to the consultancies for this person is about 500 a day, either contract or permanent, so the margins are not as massive as people think. When you then take into account the risk that the businesses are taking, and the costs of bids/proposals/management overheads, government contracts are typically not that profitable.... unless you can get a large one. The OGC and Whitehall are pushing back against these, so they are likely to find themselves in a position where they get "no bid" responses to a lot of small unprofitable pieces of work soon. For us, I'd rather put people into Banking/Telco/Media/Utility jobs where we can make a far better margin. Government contracts are very hard and expensive to win, soak up resources and make feeble margins. I left banking to run a technical consultancy for a big-4 firm so I'm painfully aware of this.
  8. Check your contract... in particular for clauses that might allow them to vary the monthly lease charge (which is usually only done in cases of personal lease purchase, where a payment is based on a variable interest rate is used related to an interbank or finance house rate... these aren't the norm in company cars). You entered into a contract for this car, at a quoted rate. Unless they have written the ability to change this into the contract then simply write back and refuse to accept the changes, pointing out that they are in breach of contract if they try to enforce the change upon you. Even if they have written a clause allowing them to vary the payment check to see if they have provided an option for early termination in such a case. If they have not, then there may be grounds for this being declared an unfair contract. UK contract law does not allow for someone to construct a lease contract that allows them to subsequently vary payments without your agreement. Imagine if they suddenly decided to up it by 30, 70 or 200 percent because they felt like it. You should have protection from this in the contract, if it is fair and legal. IMHO it sounds like they are trying it on. They know that they will be hit for VAT on servicing and maintenance costs so they are using it as an excuse to bump up the payment, somewhat disproportionately too! Check your contract. Push back. Don't accept it. Threaten legal action or invoke a termination clause/process (both of which cost them a fortune so they are keen to avoid). Good luck!
  9. Looking at the locations announced (Edinburgh, Chester, Halifax)... yes, it's HBOS IT, probably the BoS Corporate IT team and the Halifax Retail IT teams. It was inevitable once Lloyds made the decision to migrate customers over to the Lloyds IT platforms, which was done in early 2009. Since then they have been needed to design and implement the migration, but now.... I am still amazed that people are surprised by this. It was a part of the deal, Lloyds have to make the acquistion work for their shareholders, and nobody announces in excess of 50,000 redundancies in one go unless you don't care about shareholder value (and in reality, many of these people are needed through the integration process, which can take from 1-5 years). There is still quite a bit of pain to come, both from the private sector (M&A work and rationalisation) and public (impact of quango slaying and downsizing). Jobs take time to be lost, both through the need for people to merge (as above) or the impact of indecision, notice periods, etc.
  10. HMRC systems (NIRS, NPS) were constructed under the contracts with Accenture and Capgemini. PricewaterhouseCoopers doesn't do that kind of work anymore (after selling it's IT arm to IBM in 2002). And £800 a day was the low end of the scale, although government work is done under the Catalyst framework these days, so the rates are much lower and more comparable with contractor rates. Agree totally with the last point though.
  11. I sense some of the same where we are. I think the prices were just over-inflated through to 2007, and then when it "crashed" we ended up with a segmented market. At the mid-top end those that believed that their house "was worth it" have stuck to their crazy valuations. At the low-mid end there just has not been much movement as there have been no FTBs/mortgates/etc... As a result the market has ground to a halt. We see a lot of new property (each day!) coming onto the market, but it's still at prices that they hope they could get at the top of the market or beyond. We've been watching a cluster of houses that were being sold at around 650k at the peak in '07... in the past two years they have been on and off the market at 750, 799, 850k... so they are now priced higher than the equivalent home in Hertfordshire or Buckinghamshire on a commuter line... and surprise surprise, they are not selling. Realistically they are worth probably still worth about 600-650k in comparison to the other properties in the area... so where has the other 200k come from? Is this craziness on behalf of the buyers, or are the EAs also complicit in driving up the market in order to make more money? Who is setting these ridiculous valuations? One house near to us has gone SSTC three times in the past year, and then come back onto the market. We asked the EA whether this was a survey issue, and they said no, it was a finance issue for the potential buyers. When we dug into it a bit deeper, we found that the first surveyor priced it at 150k less than the agreed price, and it fell through, and each time it sold since it's been the same problem. YET the price remains the original asking price.... figure that one out! There are a few examples of price drops, but it feels like they are just starting. IMHO it takes a long time for the prices to come down becuase it is dependent upon the surveyors seeing that a similar house sold for less and then factoring in recent falls, but since an average sale takes 3-4 months to complete it might result in just 3-4 steps down in a year for a particular house/style of house in a street/area. And in the meantime, the stubborn sellers will hold out for the price their house is "worth", and no less. Stalemate.
  12. You are definitely not alone. We live in the north part of Cheshire, and although we have a nice house now we are "stuck" and can't trade up to the sort of house that we had our sights set on as our next and "final move" when we bought this one. House prices are now totally out of step with where we are, and I think overpriced by about 30% even by current standards. We are constantly having debates with estate agents and sellers that think we are a suburb of London! My wife and I have been looking for over a year (even though we know it's not the right time to buy... it's just a head v heart thing), and we have found nothing we can afford that makes sense. Where we are, houses are priced in direct comparison with a commuter zone of London. As an exercise we recently did a search of a 40-min radius of London stations, and there were better, cheaper and more houses that we could buy than where we are... stuck between two Northern cities about 5 miles from an industrial town! It's just absolutely bonkers, and totally unjustifiable IMHO. Unless prices come down by 25% or more I can't see us moving. I believe they will (as per my other post on here) so my head says stay put for now... even though my heart is on the lookout for a new place to live. The galling part is that like many on here we've done everything we could to ensure that we were "protected" and lived within our means. Others we know didn't, got into trouble, and now my taxes are paying the mortgage on their lovely house whilst we can't afford to buy one like it. If we werem't happy and well adjusted it would be enough to drive you to drink! T.I.M.
  13. I stand corrected! Hadn't realised we'd gone over the 2% mark in a month, partly becuase I was tracking the wrong index (one of the VI ones!) T.I.M.
  14. Lots I agree with in there. I think 3-3.5x salary as a norm is a sensible and reasonable long-term average (and goal), and as usual with a correction we could overshoot. I think on the salary side you have to take "household" salaries into account, as the increase in two-salary households has driven up the average (to over 30k or thereabouts). That might be less so in future, but it's the norm for many (especially those mortgaging themselves up). But yes, I'm aiming for about 100k as an average at the moment and I can see falls down towards that, maybe even if we overshoot. I am naturally conservative tho, so I'd be happy with 30%. Any more is a bonus!
  15. I was about to register my disagreement with Shylock, but I think you've hit the nail on the head. It's relative. You can't equate equity and other liquid assets to houses, they are highly illiquid markets and behave differently (i.e. more slowly). Back to houses... look at the "practice crash" we just had. 1-ish% falls each month. Yes, it equates to 15%-ish over a year, but we won't get 5% per month as some here would like. I can't ever see falls of more than 2% per month happening, even in a panic situation, as there is not enough motivation in the market for all sellers to need to sell and far too much emotion in the assets that we are talking about. And it's never happened, historically. Personally, I think we're talking about 3-4 years of falls, from later this year through to 2014... and somewhere in the region of 5-10% per year initially, rising to about 10-15% and then falling back towards stablity. Overall I can see something like 30% coming off prices over this period. T.I.M.
  16. Agreed. I called the turn a month or two ago. Got some criticism for it as most couldn't detect the slight change in sentiment, but I still think we've turned. However, we're still not REALLY at the fear stage. Where I am many, many sellers are in denial (hence the remaining ridiculous prices), and motivated sellers are still trying to get a good price by chipping away at their price (check Property Bee) week on week. The main fear in the market is the potential for loss of employment, that is causing some people fear... but many believe that they have a safety net from the govenment, some savings, equity in their house... so they aren't panicking. But for real fear, and I mean butt-clenching, night-sweating, screaming-panic like fear, just wait until the BoE base rate goes up the first month. The reaction from the banks will be swift and brutal... most will raise their rates by AT LEAST the rise in the base rate, some more. The impact on many non-fixed borrowers may tip them over the edge (as has been mentioned above), the reaction in the press will be overplayed massively (as always) and we'll start to see some deeper drops as sellers suddenly realise that they have to bail out, and quickly. But even then, with anger, fear, fright, panic and every other emotion in the market, it's going to take 2-3 years of slow painful drops to get back to what we might call sensible prices. It's all about momentum, and it's always slow on the way down. And even then, less motivated sellers will pitch for fantasy prices because they remember when their place "was worth a million". It's not going to be pretty, but it is going to be long and painful.
  17. Oh dear. Not sure what you're trying to say... that there's a bunch of people you know that are buying into what agents tell them their house is worth so the market can't be crashing? Or when people who will probably by then have a fair chunk of negative equity tell you not to buy that it's a good signal? We're all entitled to our opinion and I do respect yours. But my experience of a number of crashes (80's, 90's, dotcom in '01 and banking/houses in '07) has taught me a number of things: - When there is "mania" in something (houses, stocks, internet domain names) and everyone (including GMTV and your mate down the pub) is telling you that it's a great time to buy, well it's probably time to get out - When it "happens" (i.e. becomes visible to people), it will look like it happened quickly. It didn't, it just accelerated hard and therefore looked like it happened quickly, but in fact it was brewing up for quite a while. - Most people will brag about how much they have gained/made, few will ever tell you that they have lost or are losing - When people do tell you to get out, it's too late. Some of your friends have been lucky, and I am glad they are happy. if they are comfortable with what they have bought and their repayments then that's great. I am more concerned about people about to buy, or who are worried about losing the equity they do have in their house. For people worried about that kind of thing, I think we're in a period of "hold back". Again, this is just my opinion. I think all the signs are there if you look closely enough. Sure, some people would kill to keep prices higher than they should be, but IMHO I think the market has just turned very negative and we're about to go down. And I'm happy to predict that over the coming 2-3 months it will go from a downward sentiment to "visible drops". I just wanted to put that out there, so nobody can't say "you didn't see this one coming"! T.I.M.
  18. Ah... I think you misunderstand me. I'm not saying that HPC will cause a riot. The HPC will be a by-product of the environment and times in which we will live, but I agree with you, it won't cause people to protest and riot. If anything it will be the other way round. I'm also not advocating (and certainly not wishing for) a Mad Max scenario. When I said it will be rough, well, it will be rough for many many people who will be without a job and an income, and unable to sustain themselves in the way that they have become accustomed to. And I can pretty much guarantee that there will be a fair amount of protesting about austerity measures, unpopular taxes, cuts, job losses and the pain it will all cause. Some of this may turn ugly.... but I'm not saying that the social system will break down as a result (I'll leave that to the tin foil hat brigade). T.I.M.
  19. OK, fair point, I succumbed to using a colloquialism. Search and replace with "the ideal conditions for a big problem", then join the discussion :-) Homeless - really good post, and I feel for you. I certainly don't think you were stupid following your course of action (and I am sure many here agree), and with a little time and patience I've found that things eventually even themselves out. In ten years' time I suspect the tables will have well and truly turned, but I can understand how much of a pain in the a** it must feel.
  20. I step away for a few hours to do some work and we're at 4 pages already! My point on timing was that I think we've reached the tipping point where it is now starting to be noticeable. It's like when a car is perched on the edge of a cliff, and suddenly you realise it's going over and fast. Before that point it didn't feel like it was moving... but it was. They can't print any more. Inflation is rising, and the MPC have forgotten their economic textbooks on the lagged effects of inflation creeping through the system, so by the time they try to get on top of it it will be around 8%. That will close the door to printing more (or in reality buying up more toxic assets from invented money). In fact, I fear that this effect will cause them all kinds of problems, since they will eventually think they have managed inflation down in 2011 by raising interest rates, when what in fact will be happening is that the impact of the recession tips us into a deflationary trough. In short, unless the MPC stops being reactive and starts making decisions based on where they think things will be 6-12 months out, they will simply act to reinforce the pre-eminent effect of the time period. Printing won't work in this new world. Regarding the house market "picking up"... just where exactly? One of my best friends is in "the trade" and he's said it's pretty flat at best. OK, some developments have been restarted, but the developers are being more realistic with their sales. Low cash offers are being accepted, for example, as it helps get the site moving or clear the land from the books. Sure there are a lot more houses for sale now (so I guess if you work for Rightmove it might be doing just great right now!) but overall, I can't agree with you that it's "picking up". On CGT... I'd missed that one but you're definitely right. I think it will help accelerate this "gentle slide" into HPC into a full fall. As for the fall... I think 25% over 18 months constitutes a reasonable crash. If you look historically at what happened in the 90's and again in 2007, it falls at about 10-15% per annum (about 1% per month) as there is reluctance/resistance from the sellers who don't have to sell, and this helps keep prices higher. I agree it could go quicker, but it would have to be an almighty fire sale to better that rate (and in that scenario I'd be afraid for more than my house price). And that takes me to my last point... 25% will not feel rough, but the economic, social and political landscape that surrounds it will. Have you been watching Greece recently? That was just the starting point, if asset values start to crumble and we see some sovereign debt defaults smash through the system and take down banks, then I think we're in for some pretty rough times. A lot more unemployment, a lot more crime (as a result), protests and riots at budget decisions, higher taxes, and painful inflation/deflation that puts many people into poverty. There is a part of me that thinks the new government actually would welcome a short sharp HPC, after all taking housing costs down a couple of notches would increase people's disposable income and make our cost base a bit more competitive. And you've got to purge all of the toxicity out of a system before you can fix it! Cheers, T.I.M.
  21. You probably can't see it yet, in many areas you probably can't even detect the change in sentiment that underpins it, but I believe that the HPC is finally here. Why? Well, I think we now have the "perfect storm" that a number of people on here have been dreaming about for the past few years: - Brown gone, no more print and spend to win votes. - Austerity measures in the UK (and abroad) will destroy the "feel good feeling" - Rising risks of sovereign and corporate default (look at ViX, CDS, ratings agencies, etc) - Reducing lending from the banks in order to repair their balance sheets - Rising unemployment here and abroad (yes, it's still rising, and will rise further as the public sector takes the hit) - Increases in taxation (and more coming), equals less disposable income - Increases in inflation... 3-5% (depending on your index) now, 8-10% by next year? - Increased wage demands and industrial unrest as people genuinely find it hard to make ends meet - Repossessions increasing, leading to more disposals and some truly "motivated sellers" - Tighter lending limits, with more to come - A massive rush of people to the market in order to cash out on rises before the fall In short... economic conditions that are killing demand, with a glut of houses coming to the market that massively increases supply. The sales volumes and estate agent/righmove numbers show just this. And by the laws of basic economics there is only one direction in which prices will travel.... down (and down, and down). I've been on here for years, watching and learning, and working inside two large banks during that time. I've picked up on many changes in sentiment over this time (including the feeling that things were amiss prior to Bear Stearns/Lehmans/HBOS), and I am sensing that feeling of doom once again. Directors are battening down the hatches, traders and fund managers are looking more stressed, and there is genuine fear in the eyes of some when you talk about Greece, Spain, Portugal and what would happen if they defaulted (i.e. how quickly it would bring down Britain based on the exposure of our state-run banks). We're at the edge of the world once again. But why now (and I mean right now, not next month)? Look at the prices. At the start of a fall there is always a precipice period, where houses that have been on the market start to get reduced but 20k, 50k or even 100k if they are "motivated". New houses to the market get no interest and "motivated" sellers drop quickly whilst those more stubborn hold out and their properties stick. You also start to see a few properties that look "good value" as they lower the floor price in a street by a reasonable amount (again, motivated sellers help). So I am calling it now. Time to go on the record. As of May 2010 I believe the bounce is over and we'll start to see some real falls, maybe 7-10% by the end of this year, with another 10-15% overall next year as a minimum (i.e. about 25% down on today by the end of 2011). For those people that have been wishing for falls this may be good news. But be careful what you wish for, as the next 18 months are not going to be fun, or even that palatable for some. In short I think we're in for a really rough ride. Let's see. T.I.M.
  22. I agree, you have a point, but I think there is a lot of mileage in this for the Tories if they get this right, whichever way it goes. I just don't think the spin machine can avoid the attraction of another "Brown saves the day" event. I hope it hasn't come to this, but I do fear that there is far more to this about politics than there is about saving jobs. After all, if Unite had anything sensible about them they would be working with BA to work out how to maximise the jobs and benefits for their members in an a profitable airline, rather than going all militant on them.
  23. Hi Peter, I don't think it matters. There will be a number of people impacted by the easter break strike... they had planned holidays and are now struggling to find alternative transport. They would find such an intervention "very welcome" But that's a trivial number. The real deal is being able to shout about it all over the media... "Brown saves the day" yet again. It's a spinmaster's wet dream. We know that "wars" and "terrorist attacks" have helped incumbent leaderships steal elections in the past as there is a swing towards the leader when they are displaying "leadership in a crisis". I wouldn't be as tin-foil-hat as to say that we may see some of these in the coming few weeks, although it's been shown that there is a statistical correlation, but I would bet that there is a lot going on behind the scenes with Unite and Labour so they can both come out of this looking very good.
  24. I'm not normally into conspiracy theories, but this thought struck me last night. We know that Brown, through Charlie Whelan, is VERY closely connected to Unite. We know that Unite bankrolls Labour, and in particular has funded Brown's upcoming re-election campaign. We know that Unite are putting the pressure on BA in terms of strike action, but this was "denounced" by Brown after he was put under pressure to give his view. Biting the hand that feeds it? Odd that there was no response or retort to this from Woodley or Simpson, wasn't it? Suppose Unite were to call off their strike after some "intervention" by the PM. Wouldn't this make him look like a hero, just in time for the election? Just the kind of leader that the country needs at this time? Brown saves the world(s favourite airline) yet again? I can sense the hands of Mandelson, Whelan and the other black-arts spinmerchants all over this. Don't be surprised if we see some kind of "deal" brokered by the PM in the next week or two. It will be enough to pacify Walsh and to get Unite to back down without losing face. Oh, and this wouldn't be the first time this sort of thing has happened. Whilst the sheeple are gullible to believe what they are told, politicians will pull stunts like this in order to make them look good. Watch this space. _____ Edited: To put the name of the correct union in place!
  25. I assume that you missed the sarcasm smiley on that response? If the BoE was independent then they would have been putting up the interest rate at this point. Look at the rate the last time inflation was at this level, and the way they escalated it up the last time inflation rose this quickly. Instead they've come up with a number of excuses to suggest that they don't need to as it's short-lived inflation. What's the betting that in a few months it will be unexpectedly more long-lived inflation that they didn't see coming (must have been drowned out by the sounds of the printing presses). But by then it won't matter... the election will be over, the damage will be done, and they will have to react more rapidly. No, the BoE is not independent. The BoE is keeping interest rates down as Brown has told them that a little inflation is a price worth paying to keep the votes of the hard working families with mortgages, and besides, it will inflate a way out of some of the debt. No issue here, move on. Independent? Pah!
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