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House Price Crash Forum


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Everything posted by aa3

  1. The way UK companies gleefully walk away from debts with a smile on their face and promises of business as usual, means I won't be buying UK corporate bonds anytime soon. And then you should see how they treat common share holders - why I won't be buying UK stocks anytime soon if ever.
  2. I remember talking to some east europeans about property prices back home. They were telling me the prices, and I was saying 'you're kidding me'. I really thought they were joking until I read some statistics in one of the papers doing a piece on how out of control the prices were in east europe. The prices were the same as in the UK, actually in some parts of East Europe the prices seemed higher than many British cities. The even scarier part was when I asked the next question, what sort of idiot banks are lending these speculators this kind of money. Like 30 or 50 times the average income of the area. I searched on google some and I remember the main west European banks coming up as the financiers. The losses will be epic as the bubble pops in these places, the speculators will simply default on the loans.
  3. When this started in 2007 I said give everyone £10,000. Every man, woman and child in the country.
  4. I agree with this very much. And the idea of another poster to heavily reward engineering and science. I have a reverence of engineers, even though I'm in accounting. I think like in China today almost all of our leaders political and business should be engineers. Engineers apply the laws of nature to transform nature to human benefit. My father was an engineer in charge of a large power generation facility.. providing 2 gigawatts of electrical capacity. Enough for around 1 million homes. Think about that, the difference it makes for those people lives. Yet as a low level accountant doing people's taxes I made about the same money that my father did. That is sheer idiocy. An engineer in charge of a large city's electrical grid, water system, power generation plant, civil engineer.. should earn breathtaking amounts of money - I'm talking 5 times what say an experienced accountant would. And be held in the highest status.. as is true in much of the world already. Especially in the the third world, engineers are viewed with reverence. Our corporations should be ran by engineers, with lawyers and finance guys doing their respective support work.
  5. It is impressive that the supermarkets are actually profitable during this. Supermarkets are a great business model. I find specialty shops cool, but then I think about having to drive over to the shop, find parking and so on. Its easier just to get things at one stop shopping, plus at lower prices.
  6. I agree with that too. If I was say a welder who lost my job because the leaders backstabbed my industry I wouldn't take a retail job with the chance to make 6 pounds an hour - part time. I'd just go on the dole, and be on the lookout for reasonable wage jobs. I think everyone below a certain amount should do that. In the 21st century with the magnificent productivity we have available to us, everyone should make a living wage at minimum where they can support a family on.
  7. This type of prodigious increase in productivity should be a great benefit for a society. And it can be with the right economic system. But in the current system it just means mass job loss, and ultimately the company contracting.
  8. We need a new economic system very soon. In the post war era to 1990 we got money into the hands of the people because masses of people were needed in the factories to produce the new manufactured products. Refrigerators, washing machines, televisions, electrical machinery, automobiles and so on. There was more demand for workers than there were people. So the workers formed unions and got pay increases in line with their productivity increases with technology. The workers were buying their own output. Soon two cars was normal for a family, several bathrooms, several tvs and so forth. But at some point, I estimate sometime during the 1980's the market started automating to such a degree that it started needing less and less workers, even to produce more than before. The big time layoffs in manufacturing across the world, the 'rust belt' in the USA. Perfect example is steel towns of 30,000 where everyone used to work at the steel mill. Now they are nearly ghost towns, but little known is that the mill in town is still producing as much as it was in the past, just with 1/5-1/10th as many employees as before. Naturally this also broke the backs of the unions. Since 1990 we had another plan to get money into the hands of the people. A massive credit expansion, massive expansion in corporate, consumer, mortgage debt, getting money to people and into the economy. But that broke down in 2007, it just couldn't go any further, and there was no chance of people paying back those debts.(especially as automation continued to gain steam). Now we need a new way, and my proposal has been to send money directly to all citizens of the country. Instead of the bank of England sending 600 billion to the banking black hole, where the borrowers have less and less ability to pay back the money.. what if they'd sent that 600 billion directly to the people. 10,000pounds for every man, woman and child in the country(it wouldn't need to be that much). And what if the EU, USA, Canada, China, Japan, Korea and co all did a similiar stimulus, and realized they are going to have to do it every year from now on. On the order of a couple thousands pounds to every citizen regardless of income and rising with time.
  9. I'm torn between those two as well. Maybe its some crazy combination of both. The perfect political issue is one like gay marriage in the United States. Whether or not gays can marry is of low consequence to the daily lives of most people. What matters for most people is things like the steel mill shutting down and taking their good job with it. But it gives the people something to fiercly debate on, and that they can change, giving the illusion of power. While big issues like bailing out the banks fly through the parliament with hardly any debate. An irony I've seen lately is dictatorships are seemign to respond more to their people than democracies. They know if they don't improve their people's living standards they will be swinging from lamposts or at least their wealth confiscated.
  10. Even though I put the beatdown on lawyers in posts.. the value of a truly good lawyer in a massive deal like this is in the many millions of pounds. The market has been judging all lawyers as if they were worth nearly the same value during the boom, which isn't true. Same is true for accountants. Imagine two accountants both hired by pension funds going to buy 200 million worth of MBS. The first accountant does the due dilligence and finds out the bonds pass all the legal checks. Finds they are fairly priced compared to other securities of the same nature recently bought. The pension fund buys in and loses the whole 200 million. Second accountant looks at it like many of us on this site and says the small spread over prime doesn't justify the massive risks in these bonds. Recommends the pension fund doesn't buy them. Pension fund saves 200 million. As it is now both accounting firms would give the same bill.. actually the due dillegence one was probably one of the big accounting firms with the higher bill who eagerly signed off on these deals.
  11. Great post.. Its hard to replicate a 3 billion dollar steel plant - especially once a lot of it gets paid down. And also for a nation like India where interest rates are like 15% for corporate borrowing. Its easy to replicate a knowledge job that generally requires office space, a computer, and servers. Cost maybe 10,000 pounds per worker. Imagine that steel plant I mentioned had 3,000 workers. That is 1,000,000 pounds investmnet per worker. Not easy for a developing nation to replicate. The main cost is not labour, but the cost of the capital in the interest rates.
  12. I agree completely. Democracy sadly seems a one way street to socialism. The whole concept of democracy at a national level makes little sense to me, as the average person is so ignorant. Its not the fault of the average person either, most people don't want to spend years learning about politics or economics, they want to live their lives, and study the things they are interested in. The natural order of the world is dictatorship and monarchy.. monarchy being the dictatorship on the 2nd or 3rd generation. Democracy seems a short term abberation, really Europe has only been fully democratic for around 50 years, and already the states are near bankrupt. And the government is pushing 60% of the economy in west Europe, not that differetn from East Euro countries in the 80's.
  13. Knowledge is only a means to an end. We should keep our knowledge innovation internal, as a way to give our domestic industry an advantage. (this is what Germany and Japan do). You ever hear of Japanese companies liscencing inventions out to foreigners to produce?
  14. This is what socialism looks like in practice. (not the nice sounding theory of equality, fairness etc..)
  15. Yes the situation in the UK is worse than the US imo. The reason it hasn't seemed as bad is because the UK residential property market hasn't yet imploded like in California, Florida, Nevada and Arizona. But once you realize the whole UK property market looks more like California than the rest of the USA.. you realize how bad it could be.
  16. Something to consider; After Iceland put the state behind the liabilities of its banks, it took only 2 weeks until the country went bankrupt. Mr. Brown and Mr. Darling's press conference was on January 19. Now the British government has effectively stood behind the liabilities of these mega banks. Especially after it became obvious just how bad RBS's balance sheet is. HBOS is a whole different ballgame than Bradford & Bingley, or Northern Rock. And RBS is a whole different ballgame than HBOS. The national debt of the UK, before taking on bank liabilities: £637,400m The liabilities the UK state stood behind earlier: Northern Rock liabilities: £107,000m Bradford & Bingley liabilities: £50,000m The liabilities of the mega banks the government is either effectively standing behind or thought it soon will: Lloyds: £341,200m HBOS: £661,300m Barclays: £1,343,360m RBS: £1,887,108m Total liabilities for standing behind these 6 banks: £4,390,000m New liabilities of UK state: £5,027,000m (789% rise) One bright spot, the liabilities of the Icelandic banks the government of Iceland stood behind were said to be 10 times the GDP of Iceland. The liabilities the UK government appears to be choosing to stand behind I'd estimate at about 3.5 times the GDP of the UK. On the downside the GDP of the UK appears heavily dependent on the financial sector which is now mainly bust, just like Iceland. My prediction: Although I think the UK 'could' go bust within a month, I expect it will last longer than that. Perhaps into mid-2010.
  17. I find funny how the FTSE is flying high, considering its main component has been decimated.
  18. I used USO which is a mixture of oil futures.. but thanks for mentioning OIL and CRUD. I think I'm going to buy some OIL, as the spot price of oil has dropped even harder than the futures. And I like the diversity of owning seperate ETF's, because there is always a risk of blowup. To me the Saudis and co will just reduce production to bring the prices up, and the oil majors will slow down or stop the new projects coming online. Plus on the bullish side I've read of governments namely China with plans of stockpiling. I really like Tobacco stocks, but they seem too high. If they ever fall I want to buy into them... I'm thinking Japan Tobacco. The first world market for smoking is wrecked by the crazed do-gooders.. but the third world is a world of opportunity and in things like smoking greater personal liberty, and far larger in population anyway. Like in China the tobacco companies can openly advertise. (advertising things like booze and tobacco has to be great for advertisers and events too now that I think about it) For booze, I don't know much about the companies or market.
  19. I invest for myself and my extended family members who are being uber nice to me after I got them out of stocks in mid 2007. I've put the money in Canada, Japan, Australia, EU. My Japan investments didn't go as well as I had hoped, I bought into stocks there too early, and should have just gone into Yen, like I just bought currency in those other countries. Ah well I averaged down on some Japanese stocks with some my own money. Recently I've bought USO from the US an ETF which tracks oil futures. Extended family and even some friends heard my arguments and copied me. Down over 10% on that one in about 2 weeks, actually thinking of buying more though. As oil to me has fundamental value, and is getting too cheap imo. I'm looking for other places to put my money. So far I'm up since mid 2007 when measured in Pounds. I also should have bought longer term government bonds in Canada and co, then I would have really made some gains as the countries cut interest rates. There was lots of opportunity even a ways after they started cutting rates(but in the fog of rising resource prices it was hard to see). Now I think the bonds are a bubble that there isn't much room to move up, and potentially a lot of downside. I am also now looking for a good opportunity to get some gold in my portfolio. Also a way to get into the Chinese economy, but I may do that through resource plays. I'm going to follow this thread for your guys ideas and reasoning.
  20. I thought back in 2007 that as this crisis gains steam it will probably lead to a breakdown like the East Euro communist countries did. I looked at the Japan 1990 model too, which is likely what Germany and France will face. But the UK problems seem way bigger than Japan faced, and options a lot more limited. Just like in communist eastern block countries during the 80's, the modern UK has runaway bureaucracy that has reached a critical mass. Back in say Russia 1980's the government agencies had countless employees working in office buildings all over the country. Less and less of the government workers were involved in any sort of real work. Look at these government agencies which privatize the actual work through contracts.. yet the agencies staffing levels actually increase!! That is runaway bureaucracy. Its even worse in regulatory areas of the government, because the runaway bureaucracy makes it harder and harder for companies to actually get anything done. In a globalized world they simply will leave.. in a non-globalized world they will be able to deliver less and less at a higher cost. Some countries like France seem to be able to stop runaway bureaucracy or at least from the outside. Anglo-saxon countries if you study them, all suffer from the same growing bureaucracy with no one ever stopping it. How we've always solved this is through Schumpter's 'creative destruction'. Old companies eventually die replaced by upstarts which simply haven't had much time to grow the bureaucracy. But as more and more of the economy is through the state we have lost that creative destruction in those areas. Something like 60% of the economy of the UK directly goes through the state. So what we need is the reset button. But we'll never break the bureaucracy unless there is a total crash. Scarily it might have to be a prolonged crash to literally force the bureaucrats out just to get food for their family. Thats what it took in Russia to break it. If this economic breakdown doesn't trigger it, the bureaucracy will simply keep growing at its exponential rate, and we'll be back here within a few years. On the bright side, when we come out the other side we will get richer at an astonishing rate. The British people have the most valuable resources of all... creativity and intelligence. But you need liberty to let those run wild and grow wealthy on it. In a centrally controlled, highly regulated environment there is no room for creativity. Maybe that works for Germans, but no way does it work for Brits.
  21. I agree with other posters who are saying it is becuase high house prices is all there is. If house prices actually do crash, I don't think the UK will survive in the current form. Not just an economic depression, but state collapse. The elites in the current order will do anything and everything to keep this game going - even if the policies only buy a year or two more, because when a new order comes most of them won't be the elites in that new order.
  22. I think you are right. Imagine if we spent on nuclear reactors what we are spending on bailing out banks. I believe the electrical generation capacity of the UK is 60 gigawatts. Which is the equivilant of 38 of France's Areva EPR 1600MW reactors. Cost per reactor for arguments sake £3.5 billion each. To make our entire grid with modern nuclear plant: cost £133 billion. In 60 years we'd have to do some maintenance to extend the life of them. I like our pharmacuetical industry and its a good example the type of real value creating industry we need more of in the future.
  23. Your example of accounting work needed at a client site, would not be easy to outsource. But consider another area, there is European corporations moving their entire back office to India. And all their transactions are going on their computers and intranet, within their European computer networks already. So work that needs to be done on that data, it can be done anywhere the internet reaches. There are many accountants out there who for them its a job, and they've memorized how to do their work in a formula way - if its formula it can be taught and made into a system. But they dont' really have an interest in it.. yet the way things have been they've still been making incredible money(and doing audits and such where they missed elephants in rooms). Then there are people like us on this forum who read through Barclay's balance sheet during the middle of the night because we're interested in finance. The value is incredible, think if one pension fund came to one of us bears and asked us to go through the mbs bonds they were going to put 100's of millions in and give our opinion. If we saved them £100 million and charged them £3 million for our knowledge we would have been cheap.
  24. Ya and look where our finance guy/accountant leaders have led our corporations with all that vast amounts of management and strategic theory and such. Especially our financial corporations. It is the ultimate proof of the failure of the consultant accountant idea. To me accounting should not be this mystical priesthood that the accounting profession has made it into(and been wonderfully successful at getting themselves paid more money). It should be about crunching out the numbers, putting them together in simplified form, like all that data leading to a net income number. Being conservative with the estimates where estimates are needed, and then presenting the simplified data to the client or patron so they can make decisions with the data. There is only one little problem with my vision; computers can do all that instantaneously. So the accounting profession had to create a whole new reason for being. If the accounting software company doesn't manage its support outsourcing well it may lose customers. Of course if they were willing to pay £25 an hour they could get some decent support staff right here in the UK.
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