Rinoa Posted April 19, 2009 Share Posted April 19, 2009 Oh dear, it seems the UK RMBS AAA market is asking for 700bps spreads. Hardly indicative of AAA bonds. I guess you have vastly underestimated the scale of the problem. These spreads need to drop back down to 20-25bps before house prices can count on anything other then domestic deposits to support equity levels. Any government measures are temporary and expensive as the UK already ran a £40-50bn deficit. Are you suggesting the government raise an extra £200bn a year in taxes (equivalent to £6,600pa for every economically active person in the UK) to fund mortgage lending going forward? What are you on about? You responded to my post on SLS saying they couldn't extend it for more than one year ~ which is simply incorrect. You are now responding to claims I never made. Quote Link to comment Share on other sites More sharing options...
HAMISH_MCTAVISH Posted April 19, 2009 Share Posted April 19, 2009 of course he is. thats what Dicks do. they act without thought for the consequences. Do you understand the difference between guaranteed and funded? Do you understand the cost implications of both? Do you get that guarantees can be paid for through fees that will cover the defaults? Quote Link to comment Share on other sites More sharing options...
redgenieuk Posted April 19, 2009 Share Posted April 19, 2009 Beware those who challenge the market. To much fake liquidity will result in sterling devaluation..who knows where it'll end up. Darling is set to destroy the economy if this is true.We need to cut back spending and start make banks liquid - it'll take 5 years but we can do it Stuff the current banks.... thats what they should have done in the begining. The should have simply let all of the fall on their **** and thenset up some new banks with the billions. Problem solved. All the "investors" and the bondholders/shareholders who allowed the reckless bull get wiped out. Many overseas people will get wiped. AIG and the yanks pay $billions more for insuring things they didn't understand. Without pain, they will not learn. Quote Link to comment Share on other sites More sharing options...
ParticleMan Posted April 19, 2009 Share Posted April 19, 2009 I'm not sure that you understand what the SLS scheme is. I'm not sure you do. You do understand that recycling lending activity through the SLS decapitalises the institution concerned, don't you? Quote Link to comment Share on other sites More sharing options...
Rinoa Posted April 19, 2009 Share Posted April 19, 2009 I'm not sure you do.You do understand that recycling lending activity through the SLS decapitalises the institution concerned, don't you? Does securitisation not do the same? Don't know the answer, just asking. Quote Link to comment Share on other sites More sharing options...
ParticleMan Posted April 19, 2009 Share Posted April 19, 2009 (edited) Does securitisation not do the same? Don't know the answer, just asking. During the credit boom? No. It amounted to bringing future profit from current lending activity into the present; the securitisation of a loan permits a bank to crystallise the full value of the mortgage series and enter it on to its books at the full (model) valuation. Per inspection this turbocharges lending activity as valuations become more aggressive and just as obviously it strips the unfortunate hot-potato-holder bare as they fall. This is why the market seized up, and this is why it was an unmitigated catastrophe when it did. It's also the exact size and shape of the void which must be filled for prices to ever recapture peak levels. edit: what the BOE is doing (in applying their criteria and haircuts under the SLS) amounts to what rational market investors on the buy-side of securitisation ought to have been doing and in all likelyhood now will do (witness the spreads ?...! is showing for so-called investment-grade MBS/ABS); so this market will shrink itself back to some semblance of normalcy, yield-wise; intervention (as you and Hamish have repeatedly noted) is at levels sufficient to retard but not halt this - the goal is and always has been to prevent institutional seizure and market failure, not falls in house prices Edited April 19, 2009 by ParticleMan Quote Link to comment Share on other sites More sharing options...
Bearfacts Posted April 19, 2009 Share Posted April 19, 2009 Albert Einstein defined insanity as doing the same thing again and again and expecting different results. By this definition I think we can clearly state that the Treasury, BOE, Brown and Darling are utterly insane. Quote Link to comment Share on other sites More sharing options...
Liquid Goldfish Posted April 19, 2009 Author Share Posted April 19, 2009 Do you understand the difference between guaranteed and funded?Do you understand the cost implications of both? Do you get that guarantees can be paid for through fees that will cover the defaults? I think I understand the difference (on a simple level anyway) but even if they can sell these extra £50 billion of guaranteed secutitsied loans at a viable price, which looks unlikely, there's still going to be a big shortfall in funding Quote Link to comment Share on other sites More sharing options...
Liquid Goldfish Posted April 19, 2009 Author Share Posted April 19, 2009 (edited) Oh dear, it seems the UK RMBS AAA market is asking for 700bps spreads. Hardly indicative of AAA bonds. I guess you have vastly underestimated the scale of the problem. These spreads need to drop back down to 20-25bps before house prices can count on anything other then domestic deposits to support equity levels. these RMBS will be guaranteed by the government won't that drastically reduce the spread? Edited April 19, 2009 by newdman Quote Link to comment Share on other sites More sharing options...
ParticleMan Posted April 19, 2009 Share Posted April 19, 2009 (edited) won't that drastically reduce the spread? No, it'll cause the spreads on sovereign debt to widen. You need to walk a mile in the shoes of the investor to appreciate the niceties of this (this is why all such prescriptive measures - or more correctly, command models - fail). Sledgehead seems to have a knack for "getting" this perspective; it'd be good if we tickled out one of his more acerbic quips from the peanut gallery... Edited April 19, 2009 by ParticleMan Quote Link to comment Share on other sites More sharing options...
Liquid Goldfish Posted April 19, 2009 Author Share Posted April 19, 2009 It's only a problem if you want it to be one. I admire your positivity Quote Link to comment Share on other sites More sharing options...
durhamborn Posted April 19, 2009 Share Posted April 19, 2009 Fantastic. The writing was on the wall since early February, but the denial continues here... Denial? If you make lending available does it mean people with falling wages can pay it? My home is paid for.My 3 children couldnt even think about buying it.None of me friends could afford to buy it.Its a 3 bed.It will fall in price until people can afford to buy it.That point is a long way away yet. My house will fall another 20% at least.Good,its value means nothing to me.Its a home.When its down 40% from peak decent hard working people will be able to afford to buy a home. This HPC has a long way to run yet. Are you buying houses now Valerious?.Lets hear your forcast on average house prices including CPI inflation adjusted for the next 3 years? Il give you mine, 12 months -8%,24 months -14%,36 months -18% CPI adjusted. Quote Link to comment Share on other sites More sharing options...
Shunnyonions Posted April 19, 2009 Share Posted April 19, 2009 Yes, thats from splines site.58K currently, and falling as prices do. Hamish, I've already asked you about this on another thread, and you haven't replied. That site suggests 80-90k for 0% HPI, based on past data through booms and busts. Would appreciate your views - see bottom of this link - figure 3. http://www.houseprices.uk.net/articles/pro...y_transactions/ Quote Link to comment Share on other sites More sharing options...
HAMISH_MCTAVISH Posted April 19, 2009 Share Posted April 19, 2009 Hamish, I've already asked you about this on another thread, and you haven't replied.That site suggests 80-90k for 0% HPI, based on past data through booms and busts. Would appreciate your views - see bottom of this link - figure 3. http://www.houseprices.uk.net/articles/pro...y_transactions/ If you read the text explanation right under that graph in figure three, you'll get your answer. It says...... From mid-2008 the number of approvals as a proportion of overall transactions has fallen as mortgage credit became restricted. This has caused a reduction in the number of approvals needed to maintain neutral house price growth. The neutral level is currently 60-70k per month, see the house price predictor. The current number from the house price predictor mentioned is 58,000...... Quote Link to comment Share on other sites More sharing options...
wonderpup Posted April 19, 2009 Share Posted April 19, 2009 Isn't this 50 Bn just a rather unconvincing decoy duck floating on the debt pond trying to convince the private sector ducks to join the party? Does the government really believe they can ressurect this dead duck? It just seems so patheticly desperate. Quote Link to comment Share on other sites More sharing options...
Kazuya Posted April 19, 2009 Share Posted April 19, 2009 Quote Link to comment Share on other sites More sharing options...
maxim Posted April 19, 2009 Share Posted April 19, 2009 He has as far as I'm concerned.Discover the POWER of the 'Ignore' option. Thank you for the suggestion. Wonderful! Quote Link to comment Share on other sites More sharing options...
libspero Posted April 19, 2009 Share Posted April 19, 2009 If you read the text explanation right under that graph in figure three, you'll get your answer. It says...... From mid-2008 the number of approvals as a proportion of overall transactions has fallen as mortgage credit became restricted. This has caused a reduction in the number of approvals needed to maintain neutral house price growth. The neutral level is currently 60-70k per month, see the house price predictor. The current number from the house price predictor mentioned is 58,000...... This graph old boy? To me this graph of Spline's shows that in the last crash the break-even point (0% HPI) fell roughly between 80K and 100K approvals. Why do you expect it to be different this time? Quote Link to comment Share on other sites More sharing options...
ae589 Posted April 19, 2009 Share Posted April 19, 2009 The current number from the house price predictor mentioned is 58,000...... I agree with Hamish, this is what spline's data says. Don't forget though, that according to spline's graph in my last post, we still have to feel the effect of the massive approval drop of the last 6 months. So if you believe that we have 20k approvals until 0% HPI, you must also believe in an increasing rate of decline before that point. Quote Link to comment Share on other sites More sharing options...
Bazman Posted April 19, 2009 Share Posted April 19, 2009 (edited) If you read the text explanation right under that graph in figure three, you'll get your answer. It says...... From mid-2008 the number of approvals as a proportion of overall transactions has fallen as mortgage credit became restricted. This has caused a reduction in the number of approvals needed to maintain neutral house price growth. The neutral level is currently 60-70k per month, see the house price predictor. The current number from the house price predictor mentioned is 58,000...... Hey There, There seem to be a few problems with the recovery scenario: The government can not wave a magic wand and make the problem go away . They are simply shifting the bad debt from the banks to the public sector. This will have to be funded and the only way the UK will be abe to service this debt is to devalue Sterling +raise taxes. This makes it highly unlikely that foreign investors will pile back into the UK housing market as some bulls seem to predict. What they make on the housing would likeyl be wiped out by FX losses. It will also lead to higher interest rates especially when you consider 7eral other governments most notably the US are following similar strategies. Moreover the scheme of the government proping up the housing market in clearly unsustainable even they concede taxes are going to have to rise to try and pay off the huge debts they are taking on. This in tandem with higher intereest rates are liabel to kill any nascent recovery. Fundamentally house prices are still over valued by any measure, even on the cheapest mortgage its still cheaper to rent. The house prices were inflated by debt spiralling out of control. For example we start with £100 I lend it to you you lend to to another and another lends it back to me and we repeat 10 times. Now the banks invented ever more ingenious ways of allowing higher multiples to be lent which was fine so long as house prices kept rising. But when they turned... Well going back to my simple example now we each owe £1000 even though we only started with £100 and if some one defaults someone has to write down £1000. So even if the government could prop up the market for a short period, its already been shown that the old model is unsustainable and a return to fair valuations still seems likely given the governemnt can only provide a short term boost? Indeed the recovery would seem to be a bit of a false dawn if as is likely its accompanies by higher inflation. Your real returns are likey to be poor at best if not negative. Also history is not really on there side all other efforts in history to prop up bubble markets have failed, I don't see anything that would change things this time. Any boost to the housing market is only likely to be temporary? Lastly if you look at house prices they do tend to trend for years at a time. Its very hard to predict when a trend will turn so you are well advised to wait for a turn in the market to be firmly established beofre committing. Reason being if you buy now with fixed mortgages around 5% and house prices go up 10% you only ake 5%, however if they fall 10% you loose 10% + 5% = 15%. So three years of gains are likely to be wiped out by one year of losses if you get the timing wrong. Who would take such a bet? Given that is anything the probabilites seem to be tiled toward further losses? Clearly you are best to wait for the uptrend to be firmly in place before committing? Therefore its hard to see that extra credit will necessarily translate into higher prices any time soon. Edited April 19, 2009 by Bazman Quote Link to comment Share on other sites More sharing options...
Liquid Goldfish Posted April 19, 2009 Author Share Posted April 19, 2009 I agree with Hamish, this is what spline's data says. Don't forget though, that according to spline's graph in my last post, we still have to feel the effect of the massive approval drop of the last 6 months. So if you believe that we have 20k approvals until 0% HPI, you must also believe in an increasing rate of decline before that point. exactly it shows a 40% drop before the rate of fall even starts to recover not like a bull to selectively choose a tiny shred of evidence to make a desperate point Quote Link to comment Share on other sites More sharing options...
jp1 Posted April 20, 2009 Share Posted April 20, 2009 Looks like this is another "re-announcement" of old cash - The Times today suggests that Gordon's 50 "bullyun" is in fact the same £50bn that was announced in January Times graphic of budget proposals Treasury Guarantee Scheme For Asset Backed Securities - £50bn Status: Not yet active - expected to be re-announced in the Budget Quote Link to comment Share on other sites More sharing options...
Kazuya Posted April 20, 2009 Share Posted April 20, 2009 (edited) Looks like this is another "re-announcement" of old cash - The Times today suggests that Gordon's 50 "bullyun" is in fact the same £50bn that was announced in JanuaryTimes graphic of budget proposals Treasury Guarantee Scheme For Asset Backed Securities - £50bn Status: Not yet active - expected to be re-announced in the Budget Edited April 20, 2009 by Eiji Quote Link to comment Share on other sites More sharing options...
Ash4781 Posted April 20, 2009 Share Posted April 20, 2009 (edited) There was an article that these guarantees would be next to useless because of the lack of the secondary market liquidity guarantees. Edited April 20, 2009 by Ash4781 Quote Link to comment Share on other sites More sharing options...
Liquid Goldfish Posted April 20, 2009 Author Share Posted April 20, 2009 There was an article that these guarantees would be next to useless because of the lack of the secondary market liquidity guarantees. can anyone explain this a bit more for me, ta Quote Link to comment Share on other sites More sharing options...
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