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Investors Are Betting On A Black Monday-Style Collapse, Boe Warns

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http://www.telegraph.co.uk/finance/comment/edmundconway/7825880/Investors-are-betting-on-a-Black-Monday-style-collapse-BoE-warns.html

Investors are placing bets on a Black Monday-style crash in the British stock market at the fastest rate since the collapse of Lehman Brothers bank in 2008, the Bank of England has warned.

In a survey of markets, the Bank warned that widespread fear over the possible collapse of a sovereign debtor, including Greece and Portugal, had sparked a mass of bets on a 20 per cent fall in the FTSE 100.

The warning coincides with calculations from the Bank for International Settlements (BIS) showing that Britain has major exposure to the Irish and Spanish banking systems, which many fear could be at risk in the next round of the financial crisis.

The Bank of England used its Quarterly Bulletin to warn that markets were under increased strain following the International Monetary Fund and European Commission's bail-out of Greece.

It said that investors had fled into safe haven assets, including Treasury bonds, gold and, to some surprise, UK government bonds.

However, it pointed out that the number of investors betting on a 20 per cent fall in the FTSE 100 index, based on their purchase of options connected to such a scenario, had risen from below 5 per cent to about 13 per cent in the past month alone.

Although this is below the 25 per cent level around the time of the Lehman implosion, the rate of increase is similar.

Share prices have been hit by the fears surrounding sovereign debt in recent weeks.

I wonder if the BoE pension fund has placed a similar bet as well. They've bet on inflation, obviously no conflict of interest there.

Still it's contained.

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The warning coincides with calculations from the Bank for International Settlements (BIS) showing that Britain has major exposure to the Irish and Spanish banking systems, which many fear could be at risk in the next round of the financial crisis.

This has to be incorrect. How can the Spanish banking system be 'at risk' when it is totally forked many times over?

Any risk is to the health of citizens in close contact to the rotting carcass <_<

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Must be all the HPCers shorting?

Seriously, good article and interesting but it gives no timescale or idea as to when this believed collapses may occure - are we talking within weeks, months, what?

Obviously, I don't mean a definite date and time such as 10.23AM next Thursday but I thought short positions all had a 'sell-by date' at which point they expire and if your fall/crash had not happened by that time then you lose you money?

Does this mean that many think a crash is sooner than later?

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Just like the BBQ summer?

FTSE All Share 2675.04 12.04 +0.45%

Sterling up 1.4660 (closed Friday at 1.455)

Nothing like an increase in our debt levels and slumping Supermarket sales due to outlook to liven stocks and Sterling up.

We are in a contrarian market folks---bad news is a buy signal and good news is run for the hills of our ancestors and take refuge in the caves and the deep forests.

Edited by Realistbear

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Did you see the figure in that article of Britains exposure to Irish sovereign and private debt - £158 Billion :o

Shouldn't we be sending over the bulldozers to demolish all those Ghost estates and over-priced homes in the Dublin suburbs in order to save our banks and prevent another hpc over there :rolleyes:

".....However, it also pointed out that various countries in the euro area were particularly exposed to each other – both in terms of sovereign and private debt. Banks headquartered in Britain had larger claims on Ireland ($230 billion, £158 billion) than banks based in any other country. Britain has a $150 billion (£103 billion) exposure to Spain"

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Cheers, thanks, ta.

Pretty outrageous stuff. The contents of, and investment decisions relating to, the pension funds of public sector decision makers should be kept secret from the decision makers themselves and the public. I remember being told that Prime Ministers, members of the Cabinet, etc. had to hold any equity investments in 'blind trusts', so as to avoid any kind of bias in decision making. Obviously the smae thing doesn't apply to the BoE.

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Investors dont bet...they invest...they assist the operation with capital, sometimes with expertise.

speculators bet.

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Must be all the HPCers shorting?

Seriously, good article and interesting but it gives no timescale or idea as to when this believed collapses may occure - are we talking within weeks, months, what?

Obviously, I don't mean a definite date and time such as 10.23AM next Thursday but I thought short positions all had a 'sell-by date' at which point they expire and if your fall/crash had not happened by that time then you lose you money?

Does this mean that many think a crash is sooner than later?

12th August.

Hope that helps.

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I presume these are deep out of the money options or puts - my financial knowledge is lacking on these investments.

At the moment I don't think sentiment is overly bearish or bullish which is why I'm holding.

It is a hard environment to be a contrarian investor in as I can't find any very strong views anywhere.

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http://www.telegraph.co.uk/finance/comment/edmundconway/7825880/Investors-are-betting-on-a-Black-Monday-style-collapse-BoE-warns.html

I wonder if the BoE pension fund has placed a similar bet as well. They've bet on inflation, obviously no conflict of interest there.

Still it's contained.

Cant see a one day 10% er myself although it would be nice if there was before June options expire

13% short (in puts) though is a small enough number to make it possible

Edited by Tamara De Lempicka

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I would agree with that date, I will be on holiday and financial history always repeats. The last time I was away Lehman and HBOS went tits up.

IRRO, with respect may I say that your form of words here is highly inappropriate!

More like tits down, with giant dildo, an unlimited supply of Red Bull, & on top of the well strapped down & gagged UK tax payer

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http://www.telegraph.co.uk/finance/comment/edmundconway/7825880/Investors-are-betting-on-a-Black-Monday-style-collapse-BoE-warns.html

I wonder if the BoE pension fund has placed a similar bet as well. They've bet on inflation, obviously no conflict of interest there.

Still it's contained.

About the timing:

However, it pointed out that the number of investors betting on a 20 per cent fall in the FTSE 100 index (...) had risen from below 5 per cent to about 13 per cent in the past month alone.

Although this is below the 25 per cent level around the time of the Lehman implosion, the rate of increase is similar.

Does anybody know, in the Lehman's case, how long it took to go from 13% to 25%/implosion? :) Just curiosity.

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About the timing:

Does anybody know, in the Lehman's case, how long it took to go from 13% to 25%/implosion? :) Just curiosity.

It could happen reach that level in a day or a week or a month or a decade

The 25% short does not signify an implosion, these things are contrarian sentiment indicators, the figure could be well above 50% short interest and the most likely outcome of that would be that a bottom is in and a strong rally is about to happen. 13% is next to nothing which i would say is a good sign for the bears because the majority are still bullish, as it gets higher you should actually be getting more and more bullish because you are exhausting the sell side,

Its like having 95% long interest, that doesnt mean the market is about to rocket, it actually means it is about to fall heavily because you are exhausting the buy side

Edited by Tamara De Lempicka

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What's the story with the BoE pension fund having bet on inflation? Do you have any links?

They moved a lot of their assets into inflation linked bonds a year or so ago.

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What's the story with the BoE pension fund having bet on inflation? Do you have any links?

Don't forget that the pensions are index-linked - by investing in index-linked gilts the pension scheme assets are matched to their liabilites and the scheme expects to have enough money to pay the pensions WHETHER INFLATION IS HIGH OR LOW.

The are not betting on high inflation as such - they are hedging their risks.

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IRRO, with respect may I say that your form of words here is highly inappropriate!

More like tits down, with giant dildo, an unlimited supply of Red Bull, & on top of the well strapped down & gagged UK tax payer

I don't suppose that there is any chance of your more lurid musings being uploaded as audio files, is there?

p-o-p

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Don't forget that the pensions are index-linked - by investing in index-linked gilts the pension scheme assets are matched to their liabilites and the scheme expects to have enough money to pay the pensions WHETHER INFLATION IS HIGH OR LOW.

The are not betting on high inflation as such - they are hedging their risks.

The staff at tha BoE aren't daft enough to believe in index linking, and neither are we.

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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