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hedgefunded

Times "interest Rates Have Peaked"

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Kaletsky, worth reading for the occasional laugh, but not to be taken seriously.

...strongly suggests that Bank's own analysis puts the appropriate level of interest rates for the British economy today nearer 5.5 per cent than 5.75 per cent and certainly not higher.

This view may turn out to be wrong – I for one have argued that interest rates might need to rise to 6 per cent (although that was before the recent upsurge of sterling).

Right, so what he's saying is that interest rates could stay the same, then go down, but they might go up.

I'm just amazed anyone gets paid to write this stuff.

There's better analysis available for free on the internet.

Edited by BandWagon

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http://www.timesonline.co.uk/tol/comment/c...icle2100216.ece

"So enjoy your holiday, even if you are travelling on borrowed money: you are unlikely to face bankruptcy when you return."

Makes me want to spit.

The good thing about the press, VI or not, is the wonderful diverse and confusing messages they spew out onto a directionless and confused sheeple. An article on the consequences of miracle economics (Brownism):

http://uk.biz.yahoo.com/19072007/140/milli...debt-level.html

Thursday July 19, 07:46 AM
Millions Face 30-Year Debt Level
Millions of people may be in debt for up to 30 years if they make only the minimum repayments on their credit cards each month. One in 10 credit cardholders, the equivalent of about 3.5m people, pays back their debt by only the minimum repayment each month, according to price comparison website uSwitch.com.

Debt is still the driver of the miracle. It always comes home to roost.

On the BoE, a bet (modest) on a holding pattern would be worthwhile as we are following the US step by step as Great Crash 2 unwinds. Subprime is here (Kensington for example) and debt levels are going to crimp sheeple spending as the above article highlights. The series of hikes put in place by the muppets, albeit too little too late, will soon begin to bite now that credit tightening is here.

The miracle castle is already crumbling as the debt tide has come in. The keep is still intact but the outer walls are already a shapeless pile of smooth sand.

:

Edited by Realistbear

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Aberdeen says some riskier tranches of debt at the bottom of the collateralised debt obligations (CDOs) that hold sub-prime mortgages are not owned by "real" investors but by other CDOs.

In a way reminiscent of the collapse of the Split Capital investment trust market in Britain, Mr Taylor said cross-holdings of lower-tier debts could pass the pain of defaults further up the debt rankings than many investors expect. Even AAA-rated debt could be affected, he said.

Now this is interesting - the whole CDO theory relies on putting all the risk into the lower-rated tranches (the BBB and A grades). I don't understand how a CDO can 'cross-invest' into another, but perhaps this explains why even the AAA debt is being traded at below book value.

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http://www.timesonline.co.uk/tol/comment/c...icle2100216.ece

"So enjoy your holiday, even if you are travelling on borrowed money: you are unlikely to face bankruptcy when you return."

Makes me want to spit.

This is one of the weakest analysis of the current economic situation I have seen. Basically carry on borrowing and everything will be fine. No discussion on why the pound is strong, global trade im-balances, sub prime lending,credit tightening. Just you are all ok you can borrow against houses, shares and pensions. He is paid to write this!

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This is one of the weakest analysis of the current economic situation I have seen. Basically carry on borrowing and everything will be fine. No discussion on why the pound is strong, global trade im-balances, sub prime lending,credit tightening. Just you are all ok you can borrow against houses, shares and pensions. He is paid to write this!

And let's not forget oil prices - the single most important economic factor. That article is just garbage.

But a glance at a chart of oil prices in this decade suggests that "steadily rising" is a better term than "volatile." Crude oil futures were quoted at $17.45 a barrel in November 2001 and $75.05 Wednesday. Except for a brief pullback last fall, the gains have been persistent.

http://www.chicagotribune.com/business/chi...story?track=rss

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Guest Shedfish

what drivel - to say that 3 votes for a hold against 6 for a rise implies a cut next time?

and the last line - well

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Guest The_Oldie

Here's the disclaimer :D

This view may turn out to be wrong – I for one have argued that interest rates might need to rise to 6 per cent (although that was before the recent upsurge of sterling). But it is unlikely that the Bank will suddenly decide that its analysis was wrong by a very wide margin. The chances are, therefore, that interest rates in Britain are now at, or very near, their peak for the present cycle.

Surely the recent upsurge of Sterling is a result of the expectation that rates have not peaked.

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http://www.timesonline.co.uk/tol/comment/c...icle2100216.ece

"So enjoy your holiday, even if you are travelling on borrowed money: you are unlikely to face bankruptcy when you return."

Makes me want to spit.

This article implies that the MPC controls interest rates. Although the MPC can adjust rates from one month to the next, in the long term, the markets decide (as Norman Lamont can attest). Powerful forces are conspiring against interest rates at the moment. Not least of these is government spending (which at some point is going to have an impact on the £) and private debt/house prices (which is putting huge pressure on wage inflation). There is also evidence that the price of imported goods is on the rise.

Did the Times use one of their sports correspondents to write this article?

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As far as I can see, the markets are pricing 6.00% in September and 6.25% in December.

There is a slight chance of 6.00% in August IMO looking at the BoE minutes. Core inflation looks to be difficult to shake off and we're just about to be hammered with more rises coming through from the recent gains in oil price. A lot of the downward pressure we're currently seeing in CPI is due to the dip in the price of oil 6 months ago. That trend has reversed to almost record highs!

However, the BoE will probably wait and see now based on the very downbeat comments from Bernanke yesterday. The whole sub-prime thing seems to be blowing up at a real difficult time for the US and is bound to affect global markets. I think USD will slip further against GBP until news about the UK housing market slipping comes out ~Sep, when GBP will fall back to around $2.

The press have been saying we are at the top of the IR curve since we were at 5.00% :lol: .

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"...although that was before the recent upsurge of sterling"

So, no analysis for why it is so high, and no analysis of how this is slowing inflation... yet inflation is still shooting up even with sterling being so high!

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IMHO is a lot more likely to go higher than stay at current levels or drop, but never say never...

My open ended prediction (in the style of the BOE)

Dec 2007 - between 5.75% and 6.25%

Dec 2008 - between 5.25% and 7%

Dec 2009 - between 4.75% and 8.5%

Dec 2010 - between 4% and 12%

Oh whilst were at it can the BOE or the times pay me for this prediction?

Edited by moosetea

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I agree - this article was so unbelievably worthless that I had to read it twice to check it was really that bad!

In particular:

While it is true that incomes have recently fallen in real terms, the average British family is still far better off than it was a year ago because of the increase in its property, pensions and stock market wealth – and this favourable wealth effect will allow most people to keep borrowing to maintain their spending patterns, despite the squeeze on their real incomes. That, in fact, is how so many apparently hard-up families will be able to afford their foreign holidays this year, despite their declining real incomes and rising mortgage costs

How will they be better off overall if they run up debt against the assets that have appreciated? So their incomes are falling but that's no problem they should just borrow some more to maintain your standard of living - how irresponsible to advise this.

There are several reasons for this reassuring outlook – especially the recent extreme strength of the pound, which will squeeze large parts of the British economy and counteract a lot of the recent inflationary pressure

Doesn't this mean people will lose their jobs? How will they pay their debt back then?

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Could someone more articulate than me please respond to this irresponsible claptrap. Where did they get this journo from, if this is the Times idea of intelligent reporting I'm off to get a paper with a realistic grip on the economy. Pass over The Sun will you. (It now appears both papers have tits in)

Edited by Lord Lister

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Where did they get this journo from

Journo? Kalaetsky is co-founder of Gavekal research.........

A) GaveKal Research A Research Business Geared Towards Institutional Investors:

with over 400 clients in some 42 countries, our research business remains our core business. And the wide diversity of our clients is also our biggest strength. Indeed, we are fortunate enough to have clients in a wide array of businesses, and these clients focus on very different things, offer us unique perspectives and original thoughts. For this reason, the GaveKal Research product is built as much as possible as an interaction between the various GaveKal partners and our clients all around the world.

http://gavekal.com/page9.cfm

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Our economy is on the edge of collapse simply because interest rates have been too low for too long. If the BoE had lifted rates a couple of years ago and let inflation undershoot we would be in a much better position right now. Does anyone ever think about that?

There is simply no way that they can come down in the near future. The only glimmer of hope for those who are heavily indebted is that they stay fairly flat. However, history tells us that this is very, very unlikely.

This article is frightening because it is 180 degrees out of line. We should be getting ready to batten down the hatches because an economic storm with very uncertain consequences is upon us. The water is already uncomfortably choppy.

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Yeah lets drop rates and see what happens to sterling and inflation.

What a ****!

the article is the biggest load of shite i have seen inb The Times for a long time- crap, utterly useless- it would be more appropriate in The Sun

Edited by IDN

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Journo? Kalaetsky is co-founder of Gavekal research.........

A) GaveKal Research A Research Business Geared Towards Institutional Investors:

with over 400 clients in some 42 countries, our research business remains our core business. And the wide diversity of our clients is also our biggest strength. Indeed, we are fortunate enough to have clients in a wide array of businesses, and these clients focus on very different things, offer us unique perspectives and original thoughts. For this reason, the GaveKal Research product is built as much as possible as an interaction between the various GaveKal partners and our clients all around the world.

http://gavekal.com/page9.cfm

This could explain alot, which institutions did they advise, Bear Stern?

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If the MPC really believed that interest rates inevitably had to be increased, they would have done this already. Or, at the very least, some of the members of the MPC would already have started arguing for a bigger increase in interest rates.

Oh dear - what will the reaction be to Merv and the boys when rates are at 7, 8% or 9% next year. :lol:

The BOE are fools, but hope now they know that crashing the market is all they have left, that or raging inflation. Merv's choice. ;) (Bean will be back on board in August - the other two are now just bit players).

Edited by Wait & See

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