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Realistbear

I M F : " U K Market Comparable To U.s. Subprime Sector

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http://investing.reuters.co.uk/news/articl...RLING-CLOSE.XML

Sterling weakens, hurt by bank fund, IMF news

Tue Sep 25, 2007 3:31 PM BST
LONDON, Sept 25 (
Reuters
) - Sterling fell across the board on Tuesday, as a UK press report that a fund protecting bank deposits was only worth 4.4 million pounds added to concerns about the health of the financial sector.
Further hurting the pound was the International Monetary Fund's bleak outlook for the UK housing market. The fund warned on Monday that the
UK non-conforming mortgage market was comparable to the U.S. subprime sector.
The IMF also said that turmoil in global credit and money markets will likely continue as investors worry about the size of financial losses and where they might arise. [nN23237951].
Both reports raised worries about the health of the UK financial system after depositors rushed earlier this month to withdraw savings from mortgage bank Northern Rock.
"There were a number of news stories that came out suggesting sterling would weaken," said Teis Knuthsen, head of FX research at Danske Bank in Copenhagen.
The Independent newspaper reported that Britain's deposit protection scheme was worth $8.9 million, just a fraction of the $49 billion fund at the U.S. Federal Deposit Insurance Corporation...../

Some of us on HPC.co have been pointing out that the UK housing market is in worse shape than the US due to the much more widespread use of non-fixed IR loans (i.e. 15-30 yeara fixed periods, not one or two year "fixed" IR).

The miracle economy is clealry lagging the come-uppance the HPI bubble is having elsewhere in the world. Brown's career rests on HPI and it is clear he is not going to order the FSA to begin regulating loans until the crisis is past--or so he probably thinks. In the meantime, the SI, IO, 10X salary "cheap & easy" credit conditions will continue for a few more days at least.

HPI and sterling are joined at the hip IMO and Gordon's future rises or falls accordingly.

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http://investing.reuters.co.uk/news/articl...RLING-CLOSE.XML

Sterling weakens, hurt by bank fund, IMF news

Tue Sep 25, 2007 3:31 PM BST
LONDON, Sept 25 (
Reuters
) - Sterling fell across the board on Tuesday, as a UK press report that a fund protecting bank deposits was only worth 4.4 million pounds added to concerns about the health of the financial sector.
Further hurting the pound was the International Monetary Fund's bleak outlook for the UK housing market. The fund warned on Monday that the
UK non-conforming mortgage market was comparable to the U.S. subprime sector.
The IMF also said that turmoil in global credit and money markets will likely continue as investors worry about the size of financial losses and where they might arise. [nN23237951].
Both reports raised worries about the health of the UK financial system after depositors rushed earlier this month to withdraw savings from mortgage bank Northern Rock.
"There were a number of news stories that came out suggesting sterling would weaken," said Teis Knuthsen, head of FX research at Danske Bank in Copenhagen.
The Independent newspaper reported that Britain's deposit protection scheme was worth $8.9 million, just a fraction of the $49 billion fund at the U.S. Federal Deposit Insurance Corporation...../

Some of us on HPC.co have been pointing out that the UK housing market is in worse shape than the US due to the much more widespread use of non-fixed IR loans (i.e. 15-30 yeara fixed periods, not one or two year "fixed" IR).

The miracle economy is clealry lagging the come-uppance the HPI bubble is having elsewhere in the world. Brown's career rests on HPI and it is clear he is not going to order the FSA to begin regulating loans until the crisis is past--or so he probably thinks. In the meantime, the SI, IO, 10X salary "cheap & easy" credit conditions will continue for a few more days at least.

HPI and sterling are joined at the hip IMO and Gordon's future rises or falls accordingly.

And I think that most currency analysts have believed the GBP to have been significantly over-valued for some time. Once it starts falling we'll be caught in an inflationary, recessionary spirala.

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What happened to the holiday RB? :lol:

Maybe he's left a program running which harvests news stories and appends randomly-generated doom-laden comments before posting them here.

The question is: how can we tell?

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The fund warned on Monday that the UK non-conforming mortgage market was comparable to the U.S. subprime sector.

One of the interviewees on the BBC R4 File-on-4 program (see News page) said there were 4 Million subprime mortgages in the UK, out of 12 Million total mortgages.

Sounds worse than the US to me.

VMR.

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One of the interviewees on the BBC R4 File-on-4 program (see News page) said there were 4 Million subprime mortgages in the UK, out of 12 Million total mortgages.

Sounds worse than the US to me.

VMR.

If you think about it, it has to be very bad. Average HP = 220k. Average income = 25k. So who's buying all these houses at these prices? Either it's BTLs happy to accept cash flow loss in the vain hope of CGs or it's homeowners just lying about their income.

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One of the interviewees on the BBC R4 File-on-4 program (see News page) said there were 4 Million subprime mortgages in the UK, out of 12 Million total mortgages.

Sounds worse than the US to me.

VMR.

As we've seen in the US, the sh1tstorm only really gets going when prices really do start to decline. It only takes a small amount to start the ball rolling and there's no stopping it once all the financial consequences of those declines start to materialise.

I'd say we're months away from this being the number 1 news story for weeks / months as everything about the miracle economy evaporates before our eyes.

I think I've been reading too many of RB's posts :huh:

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Maybe he's left a program running which harvests news stories and appends randomly-generated doom-laden comments before posting them here.

The question is: how can we tell?

Harvests - love it :lol:

I'm glad RB is posting. I never thought I'd say it but it's a little less interesting on here without him. :ph34r:

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What happened to the holiday RB? :lol:

Up at 4 a.m. this morning while everyone else is akip. Jet lag!

Shall be hitting the road Thursday to visit Austin, San Antonio and Fredericksburg--all in Texas.

House building is slowing here after a brief period of fenzied building to accomodate people seeking decently priced homes. You can buy a very nice 2000sq foot all brick house in a good location with good schools etc for $150k. Property taxes are awful though--$4500 p.a. And if you don't have medical insurance............... :o:o

I think I prefer the miracle economy for all its faults as there is hope a a better day post-Great Crash 2.

THe "local" news on CNN etc is all extremely bearish. No one is trying to talk up the economy and the EAs are silent. Texas is the land of giant SUVs and PUs and I was a little surprised to see so many Toyota Yarises and Honda Civics about. I have been here 2 days and not yet seen a Hummer. Petroleum spirit is $2.50 a gallon on average but you have to travel 3 times as far to do anything which suggestrs the UK may be cheaper in this area? No diesels around either. I understand some states sell the Golf TDi and they are worth a fortune as resales in states where you cannot buy them new from a dealer.

Edited by Realistbear

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Texas is the land of giant SUVs and PUs and I was a little surprised to see so many Toyota Yarises and Honda Civics about. I have been here 2 days and not yet seen a Hummer. Petroleum spirit is $2.50 a gallon on average but you have to travel 3 times as far to do anything which suggestrs the UK may be cheaper in this area? No diesels around either. I understand some states sell the Golf TDi and they are worth a fortune as resales in states where you cannot buy them new from a dealer.

I gather that hydrogen fuel celled cars are not too far away into the future (perhaps 2010/12) though range for the US market might be an issue as well as the lack of a hydrogen distribution infrastructure. At least you won't explode in a Zeppelin like inferno if you hit a tree or a pylon now.

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I gather that hydrogen fuel celled cars are not too far away into the future (perhaps 2010/12) though range for the US market might be an issue as well as the lack of a hydrogen distribution infrastructure. At least you won't explode in a Zeppelin like inferno if you hit a tree or a pylon now.

Have you got any evidence of that one? There's a rumour there's endless abiotic oil at the centre of the earth but I wouldn't believe that one either!

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I understand some states sell the Golf TDi and they are worth a fortune as resales in states where you cannot buy them new from a dealer.

but where would you get the diesel to run it? US pumps only have 'gas'

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but where would you get the diesel to run it? US pumps only have 'gas'

Truck stops. Fing is pulling up alongsde one of those big Mack Trucks in a Golf TDi might be embarassing. :lol:

IIRC diesel is only banned in CA and a few places onb the E coast. Mercedes are apparently about to re-launch diesel which means Audi and BMW probably have the same plan. At present the German marques are struggling to compete with Lexus, INfinity and Acura due to the soaring Euro. Seen a lot more Lexus IS300s than A4s or C class on thew roads around here. IIRC the Yen and the US $ have not drifted too far apart over the last few years whereas the Euro has risen 50% very quickly--almost bubble-like in its rapid ascent.

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Have you got any evidence of that one? There's a rumour there's endless abiotic oil at the centre of the earth but I wouldn't believe that one either!

http://www.theregister.co.uk/2007/05/11/ho..._actress_promo/

I would have thought the US could cope with poorer performance given the low inter state speed limits (unless they are ignored like here) but range would be an issue, even if you can get hold of the hydrogen.

You can get them on ebay (apparently). Well according to Google you can. Google for "hydrogen fuel cell cars" and you will see this advert!

Hydrogen car fuel

Hydrogen Car Fuel on eBay for less.

Feed your passion on eBay.co.uk!

www.ebay.co.uk

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And I think that most currency analysts have believed the GBP to have been significantly over-valued for some time. Once it starts falling we'll be caught in an inflationary, recessionary spirala.

Funny you should mention that... though I don't share your certainty.

I had been thinking that Sterling was over-valued guided by these facts:

1. Government policy is pegging the UK economy to Europe's... the justification for most fiscal policy seems to be to harmonise with Europe - which, I recall, is exactly the purpose of the ERM... while the ERM fixed exchange rates, today's Euro rates seem exceptionally non-volatile.

2. Anecdotes that "everything is cheaper in Europe" - houses; restaurants; supermarkets etc. Only carriage on individual consumer items seems to make British made goods attractively priced.

I thought about Soros' bet against the BoE and how that involved shorting Sterling relative to the Euro in US Dollars... at this point in my thought-train, the USA sub-prime hit the news and I realised that the Dollar is likely over-valued, and the Euro also seems stable relative to the dollar... so, maybe the Euro is also over-valued? If Sterling is over-valued, with reference to what is it over valued? Something Asian? The Yen, maybe? But, aren't these countries most likely highly leveraged with their dramatically lower interest rates?

In trying to guess what is going to happen next, I've got two (not necessarily disjoint) ideas:

1. Houses won't come down in price until after big businesses fail... the most likely cause of which being unexpectedly increased borrowing costs arising from credit market fallout in commercial paper... suggesting I should next research CP.

2, Asset backed securities aren't the biggest concern - but, rather, exchange rates. This is supported by the relatively large disparity between interest rates in different currencies combined with the relative stability of exchange rates. Is the real deal here to do with international capital flows and how they influence exchange rates? Are exchange rates about to get much more volatile?

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Whats the most stable currency in the light of a downturn in world wide economies??

During the last 6,000 years or so, that has usually been gold or silver. However, if you're keen on paper there is plenty around and banks like Southern Turd etc. are now state guaranteed which makes everything look much rosier.

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During the last 6,000 years or so, that has usually been gold or silver. However, if you're keen on paper there is plenty around and banks like Southern Turd etc. are now state guaranteed which makes everything look much rosier.

...existing deposits only I'm afraid

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...existing deposits only I'm afraid

They nationalized (the deposits of) Southern Turd. They have to nationalize ANY other bank that goes bust as well, especially since Southern Turd had a really bad business model when compared with other banks. Deposits (at any interest rate) are now state guaranteed. Don't buy gilts/bonds. Go to the crappiest bank you can find and take the highest interest available. It's state guaranteed. ;)

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If you think about it, it has to be very bad. Average HP = 220k. Average income = 25k. So who's buying all these houses at these prices? Either it's BTLs happy to accept cash flow loss in the vain hope of CGs or it's homeowners just lying about their income.

Because the average house:

1. is bought by more than 1 person - min 1 person, max probably 2, average is somewhere in between

2. has equity, thus when they sell their house the required mortgage is less than the price of the next house

The only important information is average household income to average mortgage, all this talk about house prices to salaries, whilst giving a directional indication, tell us nothing of any consequence regarding affordability.

FTBers do not buy the average house so again this stat is not relevant for them.

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FTBers do not buy the average house so again this stat is not relevant for them.

If you thought about that for more than two seconds you'd realise what a myopic, probably self-interested comment it is. It matters a great deal if the gap between a FTB's purchasing power is reducing relative to the average house unless you take the view that it's ok for this generation to be poorer than its parent's.

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If you thought about that for more than two seconds you'd realise what a myopic, probably self-interested comment it is. It matters a great deal if the gap between a FTB's purchasing power is reducing relative to the average house unless you take the view that it's ok for this generation to be poorer than its parent's.

I think you misunderstood me. I am saying that it is not a reasonable stat to compare FTBers salaries (who have no equity) with the average house price, as this will always lead to a seemingly impossible salary multiplier.

If you look at the average house price (quoted above as £220K) and average salary (£25K) and conclude that it is impossible to buy the average house then you are surely assuming that you have no equity and are therefore likely to be a FTB. This to me seems like a pointless and incorrect conclusion to make because FTBers don’t buy the average house.

I also said that the average house prices to average salaries stat gives you a DIRECTIONAL sense, not any idea of affordability, which is what you are complaining that I don’t appreciate. Again as I said above, in that sense the house price to average salaries stat is useful, but not for declaring the onset of any financial crisis because there is a difference between the price of the house and the mortgage required. Average salaries to average household income is useful.

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