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bubbleturbo

Lehman Brothers Entering Death Spiral

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NEWSFLASH: LEHMAN -20% PRE-MKT

It’s another one of those days - mayhem in the banking sector, rumours flying, central bank action in the money markets.

Neil Hume and Paul Murphy will not know what they will be discussing at 11am until they actually get to 11am.

Help guide the conversation on Market Live, FT Alphaville’s daily markets chat.

Hit the tab above or click here

_______

This is some heavy shit man. :o:o

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There go those pesky dominoes......

Emergency bank holiday coming up, I think. Time to relieve the banks of credit balances and give the mattress an uplift.

Good job we've got two coming up this weekend.

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It's a shame if they go under. They have a really cool building in NY with a map of the world on it.

They could always stick pins into countries that have stopped dealing with them.

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Wave 1 liquidity, funding and capital strength: See Bear or Northern Rock for details. Wave 2 Tighten lending criteria and pass on funding costs: This has started but the impacts are yet to be felt. We expect prime borrowers to see the cost of their debt increase materially reducing their ability to spend or invest. For the less prime customers expect credit to be removed and where (mortgages) this is not possible expect a move from a discounted rate to SVR (4.5%-7.5%). This will place significant pressure on those least able to afford it increasing defaults and insolvency. Expect forced asset sales and deleveraging impacting asset prices. UK property prices remain 44% over valued we expect them to go to a discount to fair value.

Wave 3 Higher impairment, recession lower loan demand and more saving: This is the traditional point in the cycle where banks see profitability decline. The surge in unsecured impairment eighteen months ago was linked to excessive indebtedness (which still remains) rather than the economy which was growing above trend with full employment. The household savings ratio is 3.4%, the 35 year average is 8.1% and the last cyclical peak was in 1992 at 11.7%. This is key to the UK’s economic performance as savings and consumption are inversely correlated and circa 70% of GDP is consumption. A return to the average savings ratio will drive recession with an increase in unemployment corporate and personal insolvency. If this drives the pound to PPP equilibrium 1.62 vs. the dollar inflation will be imported into the UK and this could drive the nightmare scenario where the BoE increases interest rates heading into recession.

PM

How much is priced in and what is the right investment strategy: We believe that much of the risk is now priced in but in many cases the situation is binary either the stocks are worth double or nothing. Bradford & Bingley (Target price 193p) has a leveraged balance sheet and is exposed to relatively risky assets. Cattles (Target price 215p) is the most exposed to a weakening macro picture. It does have a strong balance sheet (with significant liquidity risk in 2009) and a high ROE but its assets are entirely sub prime. Its customers (40% have mortgages) will be hit hardest by credit tightening, have a propensity not to pay even in good times and have a weak employment track record. Strategically we like HBOS (Target price 1007p) which has a 44% average LTV on its predominantly prime mortgage book, the strongest liabilities franchise of any UK Bank and is being valued at just 1.1x book.

ROFL!! :lol::lol::lol::lol::lol::lol::lol::lol::lol:

But the EA said Properdee only goes up though??? :lol:

Edited by BubbleTurbo

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It's a shame if they go under. They have a really cool building in NY with a map of the world on it.

That's the one on Broadway is it? It's got wrap around TV screens and stuff too IIRC.

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Let us all take a moment out to give deep and heartfelt thanks for the fact that we have Alistair Darling and Gordon Brown in place to ensure stability and look after us generally.

Apparently Bear Stearns paid out their usual billions in bonuses in January. Fair play to them. You have to admire the brass neck.

I'm trying to picture the scene in the White House.

'Looks like the game is up, Mr. President'.

'What options do we have?'

'None sir, the bail out of Bear Stearns using tax payers money after they'd just paid billions in bonuses is going to create rioting on the streets.'

'Okay, war it is. Who we gonna bring hell to?'

Edited by Lets' get it right

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Let us all take a moment out to give deep and heartfelt thanks for the fact that we have Alistair Darling and Gordon Brown in place to ensure stability and look after us generally.

I think you are being far too hard on Gordon. He said "No more boom and bust". He didn't say "No more boom and collapse" or "No more boom and implosion"...

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I think you are being far too hard on Gordon. He said "No more boom and bust". He didn't say "No more boom and collapse" or "No more boom and implosion"...

Good point. He didn't say 'no more boom and apocalypse' either ... but look what we are getting.

I wonder when the US government is going to do something proper about this - and allow the banks that caused the problems to go to the wall. We should have let Northern Rock go.

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Let us all take a moment out to give deep and heartfelt thanks for the fact that we have Alistair Darling and Gordon Brown in place to ensure stability and look after us generally.

Apparently Bear Stearns paid out their usual billions in bonuses in January. Fair play to them. You have to admire the brass neck.

I'm trying to picture the scene in the White House.

'Looks like the game is up, Mr. President'.

'What options do we have?'

'None sir, the bail out of Bear Stearns using tax payers money after they'd just paid billions in bonuses is going to create rioting on the streets.'

'Okay, war it is. Who we gonna bring hell to?'

Speaking of George Dubya: he's giving a statement on the Economy at 13:30 - same time as the DOW opens.

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Guest Shedfish
Speaking of George Dubya: he's giving a statement on the Economy at 13:30 - same time as the DOW opens.

the Dow usually loses a point per word when President Evil speaks

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Speaking of George Dubya: he's giving a statement on the Economy at 13:30 - same time as the DOW opens.

What could he say that might make a difference? We've got to the point where confidence has been overtaken by fear and no amount of trying to re-instil confidence will work. If he says anything along the lines of "don't panic, everything will be fine" that will be a cue to panic. The only thing that will work is the one thing they're all trying to avoid - utter transparency and honesty. Sure, it wouldn't be comfortable, but at least there'd be certainty via knowledge of the extent of losses. Only out of the ashes will the phoenix rise - not from a few charred logs on the top of a bonfire.

Edited for typos.

Edited by Methinkshe

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What could he say that might make a difference? We've got to the point where confidence has been overtaken by fear and no amount of trying to re-instil confidence will work. If he says anything along the lines of "don't panic, everything will be fine" that will be a cue to panic. The only thing that will work is the one thing they're all trying to avoid - utter transparency and honesty. Sure, it wouldn't be comfortable, but at least there'd be certainty via knowledge of the extent of losses. Only out of the ashes will the phoenix rise - not from a few charred logs on the top of a bonfire.

Edited for typos.

Completely agree. Surely throwing more money at the markets won't work. Hasn't so far......25 mins to see what happens to the DOW on opening. My bet -200 on opening, before clawing back to finish -100. FTSE will claw some value back to finish -80....but hell, what do I know.

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Completely agree. Surely throwing more money at the markets won't work. Hasn't so far......25 mins to see what happens to the DOW on opening. My bet -200 on opening, before clawing back to finish -100. FTSE will claw some value back to finish -80....but hell, what do I know.

I like your optimism.

You might be the little optimistic ray of sunshine in some dark dark clouds.

I think it might recover a bit, but not much. If I had to put £100 quid on it i would say about 160 down at end of play, but hell, what do i know. :rolleyes:

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  • 292 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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