Bank Of England Says "worst Is Over" - It's Up From Here, Reports Thurs F T

[_w_]

Yeah .. swept under the carpet

And here is where they likely to try to lend their way out of trouble:

Petrobras May Quadruple Bond Sales to Fund Oil Finds

<Edit:

And here's how the banks would likely the sweeping to take place:

Stop Begging Ben for Help Cooking Banks' Books: Jonathan Weil

>

Edited May 1, 2008 by williamdb

[Venger]

Have you read this BBC News article?

I was going to post it an hour ago, but not sure if it's already been in discussion here.

Seems to have a darker tone than the FT's take.

The Bank of England has warned that banks' fears of a financial meltdown may become a self-fulfilling prophecy.

It suggests that the credit exposure of UK banks which has not been written down is nearly £100bn ($192bn).

The Bank says that there is a "significant increase" in the risk that a major bank collapse or reluctance to lend will disrupt the financial system.

[DabHand]

I think 'Let's get it right' sums it up well with the above post in this thread. One thing that I found so striking in the 90s is how 'well' Barclays seemed to be doing while the economy was falling apart (based on anecdotal evidence, Barclays has always been a favourite pet hate of mine so that's why I remember, I wasn't keeping an eye on banks at the time).

Jap zombie banking industry here we come then.

[Dubai]

Bank Of England Says "worst Is Over" - It's Up From Here, Reports Thurs F T, Panic over! ) Biz as usual!

To follow on from another thread, astrologically speaking, the worst time is due between August 2008 and March 2009.

Hope that helps.

[Modern Day Activist]

Bank Of England Says "worst Is Over" - It's Up From Here, Reports Thurs F T, Panic over! ) Biz as usual!

To follow on from another thread, astrologically speaking, the worst time is due between August 2008 and March 2009.

Hope that helps.

I believe Nostradamus referred to the looming crisis. 'The moon aligns with the sun on the 4th day of the 4th month, and all fookin hell breaks loose, BTLs feel Gods wrath', 'oops that's already passed' says BBC expert. Nostradamus continues 'fire and ice, rivers of blood, blah blah blah'. The bbc quote was 'Mr Nostradamus, of no fixed abode, forecasts an increase in house prices year on year'.

Jeremy Stretch was on five live at about 5.45am this morning (Thursday 1st May 2008) spouting the worse is over and things will begin to pick up, but the two interviewers really had a good dig at the guy. 'Do you r-e-a-l-l-y believe that Jeremy or are you saying that more in hope'. Jeremy went on and predicted all will be well by Q3/4 this year, adding those with low LTV may be OK, those with high will not be. Alot can happend before Q3 nevermind Q4. And it will.

So then, it is clear UK plc is fooked for the forseeable future. Thanks Jeremy.

Latest quote from bbc1 (6.01 this morning) - 'lenders too cautious'. No sh*t genius. I'll give you 250K for a box, you don't pay me back, we can be friends.

Seriously, is everyone in the BBC on crack? Seriously!

Edited May 1, 2008 by Modern Day Activist

[Mikhail Liebenstein]

Maybe the worst really IS over in the financial markets and already priced in - does the FTSE 100 nudge towards 7,000 by the end of the year?

I think much depends on the R-word.

If we get an R, then the banks will have much further to fall. So far Mr and Mrs Subprime have defaulted, but this could spread to the middle classes who who have been reckless MEWing and buying large aspirational houses. The weight of debt argument still applies and right now wage rises are not erasing that debt as they did in the past. If we start to see redundancies, especially in financial services and construction, then this will cause forced sale and mortgage defaults which will maintain the credit crunch.

[Mikhail Liebenstein]

FTSE 100 isn't specifically the UK economy though, is it?!. I don't see the DOW crashing yet and they're 18 months in front of us....

If sterling falls (as it is), the FTSE will quite easily increase, the assets being worth more in pounds and quite possibily less or the same in other currencies. Anything to do with commodities will also tend to increase assuming the Speculative element remains.

A lot of the Gold Bulls, Oil Bulls, Grain Bulls of recent times have actually taken their queue from a falling Dollar and have mainly been American with a few British followers. Actually, for the Brits this was in some senses too early (except for the fact that the speculative buying has actually driven the prices up), but the main crux of the commodity bull argument has been to defend yourself against a falling currency. The defend yourself against a falling pound argument will only really come into play when we see the Pound falling more against the Dollar in which most commodities are priced.

If commodities remain high in Dollar terms, and the pound falls against the Dollar, you probably don't want to be holding Sterling. But in this case it is quite likely that Dollars, Yen , Commodities or even shares with good foreign exposure will do the trick and will actually have the benefit of interest and dividends.

[A.steve]

With another 8%+ growth in debt, the situation is GETTING WORSE, not improving, this massively outstrips the rise in earnings and meanwhile they are fanning inflation which again is roaring ahead way beyond real incomes.

Hold hard! I read that article, and I think there is an issue of interpretation.

"The correction in the credit markets has gone too far, the Bank of England says, in a signal that it believes the worst of the global crisis could be over." is a statement by Chris Giles and Gillian Tett of the FT.

I'd need clarification of:

* In what way has the correction in the credit markets "gone too far"? The ABX showed 50% loss on AAA rated bonds - I find it credible that that under priced those bonds... it implies a ~70% mortgage default rate.

* Did the BoE actually say that it believes the global crisis is over, or did it stop short at suggesting that there had been a credit over-correction? Might this only mean that the BoE is suggesting that banks didn't need to use the SLS when they did?

* Where does the assumption that an end to the global crisis is a fix for an impending house price crash and economic recession arise? I don't see a causal link.

My interpretation of the statement, for HPC, is that it indicates that interest rates won't be dropped like in the USA - and that inflation targeting is back on the menu. I certainly hope so. It is important to remember that an HPC is outside the concern of the BoE - provided it meets CPI targets and promotes the economy... which it can do by following policies that happen to benefit a different demographic.

[Leonard Hatred]

Yay! Subprime lending to restart tomorrow!

[sikejsudjek]

With big price rises in fuel, gas and electricity, plus tax changes hitting lower earners, affordability has never been worse. When this report talks of the worse is over, it only applies to bankers. As for the rest of us, declining wages and rising outgoings will spur many defaults. The bail outs are intended to shift the pain away from the banks and onto everyone else via inflation.

Edited May 1, 2008 by sikejsudjek

[Pearshape]

I have a horrible suspicion that the BoE is looking at the write downs and simply comparing them to previous default rates. On this basis they have a good point.

However, the write offs against mortgage backed securities are implausibly high in the US too. But I understand the explanation here is due to the fact they booked profits for these securities at inception...so if they go bad, or if they have to trade them, they have to write those non realised profits back.

Anyone with better info?

Didnt this bring Enron to its knees??????

[mbga9pgf]

I have a horrible suspicion that the BoE is looking at the write downs and simply comparing them to previous default rates. On this basis they have a good point.

However, the write offs against mortgage backed securities are implausibly high in the US too. But I understand the explanation here is due to the fact they booked profits for these securities at inception...so if they go bad, or if they have to trade them, they have to write those non realised profits back.

Anyone with better info?

Arent something like 50% of alt "a" mortgages in the States currently missing payments? Doesnt bode well does it?

I also dont think the report factors in future worsening of the crisis, as we all know this one has a ever-worsening failure modfe in which further losses compound the next stage. Its called an unstable system and its charactaraised by things getting bad very quickly.

So, what happens when 25% of UK motgage lending goes POP? This is why I think the banks are not lending to each other, that was just the start. All the credit crunch did was lay the seeds of recession. Once the contagion begins in the normal UK mortgage market, starting with LIAR LOANS (one for you eric) The pack of cards is going to keep on falling. I reckon we will see writedowns all the way into 2011 personally. There is no reason to assume otherwise if prices fall 30%.

[Flat Bear]

Oh dear this is more worrying than CGNAO's pronouncements!

There must be real trouble ahead.

Yes, I take your interpretation as well

The Fed cuts to 2% and says they might pause/slow down (they hav'nt got much more to cut have they?)

The BoE is pouring 100s of billions of pounds into the system to "force" liquidity using toxic, or more precisely unwanted collateral, as a real trading value.

Banks wont lend to each other.

Banks are in dire straights by their own admissions with many forced to raise capital with rights issues etc.

It is simply not logical for banks to over estimate their write downs, it would not be in their interests.

When you analyse the situation is it not the most obvious thing ever that Mervin would try and persaud us to believe this? This is the last resort and it is a very worrying development.

How many banks are on the brink of collapse?

Edited May 1, 2008 by Flat Bear

[mbga9pgf]

You wouldnt think it was an election day today would you?

Do you ever think that they are SO desperate they are trying to talk the capital wealth funds into providing capital? thats how I read it at least:

Sir John said: "While there remain downside risks, the most likely path ahead is that confidence and risk appetite will return gradually in the coming months."

He added: "The pricing of risk in credit markets seems to have swung from being unsustainably low last summer to being temporarily too high relative to fundamentals."

Hmm, stinks to me. I think he is talking through his brown-hole. I personally think they are trying to avoid everyone dumping their banking shares, or perhaps pulling all their cash out, especially after thiese reports:

Timesonline

It just smacks of thought control to me, as they are spinning as hard as they can to avoid another Northern Rock (Which, IMO WILL happen again sometime soon).

[Guest Winnie]

Flatbear, tinecu - yes I think you are so right, this means things are bad in the bolier room. I would also add froma propaganda/ PR pov, do you not think that there are huge feelings of simmering anger towards Blanchflower on the MPC. i suspect the hawks loathe him and are furous at his crazy speech this week in Edinburgh, (which backfired as it mentioned 30% drops which is all that was latched on to!)

This is:

1) To look as if they are not trying to 'Talk us into recession' - the VIs latest taunt

2) To show publicly it is the banks who are at fault (on this Merv and Gordenron have agreed)

3) To swipe Blanchflower

4) To prepare for IR holds.....

[Leonard Hatred]

BTW, every time someone in the USA said "the worst is over", it got even worse

[babesagainstmachines]

BTW, every time someone in the USA said "the worst is over", it got even worse

The US reckons they are half way through, so we'll be a bit behind. In HPC terms though, we are 18 months behind.

3 years of 10%+ falls to come.

Ant that if the US really are halfway through, which is likely an underestimate

[Guest barebear]

For our purposes the worst that has been done is enough.

The perfect scenario is, I think, 10% falls for 3 to 5 years and no recession.

[It is different this time]

FT Thurs front page - no link as yet

(It's reported that the BoE believes all the worst bank/credit crunch news is now known & past, and loss forrecasts were too pessimistic perhaps.)

The muppets were probably told to make this rubbish statement in order to help their boss on election day!

[A.steve]

For our purposes the worst that has been done is enough.

The perfect scenario is, I think, 10% falls for 3 to 5 years and no recession.

Maybe for you - I'd like the falls to be front loaded... 17.5%; 12.5%; 7.5%; 2.5% - for a 40% drop - from peek - say.

[Bloo Loo]

For our purposes the worst that has been done is enough.

The perfect scenario is, I think, 10% falls for 3 to 5 years and no recession.

All the signs are that we are in a classic BUST phase. High order items are reducing in price, low order items and essentials are going up, money is tight and interest rates are rsing.

[mbga9pgf]

All the signs are that we are in a classic BUST phase. High order items are reducing in price, low order items and essentials are going up, money is tight and interest rates are rsing.

Apparently, the higher than expected growth in the US was caused by rising inventories, not spending... Im off there soon, cant wait to see what prices they want to offload those inventories!!!

[Bloo Loo]

Apparently, the higher than expected growth in the US was caused by rising inventories, not spending... Im off there soon, cant wait to see what prices they want to offload those inventories!!!

I dont undertsand that, surely a warehouse full of widgets is bad for growth, Otherwise, we could just produce loads and loads of say paperclips, and call it growth.

Surely Growth is what we spend, not what we spend PLUS whats in the warehouse?

[MaccaUtd]

my view is that that you can't genralise. There'll be some areas that will depend on the local econony and the areas that will be be affected most by any downturn.

Also some properties would be more insulated from falls because of the nature of the buyers. If you look at the Chard Estate Agents blog, they're talking (I help them with online stuff) about strong demand for various types of high-end London property.

But when you talk about some entry level houses then I fully expect there to be at least a 5% drop from now to the same time next year.

We've all seen the buy to let market being hammered and know someone that bought a property off plan and was intending to make 30% on it when she sold but now is struggling to sell at cost.

There's just so much re-balancing of the housing market to go over the next year.

The Bank Of England have a role to play in trying to build confidence in the housing market. But it won't be easy as the topic da jour in the media is of a melt down.

[A.steve]

The Bank Of England have a role to play in trying to build confidence in the housing market.

No they don't.

Read the "Memorandum of Association" - the BoE have no role whatsoever in building confidence in the housing market.