Financial Crisis

[Merangue]

The story on Opel / Vauxhall is not finished.

Simply stated there is no certainty how it will effect jobs in the UK yet.

The factories in the UK are the most cost effective of the group from what i understand and there is a very large market within the UK for Vauxhalls.

http://www.liverpoolecho.co.uk/liverpool-n...00252-23754210/

Whilst nothing is cast iron i suspect there will be some losses but hardly the entire workforce. Possibly the loss of orders for the van market will hit Luton job numbers but the Ellesmere port factory will probably be safe enough.

The fact that they are talking about expanding into russia may mean that even more orders might be forthcoming. Who knows.

No doubt we will hear more on Monday.

[Chaimai]

It would be interesting to know how many would be buyers could come up with a 25% deposit ?

Nearly all of them at the moment

At some point that 25% will change - infact we have been getting some 90% deals away, but there are very few around. HSBC will do 90% but are (quite rightly) cautious in their criteria, Cheltenham & Gloucester have just withdrawn a 90% product from their broker range (but still have it available for 'direct' customers).

However, pricing of mortgage products suggests that the appetite does not go much beyond 60% - this is where the 'good' deals can be had. Again, a not surprising battening down of the hatches after the nuclear fall-out from the banking crisis.

One issue is that this represents 60% of current reduced values - a double whammy. Say, a house had been valued at £200k and the owner borrowed 60% = £120k. If they wanted to remortgage for a better rate (almost impossible), or wanted to raise £20k capital for improvements, they may now be looking at £140k vs revised value £165k at best = loan to value of 85% - an area where (if you can find a lender) the interest rates are less attractive.

[neil324]

The story on Opel / Vauxhall is not finished.

Simply stated there is no certainty how it will effect jobs in the UK yet.

The factories in the UK are the most cost effective of the group from what i understand and there is a very large market within the UK for Vauxhalls.

http://www.liverpoolecho.co.uk/liverpool-n...00252-23754210/

Whilst nothing is cast iron i suspect there will be some losses but hardly the entire workforce. Possibly the loss of orders for the van market will hit Luton job numbers but the Ellesmere port factory will probably be safe enough.

The fact that they are talking about expanding into russia may mean that even more orders might be forthcoming. Who knows.

No doubt we will hear more on Monday.

Means nothing. I worked at Dunlop tyres 'Fort Dunlop' when Goodyear took it over. It ranked very high in the productivity league.The truck division and tyres had a very good reputation. Was the 1st to go. They only make motorsport tyres in the UK now.

[neil324]

b.

And the green shoots are reckoned, at least in the UK, as an increase in the number of inquiries by potential purchasers of houses?

Why are they giving us this BULLSHIT?

We need to see reports of "xyz.ltd" is expanding and looking for x,000 employees.

12, for a few minutes during the week flicked on to Bloomberg Channel

during an interview with this guy rabbiting on that he honestly believes

we're in a bull market which could go on for another year ! I just sat there in a trance………..

Just based on what you posted above today, how can the fundamentals

justify corporate earnings that would translate into a bull market?

And maybe the stock market will keep going up because they wet themselves so much bout positive

consumer sentiment reports and business sentiment reports even when on the very

same bulletin they announce another 600,000 jobs have been lost. Which data is more

important ……………….? Then its even more talk about green shoots

This is weird but as I recall didn't the same thing

happen during the 1930' depression where stocks went up?

The was a 60% retracement after the 1st drop, a classic 'bull trap' untill they fell to 89% off the peak.

[Abrak]

In marked contrast to the futures for UK house prices in general which are expected to drop by over 10% in the next 5 years, house prices in London (in the futures market) have pretty much forecast to have bottomed and are expected to rise over 10% in the next 5 years.

http://www.prnewswire.co.uk/cgi/news/release?id=187573

This, in itself, could explain the wildly differing views and experiences that some members are finding in the property market. Some are very London centric where the market appears to have stabilised while others are more in the woods where it looks as though prices have a lot further to fall.

Errrm I have to apologize for the link and all the comments here they are complete <deleted>. Although the link says dated Jan8th refers to April and then is copyright 2009, it is actually a press release from 2005.

The correct data for the HBOS March 2009 futures is here...

http://www.golf.tradition.com/tfs-news-sto...eleaseApril.htm

I asked my FA for some real time numbers but they havent changed much - actual has fallen about GBP2k, 1 year is flat and 3 and 5 year are up about GBP2k. He also gave me a 10 year future of GBP157k which is basically flat on current prices. To me this looks a vaguely interesting trade on inflation rather than an actual strong view on house prices.

(Not so much as a long term investment - I mean if you took a pretty inflationary view of the economy say 7% over 10 years (ave since WW2) that wages matched and house prices ended up at mean of 4x income you would have a price of GBP287k but you wouldnt have actually made any money in real terms. More the concept that people will soon realise that a house must be a better bet than cash in the UK over the next 10 years so that the future returns will at least match each other. In short the long end of the futures could rise 20-30% in the next 6 months.)

Note that if you do compare the 2 links, peoples perception of the value of the average UK home in 2020 has fallen from over GBP100k to GBP157k since the beginning of 2005. When you consider the average amount outstanding on mortgages is GBP104k per household, imagine what must have happened to peoples perception of their wealth.

People who doubt the Halifax to provide any sort of reliable index to base futures on may have a point. However, by far the best data collection is done by the UK Land Registry which has over 7 million data reference points. They collate price movements by only including units that have traded before. They estimate the average UK house price at GBP153k at March so although the Halifax number is a little high it isnt out by much.

[flying]

http://www.bloomberg.com/apps/news?pid=206...efer=worldwide#

Treasury Secretary Timothy Geithner arrived in Beijing with a pledge that the Obama administration will control its borrowing as he sought to reassure China its holdings of U.S. government debt are safe.

I dont know why but as soon as I read it.......I had a mental pic of a million Chinese soldiers on the lawn of the white house yelling..........Give us Geithner or we burn the place.

Edited May 31, 2009 by flying

[jcon]

<snip>

...To me this looks a vaguely interesting trade on inflation rather than an actual strong view on house prices.

(Not so much as a long term investment - I mean if you took a pretty inflationary view of the economy say 7% over 10 years (ave since WW2) that wages matched and house prices ended up at mean of 4x income you would have a price of GBP287k but you wouldnt have actually made any money in real terms. More the concept that people will soon realise that a house must be a better bet than cash in the UK over the next 10 years so that the future returns will at least match each other. In short the long end of the futures could rise 20-30% in the next 6 months.)

<snip>

I would agree with that statement re: housing as it pertains to inflation. I guess I would have nothing more to add than what I have bolded above. If people are talking huge inflation (or hyperinflation, Faber is nuts I think for making that call), then the market would force a bottom in housing, wouldn't it? (that's a legitimate question) The counter-argument could be, I suppose, is who has the cash to but that bottom in, but intuitively, the cash is there if inflation is possible, yes?

Also, another point to the poster who mentioned how many companies the US government will own... What would be the outcome if after all of the TARP money, etc. was/is injected into these companies and then another crash (say, fall '09 ?) takes out excess 'inflationary' cash from 'other parts' of the market? Wouldn't the US government come out on top? Potentially, really really on top. Perhaps my logic is flawed in it's simplicity, but it's just an idea that came up when I saw that list of companies.

Maybe my macro is all jumbled up today, so please correct me if I've said something counter-intuitive (or just flat out wrong), as it's Sunday and I'm knackered...

[flying]

Also, another point to the poster who mentioned how many companies the US government will own... What would be the outcome if after all of the TARP money, etc. was/is injected into these companies and then another crash (say, fall '09 ?) takes out excess 'inflationary' cash from 'other parts' of the market? Wouldn't the US government come out on top? Potentially, really really on top. Perhaps my logic is flawed in it's simplicity, but it's just an idea that came up when I saw that list of companies.

Well anything is possible but lets look at the one company the Govt has owned/run since Gawd knows when..... US Postal........Ok nuff said.......... We see the Govt cannot run a business.

So that leaves the folks that are running these companies now..........Ooops tried that too. Hence the rescue

I dont know & I am just a spectator but I dont see it ending well.

Edited May 31, 2009 by flying

[BEENTHEREDONETHAT]

There is an old saying "If the government ran crime it wouldn't pay"

[midas]

It would be interesting to know how many would be buyers could come up with a 25% deposit ?

Nearly all of them at the moment

At some point that 25% will change - infact we have been getting some 90% deals away, but there are very few around. HSBC will do 90% but are (quite rightly) cautious in their criteria, Cheltenham & Gloucester have just withdrawn a 90% product from their broker range (but still have it available for 'direct' customers).

However, pricing of mortgage products suggests that the appetite does not go much beyond 60% - this is where the 'good' deals can be had. Again, a not surprising battening down of the hatches after the nuclear fall-out from the banking crisis.

One issue is that this represents 60% of current reduced values - a double whammy. Say, a house had been valued at £200k and the owner borrowed 60% = £120k. If they wanted to remortgage for a better rate (almost impossible), or wanted to raise £20k capital for improvements, they may now be looking at £140k vs revised value £165k at best = loan to value of 85% - an area where (if you can find a lender) the interest rates are less attractive.

Ok but after that the latest trends suggests some are unable to keep up the repayments

Bradford & Bingley counts £700m cost as 5% of borrowers default on mortgages

Borrowers with the state-owned Bradford & Bingley (B& are defaulting on one in twenty mortgages and the failure rate is set to go even higher

Mr Pym also warned that a rise in base rate could trigger a fresh wave of defaults. Rental properties are typically yielding 3-4 per cent, and so any increase in interest rates would tip many landlords who are just covering their costs into difficulties.

http://business.timesonline.co.uk/tol/busi...icle6401725.ece

[flying]

If You Believe Banks Are Recovering …

* by James Quinn

* May 05, 2009

http://prudentbear.com/index.php/featuredc...ew?art_id=10223

This would be funny if it were not probably true

how could Treasury Secretary Geithner make the following statement to a Congressional panel late last month, "Currently, the vast majority of banks have more capital than they need to be considered well capitalized by their regulators."? Is he lying or shading the truth? Does it matter?

Roubini's estimate of $1.8 trillion more losses for U.S. banks will cause a slight problem for the U.S. banking system. The entire U.S. banking system has only $1.4 trillion of capital. Therefore, the U.S. banking system is effectively insolvent. Mr. Geithner would contend that he was not lying. There are 8,500 banks in the United States. The top 19 banks control 45% of all the deposits in the country. These are the banks that are insolvent.

[midas]

Also, another point to the poster who mentioned how many companies the US government will own... What would be the outcome if after all of the TARP money, etc. was/is injected into these companies and then another crash (say, fall '09 ?) takes out excess 'inflationary' cash from 'other parts' of the market? Wouldn't the US government come out on top? Potentially, really really on top. Perhaps my logic is flawed in it's simplicity, but it's just an idea that came up when I saw that list of companies.

Well anything is possible but lets look at the one company the Govt has owned/run since Gawd knows when..... US Postal........Ok nuff said.......... We see the Govt cannot run a business.

So that leaves the folks that are running these companies now..........Ooops tried that too. Hence the rescue

I dont know & I am just a spectator but I dont see it ending well.

some reasons why Govt can't run a business

1) Governments run by politicians make political decisions, not economic ones.

2) Politicians need headlines

3) Governments use other people's money while companies play with their own money

4) Government can't tolerate competition

5) Government enterprises are mostly monopolies and dont face competition which is what makes capitalism successful. This

model has always doomed socialist economies.

6) The CEO of a corporation decides company policy as he /she thinks best and can act quickly when needed.

only the need for profit and competition keep enterprises efficient innovative and customer driven

Edited June 1, 2009 by midas

[badge]

b.

And the green shoots are reckoned, at least in the UK, as an increase in the number of inquiries by potential purchasers of houses?

Why are they giving us this BULLSHIT?

We need to see reports of "xyz.ltd" is expanding and looking for x,000 employees.

12, for a few minutes during the week flicked on to Bloomberg Channel

during an interview with this guy rabbiting on that he honestly believes

we're in a bull market which could go on for another year ! I just sat there in a trance………..

Just based on what you posted above today, how can the fundamentals

justify corporate earnings that would translate into a bull market?

And maybe the stock market will keep going up because they wet themselves so much bout positive

consumer sentiment reports and business sentiment reports even when on the very

same bulletin they announce another 600,000 jobs have been lost. Which data is more

important ……………….? Then its even more talk about green shoots

This is weird but as I recall didn't the same thing

happen during the 1930' depression where stocks went up?

Financial markets; and the stock market in particular, have a very tenuous link with economics. They are driven by sentiment. Fundamentals will eventually prevail, but theres an old adage that 'the market can remain irrational longer than you can remain solvent'

[Naam]

The CEO of a corporation decides company policy as he /she thinks best and can act quickly when needed...

some CEOs, e.g. the Right Honourable Rick Wagoner Jr., Esq., did not act quickly but did their best to slowly destroy the world's biggest corporation.

[midas]

The CEO of a corporation decides company policy as he /she thinks best and can act quickly when needed...

some CEOs, e.g. the Right Honourable Rick Wagoner Jr., Esq., did not act quickly but did their best to slowly destroy the world's biggest corporation.

"one swallow doesn't make a summer"

[midas]

Financial markets; and the stock market in particular, have a very tenuous link with economics. They are driven by sentiment. Fundamentals will eventually prevail, but theres an old adage that 'the market can remain irrational longer than you can remain solvent'

I am just curious............. are you profiting right now from options trading ?

[midas]

If You Believe Banks Are Recovering …

* by James Quinn

* May 05, 2009

http://prudentbear.com/index.php/featuredc...ew?art_id=10223

This would be funny if it were not probably true

Flying,

As a non-American I cannot understand how this is happening?

in one of the biggest democracies in the world how and why are so many Americans and in

particular the Republicans allowing these things to happen

under Obama? I accept Americans voted for change but surely not for so many blatant lies to be told to them

such as by the current Treasury Secretary.

Surely a vibrant democracy relies on a vocal opposition but either Republicans are passively allowing these extraordinary

deceptions to take place or they are being suppressed in the main media to an extraordinary extent.

Its almost sureal to read some of this.

Edited June 1, 2009 by midas

[flying]

Its almost sureal to read some of this.

It is isn't it?

You know Schiff yes? Well I remember back when he talked about the stress tests.

He said...The stress test is like sending a gerbel across a bridge then pronounce the bridge safe......LOL

Speaking of Peter here is a great one.

Long but great.....

http://www.ustream.tv/recorded/1583738

Basically he talks about everything but at about 25 minutes he goes after GM's bankruptcy & that is interesting. Also he is basically saying they

(the libertarian party) need to join forces with the Republican as there is not enough time left to hope their party will ever get the nod. I have not finished yet but I like his POV

Edited June 1, 2009 by flying

[jcon]

Hang Seng was a freaking monster today... turnover was huge... wow. Time for bed. Yeah yeah I know we can crash blah blah but that doesn't mean you can't make serious bank on these types of days I don't even have energy to stay up for the US markets. zzzzzzz

2 things I said I wouldn't do for the summer: be back on TV, and trade. I'm 0 for 2...

GM goes bankrupt today? I hope they take every Hummer on the planet and blow them up!!! muahahaahahaha

[Chaimai]

Ok but after that the latest trends suggests some are unable to keep up the repayments

Bradford & Bingley counts £700m cost as 5% of borrowers default on mortgages

Borrowers with the state-owned Bradford & Bingley (B& are defaulting on one in twenty mortgages and the failure rate is set to go even higher

midas - just to put this segment to bed (because I have been guilty of narrowing discussion to the UK property market and the debate has now moved on):-

These default numbers are again expected and factored into current budgets. They do not represent new earth-shaking news.

Sadly, as unemployment rises so will these numbers. But also consider what default means - I suggest that it means that a borrower is one month or more in arrears with their mortgage payments. Why ? for most people their mortgage payments are the same (i.e. fixed rate) or maybe lower as a result of the drop in Standard Variable Rates, or lower because 'tracker' mortgages are tracking a lower Base Rate.

In the last UK recession we faced double digit inflation AND double digit interest rates (March 1991 Base Rate 13%) AND unemployment over 3m.

Therefore, the problem with most defaults rests with income. Unemployment has to be the largest factor here and this will inevitably result in wide regional variations. Don't know, but I would suggest that the majority of Bradfor & Bingley's mortgage exposure is north of Watford.

Remember also that default does not necessarily equal bad debt. The consequence may simply be that the borrower has to sell to remove the debt burden and is able to repay the mortgage. In this case the default has no serious 'knock on' effect. I accept that in many cases the lender will have to repossess and a shortfall may be likely.

I think my point is that, as with all headlines, we need to get behind the figures to understand the reality of what is actually happening.

[12DrinkMore]

Insanity rules the currency markets.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

June 1 (Bloomberg) -- The euro’s steepest three-month rally against the U.S. dollar in seven years is sapping the earnings of exporters in the 16-country region and delaying its recovery.

Up we go, then down we go, and then back up again. All on some perceived "values" and "reasons".

After riding this roller-coaster for the last year or two, I am fed up.

At the moment the USD is being sold because of doubts about the ability of the US to pay the debts and a possible contrived default by printing more USDs. Well OK, but now this is deemed to hurt the eurozone because some of the USDs are now floating around in the form of higher priced Euros, so off we go, let's sell a few Euros and buy back presumably USDs. Well give me a break here, when are people going to hear and respond to the message from the great US of A?

And this is

- we are in the pooh and are indebted up to and above our receding hairlines.

- we are printing our way out of this, so all we can offer to pay you is the USD, which is likely to be worth every cent that it costs to manufacture.

- you should look to develop your home markets and stop relying on the US to be the world's number one consumer.

I can't recall any statement about whether the States are bothered about the USD being the de-facto reserve currency, but I suspect that they don't really care all that much. A bit like, "if you want 'em, you can 'av 'em; we can create them by the trillion".

But if countries continue to rely on exports to the States, price it all in USD, the only currency the Yanks will pay, and try to devalue their currencies accordingly, we will all be taken down the pan. And the States will be laughing the whole way, "we told you, and you didn't listen".

[Chaimai]

We need to see reports of "xyz.ltd" is expanding and looking for x,000 employees.

Here you go, 12D - now you can sleep at night and not worry about those nasty gremlins :-

Thousands of car workers have returned to the production line at one of the UK's biggest plants after a four-month shut down.

Thousands of Honda car workers are resuming production after a four-month lay-off The Honda factory in Swindon, Wiltshire, resumed business but the 3,400 workers and management staff returned to the factory for lower wages and will be producing far fewer cars this year.

Does that make everything 100% better than yesterday ? No, of course not, but if that is the sort of 'positive news' you are looking for - you have it. Another small step for mankind and 3,000 odd people who have more chance of making their mortgage payments.

Edited June 1, 2009 by Chaimai

[churchill]

UK house prices -

What are house prices really doing?

In spite of some commentators talking about house prices bottoming out and green shoots of recovery appearing, the predictions vary widely.

To take just a sample of the indices in the last week or so, the Centre for Economics and Business Research says the end is in sight for the housing slump, though the average price has a further 8% to fall. This is modest compared with Jones Lang LaSalle which is forecasting that UK house prices could fall by another 14% before the end of the year as the impact of rising unemployment hits sales and household finances.

Meanwhile property agent Knight Frank's figures show prime central London house prices rose for first time in April since March 2008.

Think long-term

‘It might be an old chestnut but it unfortunately remains true - don't read too much into one month's figures,’ warned Liam Bailey, head of residential research at Knight Frank. ‘I think in the wider UK there is still another 10% to go. The economy is in such bad shape and unemployment is rising.’

‘London has seen a fall of around 25% from the peak and the general picture is that house prices have stabilised and are falling more slowly than in the second half of last year,’ says Bailey. ‘We have left behind a period of dramatic price falls and the market is more stable and since the New Year sellers have been more realistic about asking prices.’

Knowing who to believe

So what’s really happening and whom do we believe? Even the indices which measure historical house prices don’t agree. The Land Registry, which is the most reliable information source since it measures all house prices registered on conveyance – not just mortgaged properties - says that house prices have fallen by 16.2% over the past year to the end of April 2009.

But the Halifax House Price Index reckons they are down 17.7% year on year and Nationwide is recording a 15% drop over the past 12 months. The average house price fell from £157,320 to £154,716 during the month, a drop of nearly £45,000 from the peak in the summer of 2007. But since different properties are sold how can the indices truly reflect what is happening?

continued at http://www.citywire.co.uk/personal/-/comme...82&ea=66063

[Chaimai]

Bradford & Bingley counts £700m cost as 5% of borrowers default on mortgages

midas - sorry, I forgot one vital piece of information about Bradford & Bingley:-

Bradford & Bingley acquired mortgages from GMAC-RFC and Kensington Mortgage Group Ltd; this accounted for 44% of gross residential advances during 2007.

GMAC and Kensington really were the dog-poo end of the market. We would occasionally use them if we really were struggling to place someone. It is no surprise that their default level is higher than market norms. Suggest you look at HSBC, Woolwich, Nationwide and Abbey for a better average default figure.

Group Santander will sort out B & B eventually (by removing it's name for a start )

[12DrinkMore]

Here you go, 12D - now you can sleep at night and not worry about those nasty gremlins :-

Unfortunately those two Scottish gremlins Brown and Darling are still at the helm of the foundering ship HMS UK.

But, yes, we need more news like this. Maybe it is an indication that the stocks have been run down and now production is to be resumed at a pace that can be supported by the economy. If this is repeated throughout the economy, then it could be a sign that we have reached a sustainable level economic activity.

And these guys are manufacturing real stuff, which provides added economic value, unlike the wide boys in the banks, who produce pseudo economic activity, with most of the gains being siphoned out of the general economy and into their own pockets.

[teletiger]

"UK house prices up by 4.2%"

http://www.telegraph.co.uk/finance/persona...ree-months.html

Green shoots?

Regards.

[HardenedSoul]

"UK house prices up by 4.2%"

http://www.telegraph.co.uk/finance/persona...ree-months.html

Green shoots?

Regards.

Don't be ridiculous !

The only green shoots out there are the dollar bills the Federal Reserve is printing.

UK property has a lot further to plummet.

Edit: spell check

Edited June 1, 2009 by HardenedSoul

[12DrinkMore]

"UK house prices up by 4.2%"

http://www.telegraph.co.uk/finance/persona...ree-months.html

Green shoots?

Regards.

Jesus, what is that guy taking or which universe does he live in? Or has he a vested interest in selling mortgages????

Here is another

http://www.independent.co.uk/news/business...et-1693305.html

Hamish McRae: At last, shafts of light are shining in the windows of the housing market

The comments after the article are interesting, but I was particularly drawn to

Hamish McRae ignores the most important fact. The UK housing market since the 70s has provided a good investment. No government after this crash will ever allow it to do that again. The pain of letting houses rise above general prices and income has been to great. In the short term, the government will allow a small recovery (it owns to much of the debts and will want that paid back). But in the long term, it (or a future EU) will put in place taxation policies that will ensure the assert value of property never bubbles again.

I just wonder if there could be a small spark of truth in that. After all the QE and bailouts, there will be tremendous pressure on the next government to raise more taxes. During the boom it had reached the ridiculous level that people in the UK were earning more from escalating property values than actually working. This is part of the fascination the UK population has with house prices.

Although it would be hugely unpopular, the introduction of capital gains tax on property early in the next government's term could, in fact, be a positive stabilising factor. An economy based on rapidly rising asset prices and expanding credit is simply unsustainable. Wealth has to be generated through WORK and PRODUCTION, not sitting on your arse and looking at a property portfolio. Yes, sure it can work for a few, that has always been the case with the wealthy landowners through history, but there is no way it can form the basis of a sound economy, with everybody thinking they can do the same.

Edited June 1, 2009 by 12DrinkMore

[badge]

FTSE 350 UK Real Estate Index. Coincidentally at the same level as June 1987. So the(forward looking?) stock market has it wrong, or house prices have it wrong, or both.

[Abrak]

"UK house prices up by 4.2%"

http://www.telegraph.co.uk/finance/persona...ree-months.html

Green shoots?

Regards.

To be fair to the Nationwide, this is really just a case of cr*p reporting by the Telegraph. 4.2% rise is a statistically significant figure so I looked up the statistics. It turns out that the Telegraph is using unadjusted data. When you look at the seasonally adjusted data prices are not up this year they are down by over 1%. And over the last 3 months, they have risen (from the market bottom) but by less than 2%. Considering that the Nationwide's ave. house price is lower than the Halifax's and that they use mortgage data, the rise probably doesnt mean anything at all and the best one can say is that prices appear to have stopped falling (which in itself is something.)