blonde poker forum

http://news.bbc.co.uk/1/hi/business/6994328.stm


Exciting stuff for the academic economists on blonde!

the US sub prime market is extremely hairy too.


Not a great time to be splashing out on luxuries people if you are mortgaged, credit carded etc etc

They've talked about nothing else on 5 Live this morning.  I have my mortgage with NR but apparently it makes no difference to me. If they do go bust, it will just get taken over by someone else.  I was hoping for a moment that all debts would be cancelled, but that was just a fleeting thought :D  They hold the deeds anyway and I'd want those back for sure.

US market has been dodgy for a while, it's one of the reasons our markets haven't been doing that well.

Nothing you can do about it though, just don't borrow more.  Things will calm down sooner or later.

I believe NR is secure and it's solvent, the sub prime market has got everybody jittery. Obviously NR's bottom line will be hit because of the publicity and the rate the B of E is going to charge. The share price will bottom out quickly and there will be a slow but steady correction upwards.

IMO!

yep, no risk for Northern Rock clients at all

15 years ago the Midland almost went under, HSBC came in and bought it

The BOE acts as guarantor in these situations as if one went under the effect on the economy would be immense


My general point is that with inter-bank lending costs rising, this will be passed on in higher charges for borrowing to us.

The whole system is awash with money at the moment, it's just that the stingy banks don't want to lend to each other (or anyone else)  until it settles down. NR aren't a bank and their main business is mortgages so its a short term cash flow problem for them. Unforunately if it doen't setlle down soon individual lenders will be raising interest rates as the pithy banks make it expensive to borrow money, and we all know how long it takes them to reduce them again. However don't panic Mr Mainwairing (yet  ;hide;)

Just rejigged my mortgage with NR this month (one fixed deal runs out another comes along) but i can't help wondering if they get themselves into trouble by offering silly amounts to their customers.
I know they offer 120% mortgages but they also offer a "together" mortgage where you can borrow unsecured on top of the mortgage with the same rate.
I know these make them very attractive to first time buyers etc. but it is so easy to go bankrupt these days it's almost free money.
e.g. (based on what i did 6 years ago) i borrowed £60k for my house + £10k for beer. The £10k was unsecured, a couple of years later i ran out of beer and they offered me another unsecured loan of up to £17k (i didn't take it) which would've meant i could have sold my house for e.g. £61k and walked away and filed for bankruptsy (sp?) when they chased too hard.
It seemed like madness to me 50% on top unsecured.

In the US, the sub prime market has been an accident waiting to happen for years. A real pyramid of lending in organisations such as Fannie Mae and Freddie Mac.

In the UK, the nearest manifestation of that has been "self certification" mortgages where individuals can borrow many multiples of salary on only the most cursory checks.

Add to that a lot of cc borrowing and unsecured credit elsewhere.

 

Enough of this legal mumbo jumbo, am i ever going to be able to afford a house or not?

As someone who thinks that economics and finance are all smoke and mirrors and a house of cards just waiting to collapse, can someone tell me exactly why the BoE should bail out Northern Rock for what are, essentially, bad business decisions (lending money to people who can't afford it)?

Isn't the whole point of capitalism that it is a ruthless system in which bad business decisions are punished (through companies going bust etc).

it's just a cycle I believe similar stuff happened in the 70's and early 90's. house prices will go down and sentiment will change from "can't go wrong with property" to "never buy property" and that will be exactly the right time to start buying.

I work for a bank, when i started 4 years ago we would throw money to anybody that wanted it, secured or unsecured, recently the bank has really clamped down on lending, no more 100% mortgage and much tighter lending criteria.  Its got to the point where we wont even extend peoples terms as they cant afford the mortgage over a 5 year longer period, therefore activly encouraging people to move to the likes of northern rock et al.  

Yes, wait a few months, House Prices are coming down..

If the BoE didnt bail them out the impact of them going bust would be much worse than lending them a few quid.  

And the impact would be?

higher unemployment, far worse consumer confidence, recession

If depositors lose confidence in those they deposit with, the whole economy slows down dramatically

Its why the BOE acts as lender of last resort, not to bail out the company but to prevent it having to bail out the consumer


The company: almost certainly will get bought.

It's not their loans which are bad, but the way NR itself finances them by borrowing from other commercial institutions. These lenders have crapped themselves after the US sub prime crisis and don't fancy lending money to anyone and so the NR can't carry on as normal.

That's my understanding anyway!

yes this is the whole "financial lending is a house of cards" point..once one too many cards is removed as has been the case in the US the system seizes up

Chaos


At an incredible bargain price


Yes, it's just the cash flow that's the problem, they are solvent.

True, I was just saying it's not the NR lending money to people who can't afford it that has caused their current predicament.

Not unless you have a huge deposit and earn loads.

Oh thx Graham, dream killer... :(

If the whole system is so precarious that one company going bust would lead to economic crisis surely it's going to fall down at some point anyway? Surely such a fragile system is not a desirable thing to base our whole lives on and it would be better long-term for it to fall apart, to be rebuilt in a better way?

And here's a selfish question. As someone who is debt free (no mortgage, credit cards etc) would it not be the case that what I stand to gain from a economic crisis (being able to afford a house, for example) outweighs what I could lose (slightly increased chance of losing my job and not being able to get another one of similar salary).

... but it won't go bust - because the BoE won't let it.

Therefore it's  not precarious at all.

there were queues of depositors outside NR's this morning. Its not the system that is fragile as such as CONFIDENCE. without that, economic growth falters substantially

Selfishly, yes you are right.

You can always get 6 times your salary and get one though, you'll just have to eat value baked beans as your staple diet

 rotflmfao

They also switched their internet banking site off so people couldn't withdraw their money overnight...

Where does the BoE get its money from? Is it us, taxpayers?

Apologies for all the simple simon questions, but this whole thing utterly baffles me - I strongly think that economics and global finance share many characteristics of organised religion (essentially a pyramid scheme of confidence and beliefs) and so I want to understand if there are concrete facts which underpin everything.

Except there is evidence for the existence of money.  Well some of it.

You actually want a crash in the housing market.  That will help many first-time buyers and those trying to move up the housing ladder.

Another question.

We're told that 'economic growth' is so important, and everyone is happy when the country's economy grows by 3% or whatever. What is this growth measured against? The US economy is said to drive the world economy, and a crunch there will lead to a drop in 'global economic growth'. WTF is 'global economic growth'? Growing compared to which other economies? Surely it's a closed system (unless we have some sort of secret trade surplus with Mars)?

http://en.wikipedia.org/wiki/Economic_growth

Growth is the opposite to recession.

http://en.wikipedia.org/wiki/Recession

Happy reading... ;D

Baked beans and staples, jeez, think i'll stay clear of the silo diet...

Well you certainly won't be wanting to stand behind him!

this post arouses me.

Team Hardon has a new member

Plenty of iron though, so no chance of anaemia.  Visits to the loo wouldn't be too pleasant though...  :o

(http://www.yappari.co.uk/wp-content/images/smile/ban.gif)

I have a house, I don't need to eat the staple part of it, just the beans. 

It's all natural though :)

I've always understood global finance is underpinned by confidence, rarely bare financial facts. Thus the problems in the  sub prime market in the US, where the full extent of the debt is not yet known, has created a severe lack of confidence. Without the intervention of the Fed Res etc, we would of had a "Run On The Banks", resulting in a global depression. Hugely worrying that a lack of confidence in a small sector of finance in the US, can reverberate World Wide with possibly devastating effect.

See, one big pyramid scheme.

And none of us are at the top of it.

yes - that's just put me off my sandwich!

What's in it?  I was just about to get one and if you don't want yours...

....I'm not saying it....:P

Andrew, think glass half-full, not half-empty.

If the Nikkei or Dow Jones drops overnight, my Shares in Severn Trent or St Modwen Properties or BT or BA will drop immediately. They WILL. Why? Smoke & mirrors, confidence, whatever, it mattters not. In truth, the earning value of each of those companies is wholly unchanged from yesterday, yet the company's value has dropped, as has the value of my Shares. Bloody unfair, eh?

But, conversely......

If the Nikkie & DJ both rise steeply tonight, my Shares will all suddenly be worth a lot more.

We can't have it both ways. Well, in fact, we can......

The money markets move in mysterious ways.

Northern Rock is safe as...err, houses? Seriously, it's a technicality. Forget it, it will be forgotten about within a few days.

And another thing Andrew. Stop asking daft questions. The Emperor, who, I can assure you, IS dressed in a lovely new suit, does not approve.

Tikay...
Cant see the Nikkei or the D.J rising.... Its a sodding great house of cards and its wobbling and groaning at the moment...
Sadly the proverbial rolls downhill and its us poor sods at the bottom who will end up geting coated in the brown stuff... Those at the top will get richer and continue having there palms crossed with silver whereas us at the bottom will continue to have the yolk of motgage debt hung around our necks....

Now if everyone DIDN'T pay there mortages for a couple of months ...now that would send the global markets into meltdown and the fat cats would get well and truely burned ..

Workers of the World Unite .. you have nothing to lose except your Chains...

And your house.

and your savings

My savings are all securely deposited at Blondepoker - no worry there.

none at all


full of northern rocks, and gold fish

;tightend;

Credit where credit's due.

That's wrong mate. I guarantee it's wrong. The markets fall & rise in tune with investor confidence & economic activity. Always have, always will. We all suffer, & we all benefit. Markets are the most efficient economic indicator on the planet. I can absolutely guarantee that in 10, 20, 30, 40 or 50 years the Markets will be higher than they are now. They'll go up & down in the interim, in the short-term, but in the long-term, they'll never stop rising. Think of Property shares. They may be over valued or under valued right now. It matters not. Over time, they will gain value, because we need land. And they don't make land any more. Ditto Water. Ditto Oil. Ditto Gas. And so the Markets rise & fall - but always rise in the long-term. And we all suffer & benefit.

 :goodpost: ;iagree;

As to the point why is growth important, it is important because it creates new employment which brings more disposable income into the economy therefore creating more and more employment and reducing benefit payments.

For every new pound that is created by growth it's true value is so much more because after the initial spending of that pound the next person will spend say 90% of that pound and so on and so on. As a result the demand for more goods and services increase which therefore subsequently means the creation of more employment.

Naturally the fluctuatation tends to be nominal in a global economy except for when you have the largest economic country start cocking things up, cue stupid greedy yanks.

Again, this all seems like a pyramid scheme - thing A creates demand for thing B which increases thing A which creates demand for thing B etc etc. I can understand how this works when the initial seed of economic growth is something which has genuinely (to all intents and purposes) come from nowhere and is new (oil, gold or coal out of the ground, farming and agriculture which is not severe enough to affect replacement levels), but much of the new employment over the past 20 years has been in the service industry - jobs for jobs sake.

I got a prepaid Mastercard this week and very handy it will prove I think, but there is one little thing in the small print:

If you keep a large amount such as £1000 or more on your card please be aware that you are not covered should The Newcastle Building Society go bust !

Is this something that I need to worry about ?

No.

They gave you a card at your age Ralph?

I mentioned that Tikay from the telly was a pal....

 :respect:         exactly Jobs for jobs sake.... I was looking for my ancestors on the 1901 census last night and looking through the area of Cornwall where they came from it was with a tinge of sadness that i noted how many were employed by the Tin mines .. a now dead industry ... The same is true of the Oil and Gas industry .. My concern is we are plunging headlong towards oblivion when the Gas and Oil run out and all that people care about is profit profit profit...granted we all have to make a living , but my conscience pricks me and to quote Steve Earle "if we all checked in with our Conscience once i a while the world would be a better place"

Isn't this all a bit deep for a Poker forum ??

Yes we should all have careers doing something meaningful and productive - like gambling

Truly LOL'd there, brilliant!!

Back on topic:

Why is Northern Rock actually in any financial trouble at all? Surely it's optional. It has the current mortgages financed already with the customers paying them off. They only need more money to finance further mortgages. And although they need to expand to keep shareholders happy, I don't see why it's essential that they need to borrow money. What have I missed?

They loan out money on a long term basis and finance that by borrowing in the short term, so as each short term loan expires they need to borrow again to pay off their debt.

and their margin is because they borrow short at a lower wholesale rate than the long retail lending they do

now, borrowing at LIBOR +1% on an emergency basis via the BOE that profit gets wiped out short term.

the subprime market in this country has changed incredibly in the past 10 years.

10 years ago I was a subprime customer due to a number of factors, own business, cash flow troubles, debts etc. I would be what is called in mortgage terms today "light adverse". Today (or at least yesterday) a LA customer can get a mortgae at pretty much near bank base rate, perhaps even with a small discount if fixed for a couple of years.

When I took out my mortgage 10 years ago, we had around 3 lenders to choose from, the best of whom offered us a deal at 4.5% above bank base rates.

Clearly the current model of paring back margins on subprime products is backfiring spectaculalrly. I would include the vast majority of buy to lets out there, where the "owners" are leveraged to the hilt. They are often no more than a couple of months delayed rental income payments away from disaster.

the next couple of months could be interesting...

I dont think too much is going to change in the market on this until the banks start announcing their next round of results.
There is no liquidity in the market as banks just wont lend to each other due to the fact that they dont know what is hidden in each others balance sheets. i.e. how deep are they into the sub prime / hedge fund issues.

Once the results are announced which would have to contain details of any catastrophies, things will ease. Personally I dont think at the moment that things are any where near as bad as the market has made it seem.
For example if a bank was in serious trouble it would be obliged to issue a profit warning to the stock exchange. (you have to do this if you forecast coming in below 10% of stated budgets).

Northern Rock will be bought by someone like BBVA at a huge discount. There is nothing fundamentaly wrong with the NR business they have just been caught out my the current unprecedented market conditions.

The ppl who should be worried are NR mortgage holders.  If NR has to borrow from the BoE for a prolonged period, the higher cost will have to be passed on to borrowers.

As far as the root of the problem is concerned, more than any other industry financial services is full of bullshiters and sheep.  The bullshiters create elaborate money making schemes that the sheep don't understand, but as everyone else is doing it, they do the same and pick up their bonuses.  At the moment the sheep realise that they have no idea what their or anyone elses liability is to exotic mortgage securitisation vehicles, so like good sheep they do what everyone else is doing and stop lending money.

I'm afraid not, son. Not on MacDonald's wages, anyway.  ;nana;

NR are NOT in trouble, & remain profitable. They have, for reasons explained, a short-term liquidity problem, caused, in the main, by market conditions. They are not innocent, but in the main, they are small-fry caught in the crossfire of a global situation. The money markets are so elaborate these days, with financial engineering & extraordinary levels of leverage, that such hiccups will occur from time to time.

Im looking to sell my house and move abroad hopefully by the start of next year

Will my sale price be affected by whats going on?

Will it take longer to sell?

Should i lower my asking price a little to try to get a sale through as quick as possible

house prices are generally governed by one thing - demand. If you have more demand than supply - prices will go up, and vice versa. So the question you need to ask yourself is will confidence in the market be hit by this isssue, to such an extent that there are less people in the housing market ? At a guess I would say no. The next question is will people find it more difficult to borrow money ? I would say yes, which will case less demand in the market.

I would expect prices to fall for the next few months, maybe around 5%. I dont expect this fall to be terminal though and end up in a fully blown slump.

Of course it largely depends on which sector your house is in at the moment - if you are sitting in a 3 million quid surrey mansion, I would expect these prices to be pretty impervious to the slings and arrows of everyday economics. If you have a 100 grand starter home, the chances are you will be harder hit.

Its been said many times that NR aren't actually in long term trouble - but the question surely should now be 'when will they be' if idiots keep queing 100's deep at the branches to withdraw their savings? How much of its business is based on its customers deposits? Surely they can't keep losing 1 billion a day too much longer.

I'm actually thinking of poping down there to see what they can offer me on a savings account! Apparently they come down the que every twenty minutes to ask if anyone is there to deposit!!

I hope they don't get taken over either.

I think very little of their business was based on retail savings, compared to other banks at least.

Also it's a positive feedback loop, the more people take money out, the more it looks like they could be in trouble so the more people want to withdraw.

Nope

Did you hear on the news about the couple who wanted to withdraw 1 million quid from their account. I bet the bank manager sh1t a brick when they heard that today.

Of course the NR declined and the old dears had a sit in at the branch, the police where called and removed them. The old dears did have a good and valid reason though, they had tried to access the account over tinterweb but couldn't and they couldn't get in touch via phone, and it is their life savings.

Quote from NR employee

"As a staff member of Northern Rock I would just like to say that there is no need to panic - the Bank of England and all other authorities back Northern Rock 110%"

With that sort of maths is this the reason they are in trouble  >:?

what interests me, and maybe mr End has an opinion on this (which he might even want to share) is where the NR share price is going to end up ?

I have a buy position locked up in my system at anything below 2 quid, but to be honest, I dont expect it to go that low - there are all sorts of rumours of takeover  bids being around the 2 quid mark, but will it really go as low as this ? closing price today of 257, against a high of 335 yesterday.

its the takeover rumours that are keeping it low. I am happy to buy around the 2 quid, I know that the company is really worth a lot more than £2 per share.

forget about all this, when are you gonna upgrade your existance and get a BMW

intrinsic price of the share with the gov g'tee is around £2.30 or so imo

 rotflmfao rotflmfao rotflmfao

that must be where I have been going wrong all this time...


seriously, 230p per share ? you do know that before the "crunch" started (and it was a few months ago) they were trading around 11 quid per share ?

yes, but the flow of money going out the bank is collosal, obviously assuming more money goes back in the future the price is gonna rise, but based on various factors I dont think its worth much more at this juncture, and you have to risk that confidence in the bank will rise again... and people/bank relationships have historically been pretty flimsy. Theres just too many alternatives these days.

206p now, getting close to a "must buy" imho...

Little story for you now....

Going back a few years I was in the City employed as a fund manager.

Equitable Life had just "blown up" causing all those problems for its customers and my bosses, in their wisdom, put the company I was working for forward to the BOE as a potential buyer of the company.

Muggins here was told to do the "due diligence" on the investment assets of Equitable Life, as part of a team of 5 who had two weeks to do the report and make a recommendation to the Chief Exec

So off I trotted to a "data room" in a lawyer's office in the City where I had to conduct an inventory and value each single investment in the portfolio. This took all of the two weeks, about 16 hours a day and then kipping in a nearby hotel.

Compiled the report, stood up in front of the board and made the recommendation and found that the liabilities side (not the side I was looking at) was completely out of control and the business was basically unsaleable.

My point is at this precise moment all across the City teams from the likes of HBOS/Lloyds/HSBC etc will be doing the same

a) because its a one off opportunity to look inside the books at a competitor

b) because there is a one-off opportunity to acquire market share at a discount

The only thing that will stop this happening is whether these potential acquirers will have trouble raising the finance to buy NRK

Assuming this isn't a problem the business is a sitting duck, opportunities to acquire that many affluent customers are rare,and in corporate finance speak the "synergies" of combining two mortgage books are high...back offices can be closed, computer systems combined etc such that the cost savings can reduce the effective "in" price to the buyer

Depending on how serious the NRK funding problem really is will determine whether the business is sold at a premium to today's price or not

It's not just the finance to buy NRK they need but they'll need to be able to finance it's £110bn of loans long term too...

yes, but far less of a problem to a big global business such as those I mentioned

Funding the acquisition debt and then refinancing the NRK mortgage book off the very short term wholesale market funding that NRK's business model relied upon is the key here

thank fk im a pauper, i never have to worry about the post office going tits up :)

Surely this would only apply if you are not on a fixed rate mortgage????  And even then you would have the option of taking your mortgage elsewhere no?    My mortgage is with NR, I have one year left on a very very low fixed interest rate, I am assuming after that time the rate will jump up whether it be offered by NR or whoever possibly takes it over.  I'm also assuming (I know, there's an ASS in assume) that if anything happens then it could take at least a year for it all to go through etc so by that time I will most probably ship around and look for another mortgage anyway.

At this stage I'm not concerned about the issues with NR - wisely or unwisey, who knows.  Cross that bridge when I come to it.    As an aside, I have received nothing at all from NR ... usually when something like this hits the press you get one of those "you have nothing to worry about, business as usual" kind of letters lol 

I thought the fixed rate mortgages were affected by different market factors?  Not that I know a great deal about it.

Same here, but I read through our paper work and I cannot see anything that says that the rate 'can' be changed at any stage throughout the 3 year term. The only thing I could see was a penalty if we move/change the mortgage (or pay in full lol) BEFORE the fixed term was up.

Maybe there's something there in 2pt size that I have missed altogether lol

hmmmmmmm maybe that letter will drop on my doormat any day now!

English only please...   ;shame;