This is a lovely article from the FT, hat tip to Stumbling and Mumbling
. http://www.johnkay.com/strategy/568
The most telling lines are the following:
"The business I joined gathered deposits from small savers, mostly through its branches. It lent the proceeds to house buyers. Founded as a self-help organisation by provident Yorkshire folk 150 years ago, the Halifax became the world’s largest mortgage lender. Its quality of service and competitive interest rates trounced conventional banks in the UK retail savings market. The simple business model was very robust. In the early 1990s, a combination of high interest rates, recession and falling house prices posed much more serious problems for UK homeowners than anything seen, or likely, in the current credit crunch. But the Halifax remained profitable and mortgages readily available."
Got that? Remained profitable and mortgages readily available.
The difference is that now they were looking to make a profit for shareholders. Then they focussed on providing service and satisfaction to their customers.
Of course, there were no 125% mortgages then. I think the best was liable to be 80%.
And it was all financed from people's savings.
Monday, September 29, 2008
Sunday, September 28, 2008
California House prices..
.. are down 41% from a year past August. Sales however were up 56% from the same time and 4.4% up on July. House price deflation has now almost levelled out, with a slowing rate of decline all this year to just .4% in August 2008. The average price, of course, is much lower than ours.
It'll take a couple more months, but the house price drop will no longer exist come Christmas. By spring, Californian prices might be tentatively improving. As I reported previously, sales have returned to 2001 levels and look as if they might hold there.
On that basis, UK prices still have a long way to fall - and a long time to do it.
Spring 2010 is time enough to start looking again.
What it does show, as ever, is whenever the Government gets round to doing something, its already too late. Arguably, the Fed bail-out plan is not necessary.
There will, however, be a huge number of politicians and financiers breathing a huge sigh of relief when it passes Congress.
It'll take a couple more months, but the house price drop will no longer exist come Christmas. By spring, Californian prices might be tentatively improving. As I reported previously, sales have returned to 2001 levels and look as if they might hold there.
On that basis, UK prices still have a long way to fall - and a long time to do it.
Spring 2010 is time enough to start looking again.
What it does show, as ever, is whenever the Government gets round to doing something, its already too late. Arguably, the Fed bail-out plan is not necessary.
There will, however, be a huge number of politicians and financiers breathing a huge sigh of relief when it passes Congress.
Saturday, September 27, 2008
The velocity of money
When I wrote at the PPS of the foregoing blog about the velocity of money, so many things went through my head that I stopped short. It needs a post of its own.
Remember the scene in Frank Capra's classic "It's A Wonderful Life"? George Bailey (Jimmy Stewart) has not gone on his honeymoon to prevent a run on the Bailey Building and Loan. Facing a crowd of frightened depositors he describes banking perfectly.
To paraphrase slightly, George says "You're thinking of this all wrong. It's not like I've got the money back there in the safe. Your money's not here - it's in Joe's house right next to yours - or in Mr. Kennedy's house or Mrs. Mecklin's or a hundred others. "
That's what banking is about. The bank lends your money out. But only if someone borrows - that's the velocity of money.
Suppose you deposit £1000 in an account whilst the Banking Reserve requirement is 15%. That means the bank can lend £850 ( it keeps back the remaining £150 as a reserve.)
A farmer comes in and borrows money to buy stock, all £850 of it. But the person he buys the stock from puts that £850 back into a bank. They reserve £127.50 ( 15% of £850) and lend out the remaining £722.50. So it goes on. In effect £1000 eventually does the work of about £7000.
New scenario - the reserve requirement drops to 10%. That means instead of £850 the bank can lend £900. Eventually that means some £10,000 is " created".
But suppose the person who borrowed the £722.50 goes bust or doesn't pay it back. That bank still has to give its depositor back the £850 he deposited. That bank can only do it if another bank lends it the shortfall. This is what is meant by the interbank market has seized up. Every bank is too afraid to lend to any other when they might have to repay their depositors. This, in effect, is what has pulled down the various banks over the last week or two. HBOS is classic - it was lending not 85% of its deposits - it was lending 180%. This is all compounded by the fall in house prices, which is what the banks have used as collateral. Even supposing house prices were steady there would be a serious recycling problem, but with the collateral falling faster than anyone can make sense of, the only response is get your money somewhere safe.
So at the moment, instead of the velocity of money being say 7 ( £7000 divided by £1000) its probably already down to 4 and still heading south. Effectively, if house prices fall say 25% for a cumulative loss in the UK of about £300 billion ( I'm ignoring the non-mortgaged ones) that's actually about £2,500,000,000,000 that just disappeared from the banking system. To give you an idea of how big a number that is, if every £1 was 1 second, then 1million would be about 11 .57 days. 1 BILLION would be about 32 years. 2,500 BILLION would be 80,000 years.
Which is why all the talk is of only $700 billion to fix the problem. Putting that back into the equation means those banks that have a problem with illiquid assets can get cash - and it also explains why Washington Mutual was taken over. Its deposits were melting as people realised it was effectively over lent. JPMorgan bought the good bits, paying $1.9billion, gets all the deposits and mortgages, banks, people etc etc, but NOT the money being rolled over in the markets that had virtually dried up anyway. Bank of America must be a touch sore they had to shell out $50billion for Merill Lynch, when just by waiting they might have got it for free. Dimond at JPM has shown himself the savviest of all the bankers. In both cases, BofA and JPM, the Fed is effectively standing right behind them saying we will give these two ANYTHING they need immediately.
In the same way, the Bank of England, despite not saying it, has learnt its lesson from Northern Rock, and is standing behind Lloyds TSB over the HBOS position. My belief is Lloyds will have to write off billions not only from the Halifax mortgage book, but from all the equity stakes and funding they took in various ventures ( like Tom Hunter).
So what needs to happen? Actually, Hank Paulsen's solution is fine - remove the bad bits and let everyone get on with the good bits (which is what Dimond has done) - but the banking supervision system needs beefed up. Perhaps there needs to be a cap on now much any one bank can borrow interbank. In effect, banks make their clients sign covenants as to how much they are borrowing against their assets ( JJB sports today is a classic banking squeeze) so why should the Fed or the BofE not do the same with banks? We could do the same over here. Instead of running down Northern Rock, let it buy all the duff mortgages at 80% loan to real value. The whole system would leap to life almost overnight.
Although I've been predicting this for quite a long time, it's much much worse than I expected. It's also quite a different thing to protect fully against it. I thought we might be through this by next spring. At the moment I wouldn't bet on anything getting any better until spring 2010.
In the meantime, I am battening down the hatches and buying agricultural land.
At least I will be able to eat.
PS
I have heard it all now. Someone paying off their credit card referred to "deleveraging" their position. Like it
Remember the scene in Frank Capra's classic "It's A Wonderful Life"? George Bailey (Jimmy Stewart) has not gone on his honeymoon to prevent a run on the Bailey Building and Loan. Facing a crowd of frightened depositors he describes banking perfectly.
To paraphrase slightly, George says "You're thinking of this all wrong. It's not like I've got the money back there in the safe. Your money's not here - it's in Joe's house right next to yours - or in Mr. Kennedy's house or Mrs. Mecklin's or a hundred others. "
That's what banking is about. The bank lends your money out. But only if someone borrows - that's the velocity of money.
Suppose you deposit £1000 in an account whilst the Banking Reserve requirement is 15%. That means the bank can lend £850 ( it keeps back the remaining £150 as a reserve.)
A farmer comes in and borrows money to buy stock, all £850 of it. But the person he buys the stock from puts that £850 back into a bank. They reserve £127.50 ( 15% of £850) and lend out the remaining £722.50. So it goes on. In effect £1000 eventually does the work of about £7000.
New scenario - the reserve requirement drops to 10%. That means instead of £850 the bank can lend £900. Eventually that means some £10,000 is " created".
But suppose the person who borrowed the £722.50 goes bust or doesn't pay it back. That bank still has to give its depositor back the £850 he deposited. That bank can only do it if another bank lends it the shortfall. This is what is meant by the interbank market has seized up. Every bank is too afraid to lend to any other when they might have to repay their depositors. This, in effect, is what has pulled down the various banks over the last week or two. HBOS is classic - it was lending not 85% of its deposits - it was lending 180%. This is all compounded by the fall in house prices, which is what the banks have used as collateral. Even supposing house prices were steady there would be a serious recycling problem, but with the collateral falling faster than anyone can make sense of, the only response is get your money somewhere safe.
So at the moment, instead of the velocity of money being say 7 ( £7000 divided by £1000) its probably already down to 4 and still heading south. Effectively, if house prices fall say 25% for a cumulative loss in the UK of about £300 billion ( I'm ignoring the non-mortgaged ones) that's actually about £2,500,000,000,000 that just disappeared from the banking system. To give you an idea of how big a number that is, if every £1 was 1 second, then 1million would be about 11 .57 days. 1 BILLION would be about 32 years. 2,500 BILLION would be 80,000 years.
Which is why all the talk is of only $700 billion to fix the problem. Putting that back into the equation means those banks that have a problem with illiquid assets can get cash - and it also explains why Washington Mutual was taken over. Its deposits were melting as people realised it was effectively over lent. JPMorgan bought the good bits, paying $1.9billion, gets all the deposits and mortgages, banks, people etc etc, but NOT the money being rolled over in the markets that had virtually dried up anyway. Bank of America must be a touch sore they had to shell out $50billion for Merill Lynch, when just by waiting they might have got it for free. Dimond at JPM has shown himself the savviest of all the bankers. In both cases, BofA and JPM, the Fed is effectively standing right behind them saying we will give these two ANYTHING they need immediately.
In the same way, the Bank of England, despite not saying it, has learnt its lesson from Northern Rock, and is standing behind Lloyds TSB over the HBOS position. My belief is Lloyds will have to write off billions not only from the Halifax mortgage book, but from all the equity stakes and funding they took in various ventures ( like Tom Hunter).
So what needs to happen? Actually, Hank Paulsen's solution is fine - remove the bad bits and let everyone get on with the good bits (which is what Dimond has done) - but the banking supervision system needs beefed up. Perhaps there needs to be a cap on now much any one bank can borrow interbank. In effect, banks make their clients sign covenants as to how much they are borrowing against their assets ( JJB sports today is a classic banking squeeze) so why should the Fed or the BofE not do the same with banks? We could do the same over here. Instead of running down Northern Rock, let it buy all the duff mortgages at 80% loan to real value. The whole system would leap to life almost overnight.
Although I've been predicting this for quite a long time, it's much much worse than I expected. It's also quite a different thing to protect fully against it. I thought we might be through this by next spring. At the moment I wouldn't bet on anything getting any better until spring 2010.
In the meantime, I am battening down the hatches and buying agricultural land.
At least I will be able to eat.
PS
I have heard it all now. Someone paying off their credit card referred to "deleveraging" their position. Like it
Friday, September 26, 2008
Nick Robinson last night..
.. was on BBC news in America. His report was entirely to do with the Fed bail-out talks, and hardly mentioned Broon at all.
The most striking thing he said was that the mood in respect of the Credit Crunch was entirely different in the States - as well it might be. He said no-one who had not experienced it would understand the sombreness with which people were going about their business.
The real problem, of course, are the regulators who allowed Banks to create derivatives in the first place. Yes I know Real Estate prices in the States are falling.If you have a mortgage of say 60% and then take out a second mortgage for a further 30% - and then a personal loan of 10% as well - if the price falls even a penny you are in negative equity. If it falls 25% your first mortgage is coverd but the rest isn't. As long as you pay its all right. If you don't, the personal loan company loses 100%, the second mortgage loses half its money - but the primary mortgagee is OK.
The problem now is that there are layers on and within other layers - all passed back and forth and round about, so that even the primary mortgagees don't have cover.
During the secondary banking crisis of 74-76 in the UK, this is exactly what the problem was. The Bank of England lifeboat enabled positions to be unwound and I think the BofE actually made a small profit overall - but a lot of overstretched banks went to the wall or were amalgamated. The difference is that interest only mortgages were almost unknown then so that the banks were at least getting an element of their capital back, and, frankly, no-one had much money anyway. Nowadays, virtually everything we " own" is bought with borrowed money - certainly at the lower end of the social scale and within younger age groups. In reality we are "poorer" than we were then.
It is most instructive to follow the chronology - from 1971 when Banks liquidity requirements were reduced, property prices surging in 1972 and 3, Bank shares starting to fall in mid 1973, liquidity drying up at the end of the year with a mini-budget which squeezed the public. 1974 was utterly dire and at the start of 1975 the FTSE was at 146. So even now its grown some 35 times. The lifeboat peaked in March/April 1975 and started to fall thereafter as companies managed to access other money and money started to circulate round the system again. By mid 1976 things were beginning to get back to normal.
So now is very much like then - with bigger numbers. It shows why the liquidity issue is the one that counts.
So I am seriously pessimistic about the next year or two.
I'm busy working on an escape plan which involves gold coins and vegetables.
PS
I met a surveyor I hadn't seen for some years this afternoon. He was actively touting for business - as in, you have money, you want buy? He says this is the only way the market will get going again, with those with a bit of cash buying up distressed assets. His touting had led one invester to pick up a brand new block of 27, 1& 2 bedroom flats in a good location for £85,000 each. They had been on the market for £149,000 and £169,000 - with not one sold since launch in February.
We're definitely into the " There is no combination of circumstances under which we will accept that price.." scenario.
Except they will eventually when the next interest bill is due.
PPS
Ecomosts will tell you that the growth of money is extremely important.What has been happening recently is that the growth of money has been falling ( probably for the first time in more than 15 years) and may well have started to contract ( we wont know for a minth or so).
Much more importantly, as far as business is concerned, is the rate at which money circulates around the system, called velocity of money.
The most striking thing he said was that the mood in respect of the Credit Crunch was entirely different in the States - as well it might be. He said no-one who had not experienced it would understand the sombreness with which people were going about their business.
The real problem, of course, are the regulators who allowed Banks to create derivatives in the first place. Yes I know Real Estate prices in the States are falling.If you have a mortgage of say 60% and then take out a second mortgage for a further 30% - and then a personal loan of 10% as well - if the price falls even a penny you are in negative equity. If it falls 25% your first mortgage is coverd but the rest isn't. As long as you pay its all right. If you don't, the personal loan company loses 100%, the second mortgage loses half its money - but the primary mortgagee is OK.
The problem now is that there are layers on and within other layers - all passed back and forth and round about, so that even the primary mortgagees don't have cover.
During the secondary banking crisis of 74-76 in the UK, this is exactly what the problem was. The Bank of England lifeboat enabled positions to be unwound and I think the BofE actually made a small profit overall - but a lot of overstretched banks went to the wall or were amalgamated. The difference is that interest only mortgages were almost unknown then so that the banks were at least getting an element of their capital back, and, frankly, no-one had much money anyway. Nowadays, virtually everything we " own" is bought with borrowed money - certainly at the lower end of the social scale and within younger age groups. In reality we are "poorer" than we were then.
It is most instructive to follow the chronology - from 1971 when Banks liquidity requirements were reduced, property prices surging in 1972 and 3, Bank shares starting to fall in mid 1973, liquidity drying up at the end of the year with a mini-budget which squeezed the public. 1974 was utterly dire and at the start of 1975 the FTSE was at 146. So even now its grown some 35 times. The lifeboat peaked in March/April 1975 and started to fall thereafter as companies managed to access other money and money started to circulate round the system again. By mid 1976 things were beginning to get back to normal.
So now is very much like then - with bigger numbers. It shows why the liquidity issue is the one that counts.
So I am seriously pessimistic about the next year or two.
I'm busy working on an escape plan which involves gold coins and vegetables.
PS
I met a surveyor I hadn't seen for some years this afternoon. He was actively touting for business - as in, you have money, you want buy? He says this is the only way the market will get going again, with those with a bit of cash buying up distressed assets. His touting had led one invester to pick up a brand new block of 27, 1& 2 bedroom flats in a good location for £85,000 each. They had been on the market for £149,000 and £169,000 - with not one sold since launch in February.
We're definitely into the " There is no combination of circumstances under which we will accept that price.." scenario.
Except they will eventually when the next interest bill is due.
PPS
Ecomosts will tell you that the growth of money is extremely important.What has been happening recently is that the growth of money has been falling ( probably for the first time in more than 15 years) and may well have started to contract ( we wont know for a minth or so).
Much more importantly, as far as business is concerned, is the rate at which money circulates around the system, called velocity of money.
Toooo dull
A reader of this blog has indicated that he feels the financial bits and the political bits are dull.
Quite apart from the fact that they are clearly insightful,penetrating and brilliantly written, perhaps he has a point.
What is a blog? Is it just a collection of stream of consciousness from a person? Does it have a specific topic, like Political Betting, Guido,Iain Dale or Dizzy? Or canal boating like Gypsy Rover? Perhaps blogs should be within categories ( mostly moaning like Wife in the North or Economic like Chris Dillow) so you could choose what you were interested in without having to trawl through endless pages.
Anyway, I think it highly unlikely I will change much here. If there is a point to a blog, I can't help but feel it should be a celebration of the diversity that lies within all of us. That's one reason why the Speccie's Coffee House works well, it has different writers commenting on different things, which makes it like a newspaper where you can skim what doesn't interest you and read in depth what does.
One of my peculiarities is my love of Crossword Puzzles. I came across an anagram the other day which I really liked. I can't remember the clue, but the answer was an anagram of MOONLANDING STORY.
It was STANDING ROOM ONLY.
Quite apart from the fact that they are clearly insightful,penetrating and brilliantly written, perhaps he has a point.
What is a blog? Is it just a collection of stream of consciousness from a person? Does it have a specific topic, like Political Betting, Guido,Iain Dale or Dizzy? Or canal boating like Gypsy Rover? Perhaps blogs should be within categories ( mostly moaning like Wife in the North or Economic like Chris Dillow) so you could choose what you were interested in without having to trawl through endless pages.
Anyway, I think it highly unlikely I will change much here. If there is a point to a blog, I can't help but feel it should be a celebration of the diversity that lies within all of us. That's one reason why the Speccie's Coffee House works well, it has different writers commenting on different things, which makes it like a newspaper where you can skim what doesn't interest you and read in depth what does.
One of my peculiarities is my love of Crossword Puzzles. I came across an anagram the other day which I really liked. I can't remember the clue, but the answer was an anagram of MOONLANDING STORY.
It was STANDING ROOM ONLY.
Wednesday, September 24, 2008
The deal for the money that AIG desperately needs
"AIG made it clear how onerous the terms of the two-year loan will be. Not only will it pay 8.50 percentage points over 3-month LIBOR, putting the current rate at well above 11 percent, but it will also pay a commitment fee equal to about $1.7 billion. AIG will also pay a fee on undrawn amounts of 8.5 percent a year. The interest and the fees will be added to the balance outstanding, the company said. " And they have to pay it back from sales of assets and new equity sales.
So they will be paying a MINIMUM of $7.5billion per year in interest, even if they don't draw a dime. And paying $1.7billion for the privilege.
The hearings about the Paulson bailout have so far not focussed on what the terms might be.
But if this is anything to go by, the US taxpayer is doing very very nicely indeed out of the credit crunch.
PS
It would appear that existing housing sales in the US are beginning to bottom out at an average rate of 5 million a year ( give or take). The markets not dead by any means, just going slow - say, oh, I don't know, round about where it was in 2001. Doesn't quite chime with Armageddon does it?
PPS
My cousin's family has been renting in LA for about 5 years. They've just bought the house they wanted from that time ( when someone pipped them to it) for 70% of the asking price last December. So they only paid 50% more than it would have cost them in 2002.
So they will be paying a MINIMUM of $7.5billion per year in interest, even if they don't draw a dime. And paying $1.7billion for the privilege.
The hearings about the Paulson bailout have so far not focussed on what the terms might be.
But if this is anything to go by, the US taxpayer is doing very very nicely indeed out of the credit crunch.
PS
It would appear that existing housing sales in the US are beginning to bottom out at an average rate of 5 million a year ( give or take). The markets not dead by any means, just going slow - say, oh, I don't know, round about where it was in 2001. Doesn't quite chime with Armageddon does it?
PPS
My cousin's family has been renting in LA for about 5 years. They've just bought the house they wanted from that time ( when someone pipped them to it) for 70% of the asking price last December. So they only paid 50% more than it would have cost them in 2002.
Warren Buffet steps up to the plate
Todays news that the Sage of Omaha has spent $5 billion ( with a possible further $5 billion) on preferred stock in Goldman Sachs is the clearest indication yet that despite doubts of the Fed bailout, things are actually improving.
Admitedly he's getting 10% interest ( think about it - Goldman Sachs is having to pay 10%, so the rest of us will shortly have to as well) but a $5 billion bet is still serious money.
Talking to bankers in the last week, they reiterated that there was no real problem for people wanting a mortgage - the money's there. What's not there is the deposit required ie the banks believe the prices of property still have a way to fall and they want the house-buyer to shoulder that risk.
And, of course, they want to earn a profit on the mortgage itself. In simple terms their costs to get their hands on money are about 2.5% more than they were when interest rates were .75% higher. You, dear house buyer, will have to pay this, and your mind-set has not shifted enough to get enough of you doing it to make a difference - in the UK at least with reports of a mere 20 odd thousand mortgages being granted last month. When you do decide you are prepared to pay a rate nearer 10.0% than 5% you will find that the market will start to move again. Remember, within even teenage scribblers' lifetimes people were paying 15% for a mortgage.
So Warren has put his money on the line very clearly. I said some days ago we were probably within 10/15% of the bottom for US house prices and the stock market. The huge jump on Friday was largely a sideshow, but I still hold firm to my prediction. If the US gets near 9500 for the Dow and the UK Ftse 100 around 4250, fill your boots, as the expression used to be.
PS. Mr. B has suggested he would be happy to buy some of AIG's assets. Well there's a shock. I think I mentioned he would be paying 50cts on the $ for what he wants.
Admitedly he's getting 10% interest ( think about it - Goldman Sachs is having to pay 10%, so the rest of us will shortly have to as well) but a $5 billion bet is still serious money.
Talking to bankers in the last week, they reiterated that there was no real problem for people wanting a mortgage - the money's there. What's not there is the deposit required ie the banks believe the prices of property still have a way to fall and they want the house-buyer to shoulder that risk.
And, of course, they want to earn a profit on the mortgage itself. In simple terms their costs to get their hands on money are about 2.5% more than they were when interest rates were .75% higher. You, dear house buyer, will have to pay this, and your mind-set has not shifted enough to get enough of you doing it to make a difference - in the UK at least with reports of a mere 20 odd thousand mortgages being granted last month. When you do decide you are prepared to pay a rate nearer 10.0% than 5% you will find that the market will start to move again. Remember, within even teenage scribblers' lifetimes people were paying 15% for a mortgage.
So Warren has put his money on the line very clearly. I said some days ago we were probably within 10/15% of the bottom for US house prices and the stock market. The huge jump on Friday was largely a sideshow, but I still hold firm to my prediction. If the US gets near 9500 for the Dow and the UK Ftse 100 around 4250, fill your boots, as the expression used to be.
PS. Mr. B has suggested he would be happy to buy some of AIG's assets. Well there's a shock. I think I mentioned he would be paying 50cts on the $ for what he wants.
Tuesday, September 23, 2008
The New Brideshead..
.. was at Bafta tonight.
Perfectly OK film, but I always feel that religion has a lot to answer for.
There was one lovely line. Michael Gambon's Italian lover, when Charles Ryder was talking about sin, religion etc, she said " Ah, we Italians are different. We listen to our heart and then go to confession"
The Italians are lovely.
Perfectly OK film, but I always feel that religion has a lot to answer for.
There was one lovely line. Michael Gambon's Italian lover, when Charles Ryder was talking about sin, religion etc, she said " Ah, we Italians are different. We listen to our heart and then go to confession"
The Italians are lovely.
Monday, September 22, 2008
Mouse powder.
I was watching the Price of Property on TV tonight, and there were a group of young Moslem Bangladeshi men in Manchester who had several buy to let flats that they owned. Their parents had started buying property in the early 70's, funded by - not mortgages - but cash borrowed from families and friends. Slowly paid back, in time they were able to buy another and another.
Mrs. Lear, when the presenter asked " Where did you get the money?" snorted, and said " From under the bed"
Which reminded me of a yellow powder I recently saw for sale in Romania.
" What's that for?" I asked Alin.
" It's for the mouses Mr. King."
" What mouses? I mean mice" We have the same problem with sheeps.
"The ones that are eating the money"
Alin finally made me understand that the powder was used the put on and around the money in the shoeboxes under the bed. Noone really believes the banks will give them back their own money, so they keep their money under the bed.Despite mice loving the taste of Romanian banknotes, they can't stand the yellow powder.
Simple really.
Mrs. Lear, when the presenter asked " Where did you get the money?" snorted, and said " From under the bed"
Which reminded me of a yellow powder I recently saw for sale in Romania.
" What's that for?" I asked Alin.
" It's for the mouses Mr. King."
" What mouses? I mean mice" We have the same problem with sheeps.
"The ones that are eating the money"
Alin finally made me understand that the powder was used the put on and around the money in the shoeboxes under the bed. Noone really believes the banks will give them back their own money, so they keep their money under the bed.Despite mice loving the taste of Romanian banknotes, they can't stand the yellow powder.
Simple really.
Friday, September 19, 2008
So that's the plan...
.... distort the markets. Actually, the shorts are NOT having an effect - its the holders of shares that were & are selling because they don't believe what the FSA in particular tells them.
The US removing dead mortgages onto its books will of course have the best possible effect - but it probably also means that the US, which was teetering on the edge of bankruptcy, is now bust. Sovereign states can't go bust? Tell the people who lent money on that premise in the 70s. China is making its move. Watch for a huge increase in Chinaphobia Stateside.
The plus point in all this is that this move will effectively inject gigantic sums into the banking system - which will enable the $180billion ( plus all the rest that noone has bothered to add up) to be repaid. In essence, its another recycling, but with a huge increase in available credit.
It'll take time to work through, but this "should" be the bottom. Buy that US property now before the deals dry up.
The US removing dead mortgages onto its books will of course have the best possible effect - but it probably also means that the US, which was teetering on the edge of bankruptcy, is now bust. Sovereign states can't go bust? Tell the people who lent money on that premise in the 70s. China is making its move. Watch for a huge increase in Chinaphobia Stateside.
The plus point in all this is that this move will effectively inject gigantic sums into the banking system - which will enable the $180billion ( plus all the rest that noone has bothered to add up) to be repaid. In essence, its another recycling, but with a huge increase in available credit.
It'll take time to work through, but this "should" be the bottom. Buy that US property now before the deals dry up.
Tuesday, September 16, 2008
What happens next?
WW and I have been exchanging views on what is going to happen.
You can be pretty sure the Fed will cut rates this week, but it won't have much of an effect overall. The BofE will have to do the same pretty soon, but, with typical backward looking thinking, it will be too little. It already has been and its far too late. Even the ECB will have to move soon, despite everything they say, otherwise we will all be back to The Good Life in the dark.
The crux of the whole matter is actually an insurance company, once the world's biggest, AIG. If - and I stress if - the line can be held somehow, there could be time for the other broke banks to get merged or closed without too much of a problem. The Bear Stearns takeover already bought enough time for the Fed to be able to ignore Lehman.
The really depressing thing is that the losses being racked up are so large that the potential lending by those who still might is curtailed to such an extent that I doubt we will see any kind of light for at least a couple of years. We are going into another Ice Age financially.
Even if you have a committed line of credit, don't expect it to get rolled over. Typically, it will be cut by 20%, you will pay a significant fee and you will have to pay a higher margin.
And here's a trick. People talk about eg 2% over base - at the moment this would be 7%. Now the banks are talking about eg 2.25% over LIBOR. Doesn't sound like much? Well, LIBOR is not 5% its about 6.5% ( and expected to go higher now - so the actual increase is25%.
Mrs.Lear was putting the dog to bed last night whilst I was dealing with some emails and said," Well, what do we buy - oil ,gold, Government bonds?"
Just leave it in cash - and spread it around. I've told the story before about the fund manager who several years ago only wanted to invest in Bank of England CDs and gold.
And that was physical gold you can touch and fondle, and hold to your chest, not certificates.
In the end, nothing will get better until someone somewhere starts seeing the price of American houses as being of value. They're still falling, but the vultures are out and we can't be too far off the bottom - probably another 10-15% drop overall.
Watch this space.
PS
And don't think about retiring any time soon. The fall in markets means that pension payouts will be falling very fast very soon.
PPS
Henderson Global Investors's Jenna Barnard, in charge of a number of funds including the Henderson Strategic Bond fund, said: 'The fate of AIG will be the key driver of both credit and equity markets in the near-term with the potential to further destabilise markets.'
PPPS
I knew Lehman's was doomed from the moment Gordon Brown opened it's shiny new London offices. What I didn't know was he had performed the same function for Dresdner Kleinwort - defunct a few weeks ago. The Jonah effect never fails....
You can be pretty sure the Fed will cut rates this week, but it won't have much of an effect overall. The BofE will have to do the same pretty soon, but, with typical backward looking thinking, it will be too little. It already has been and its far too late. Even the ECB will have to move soon, despite everything they say, otherwise we will all be back to The Good Life in the dark.
The crux of the whole matter is actually an insurance company, once the world's biggest, AIG. If - and I stress if - the line can be held somehow, there could be time for the other broke banks to get merged or closed without too much of a problem. The Bear Stearns takeover already bought enough time for the Fed to be able to ignore Lehman.
The really depressing thing is that the losses being racked up are so large that the potential lending by those who still might is curtailed to such an extent that I doubt we will see any kind of light for at least a couple of years. We are going into another Ice Age financially.
Even if you have a committed line of credit, don't expect it to get rolled over. Typically, it will be cut by 20%, you will pay a significant fee and you will have to pay a higher margin.
And here's a trick. People talk about eg 2% over base - at the moment this would be 7%. Now the banks are talking about eg 2.25% over LIBOR. Doesn't sound like much? Well, LIBOR is not 5% its about 6.5% ( and expected to go higher now - so the actual increase is25%.
Mrs.Lear was putting the dog to bed last night whilst I was dealing with some emails and said," Well, what do we buy - oil ,gold, Government bonds?"
Just leave it in cash - and spread it around. I've told the story before about the fund manager who several years ago only wanted to invest in Bank of England CDs and gold.
And that was physical gold you can touch and fondle, and hold to your chest, not certificates.
In the end, nothing will get better until someone somewhere starts seeing the price of American houses as being of value. They're still falling, but the vultures are out and we can't be too far off the bottom - probably another 10-15% drop overall.
Watch this space.
PS
And don't think about retiring any time soon. The fall in markets means that pension payouts will be falling very fast very soon.
PPS
Henderson Global Investors's Jenna Barnard, in charge of a number of funds including the Henderson Strategic Bond fund, said: 'The fate of AIG will be the key driver of both credit and equity markets in the near-term with the potential to further destabilise markets.'
PPPS
I knew Lehman's was doomed from the moment Gordon Brown opened it's shiny new London offices. What I didn't know was he had performed the same function for Dresdner Kleinwort - defunct a few weeks ago. The Jonah effect never fails....
Seen on a billboard
" Help your loved one stop smoking!"
Underneath someone had written " Murder them"
Underneath someone had written " Murder them"
Monday, September 15, 2008
That one sided romantic email exchange...
The ineffable Winchester Whisperer has asked what happened to the emails from the young couple who were getting on so well.
Unfortunately, my email decided that it had titillated me enough and stopped sending them to me.
But I can see two possible outcomes.
The first is they get together, have kids, live to a ripe old age with people still saying how in love they are after 50 years.
Or he's already married and had removed his wedding ring, he lies to her all the time, uses and abuses her, then dumps her and goes back to his wife.
Personally, I think I prefer the Brian Aldridge outcome.
Unfortunately, my email decided that it had titillated me enough and stopped sending them to me.
But I can see two possible outcomes.
The first is they get together, have kids, live to a ripe old age with people still saying how in love they are after 50 years.
Or he's already married and had removed his wedding ring, he lies to her all the time, uses and abuses her, then dumps her and goes back to his wife.
Personally, I think I prefer the Brian Aldridge outcome.
Lehman Brothers.
There must be lots of people who simply can't believe they are bust.
Lets all keep our fingers crosssed that our old friend Warren rides to the rescue of AIG. He has enough cash himself to bail them out but will be looking to get 100% for less than 50 cents on the dollar of what he regards as their real worth. If they aren't saved, then we really are entering the ice age.
But its an ill wind.
I was speaking to a small flight operator who has made probably a couple of hundred thousand extra out of the demise of XL, and has put himself back in the CAA's good books. Mind you, the only reason so many people are in bother is entirely down to the changes the government ( this one) forced on the CAA. It means only about 50% of travellers are actually covered nowadays.
Some someone is going to make cash out of Lehman - apart from the lawyers and liquidators of course.
Lets all keep our fingers crosssed that our old friend Warren rides to the rescue of AIG. He has enough cash himself to bail them out but will be looking to get 100% for less than 50 cents on the dollar of what he regards as their real worth. If they aren't saved, then we really are entering the ice age.
But its an ill wind.
I was speaking to a small flight operator who has made probably a couple of hundred thousand extra out of the demise of XL, and has put himself back in the CAA's good books. Mind you, the only reason so many people are in bother is entirely down to the changes the government ( this one) forced on the CAA. It means only about 50% of travellers are actually covered nowadays.
Some someone is going to make cash out of Lehman - apart from the lawyers and liquidators of course.
T5 jinx strikes again....
Dear Mr Lear,
Last Thursday you received an email from us intended for people who had recently travelled through Terminal 5 on one of our shorthaul or domestic routes.
This was a result of a technical error which has now been resolved.
I'm sorry for the confusion this may have caused
Thank you for your understanding.
Warm regards,
Sarah Keyes
Executive Club Manager
Last Thursday you received an email from us intended for people who had recently travelled through Terminal 5 on one of our shorthaul or domestic routes.
This was a result of a technical error which has now been resolved.
I'm sorry for the confusion this may have caused
Thank you for your understanding.
Warm regards,
Sarah Keyes
Executive Club Manager
Sunday, September 14, 2008
Give something back
I was watching Pirates of the Caribbean this afternoon, and was taken with two things one of the pirate captain's said.
The first was: " Take what you can and give nothing back"
The second was: " Better the days when a man did not make pacts with the Devil, but lived by the sweat of his brow and the strength of his back."
I suppose it is far fetched to compare these statements with the present malaise in the Banking sector, but I'm not so sure.
My own view would be that first one encompasses the Bankers' general greed. When times are good, they earn fortunes. When times are bad, the clients pay fortunes. Just think how much a bounced cheque or an over-limit fee is. And of course the Banks are still fighting the case against these through the courts.
The second one, of course, refers to all the toxic debt the Banks have created over the last ten years or so. Themselves, they have added nothing to human capital or wealth, and, indeed, are probably now going a long way towards destroying it.
But back to the first one.
Living your life according to the first statement has to be a recipe for misery, even for those who are taking but giving nothing back.
It can't be a coincidence that in every " happiness" survey, it is those engaged in charity and community projects that come out top.
So, despite disliking Noel Edmonds, his attempt on Sky1 to get people to give something back is long overdue, and most deserving.
The first was: " Take what you can and give nothing back"
The second was: " Better the days when a man did not make pacts with the Devil, but lived by the sweat of his brow and the strength of his back."
I suppose it is far fetched to compare these statements with the present malaise in the Banking sector, but I'm not so sure.
My own view would be that first one encompasses the Bankers' general greed. When times are good, they earn fortunes. When times are bad, the clients pay fortunes. Just think how much a bounced cheque or an over-limit fee is. And of course the Banks are still fighting the case against these through the courts.
The second one, of course, refers to all the toxic debt the Banks have created over the last ten years or so. Themselves, they have added nothing to human capital or wealth, and, indeed, are probably now going a long way towards destroying it.
But back to the first one.
Living your life according to the first statement has to be a recipe for misery, even for those who are taking but giving nothing back.
It can't be a coincidence that in every " happiness" survey, it is those engaged in charity and community projects that come out top.
So, despite disliking Noel Edmonds, his attempt on Sky1 to get people to give something back is long overdue, and most deserving.
Saturday, September 13, 2008
Mrs. Lear's Dunkirk
The potential relaxation of the 100ml limit of individual cosmetics on planes can't come soon enough for Mrs. Lear.
On the recent trip to Italy, she had bought a new suitcase ( large) and then discovered that it didn't fit in with Ryanair's requirement of 15kgs - or pay £12 per kilo overweight.
So at the desk she unpacked the books and her washbag ( the heaviest item in the case) and shoved them into her handbag.
The only problem was when she got to security, her nearly new extremely expensive face cream came in a jar of 125ml.
" In the bin" says the heartless security man.
" Not bloody likely" says Mrs.Lear, and walks back out to the check-in area.
Casting about for something, she spies Nivea cream in 50ml jars -£1.99 each. Done deal.
Only then she has to empty out the cream into the bin - very messy. The remains are smeared on her face and arms.
The extremely expensive jar is decanted into the two jars - even messier - and THERE IS SOME LEFT OVER! So she smears that all over her face, hands, arms and anywhere else visible.
By now she is smelling quite divine, and looking extremely greasy. She rubs and rubs, but there is so much that it won't disappear immediately.
She goes back to security and gets through, with a lot of strange looks from all and sundry.
Once in Pisa, the sun is hot - and she starts sweating under the goo. When she finally gets to the hotel in Camaiore, she just has the wipe it all off and wash the remains away.
But at least 100ml was saved.
UPDATE:
Mrs. Lear has now purchased from Boots an extremely handy little travel pack which consists not only of bottles/jars of 100ml but also pumps to transfer from the original bottles into the 100ml ones for travel.
Why she can't just leave them in the hold baggage, I don't know.
On the recent trip to Italy, she had bought a new suitcase ( large) and then discovered that it didn't fit in with Ryanair's requirement of 15kgs - or pay £12 per kilo overweight.
So at the desk she unpacked the books and her washbag ( the heaviest item in the case) and shoved them into her handbag.
The only problem was when she got to security, her nearly new extremely expensive face cream came in a jar of 125ml.
" In the bin" says the heartless security man.
" Not bloody likely" says Mrs.Lear, and walks back out to the check-in area.
Casting about for something, she spies Nivea cream in 50ml jars -£1.99 each. Done deal.
Only then she has to empty out the cream into the bin - very messy. The remains are smeared on her face and arms.
The extremely expensive jar is decanted into the two jars - even messier - and THERE IS SOME LEFT OVER! So she smears that all over her face, hands, arms and anywhere else visible.
By now she is smelling quite divine, and looking extremely greasy. She rubs and rubs, but there is so much that it won't disappear immediately.
She goes back to security and gets through, with a lot of strange looks from all and sundry.
Once in Pisa, the sun is hot - and she starts sweating under the goo. When she finally gets to the hotel in Camaiore, she just has the wipe it all off and wash the remains away.
But at least 100ml was saved.
UPDATE:
Mrs. Lear has now purchased from Boots an extremely handy little travel pack which consists not only of bottles/jars of 100ml but also pumps to transfer from the original bottles into the 100ml ones for travel.
Why she can't just leave them in the hold baggage, I don't know.
Friday, September 12, 2008
Modernisation
I was walking the other day in the Dean Gardens in Edinburgh, and was admiring the excellent bridge which spans the gorge. Built by Thomas Telford in 1831, it is non only a marvellous piece of engineering, it is also a piece of art.
The individual stones were each hand-carved and given their own character. The arches are beautiful to behold.
Of course, at the time the British were pre-eminent in engineering and building, with many Scots at the forefront. Scots will almost surely remain as exceptional engineers - one only has to think of Scottie in Startrek to know this. Naturally, the stereotype gloomy Scot ( " The Dylithium Crystals canna tak it sur!") is also to the forefront.
But back in 1831 Telford gave a price for the bridge and a completion date. These were accepted and he set to work.
Some three months or so before the hand-over date, the bridge was finished.
The city fathers were delighted, but Telford said " Not so fast. The handover date is when the bridge will be handed over. Until then it remains mine."
There was nothing they could do. In law this is perfectly correct.
The next morning a temporary toll-booth appeared at either end of the bridge, and for a modest sum anyone and anything could cross. Naturally it generated enormous interest, and earned Telford a huge sum of money.
On the handover date the tollbooths were taken away and there was a ceremony, after which everyone could cross for free.
It is said he earned more from the tollbooths than from building the bridge.
This was Edinburgh's " Odd wee bit of modrenisation" ( I know it's spelt wrongly, but Scots often use this particular phonetic in speech).
I was reminded of this whilst in Italy recently, when my sister-in-law remarked that despite my great age, I still had " Just the odd wee bit of modrenisation" in my makeup.
The individual stones were each hand-carved and given their own character. The arches are beautiful to behold.
Of course, at the time the British were pre-eminent in engineering and building, with many Scots at the forefront. Scots will almost surely remain as exceptional engineers - one only has to think of Scottie in Startrek to know this. Naturally, the stereotype gloomy Scot ( " The Dylithium Crystals canna tak it sur!") is also to the forefront.
But back in 1831 Telford gave a price for the bridge and a completion date. These were accepted and he set to work.
Some three months or so before the hand-over date, the bridge was finished.
The city fathers were delighted, but Telford said " Not so fast. The handover date is when the bridge will be handed over. Until then it remains mine."
There was nothing they could do. In law this is perfectly correct.
The next morning a temporary toll-booth appeared at either end of the bridge, and for a modest sum anyone and anything could cross. Naturally it generated enormous interest, and earned Telford a huge sum of money.
On the handover date the tollbooths were taken away and there was a ceremony, after which everyone could cross for free.
It is said he earned more from the tollbooths than from building the bridge.
This was Edinburgh's " Odd wee bit of modrenisation" ( I know it's spelt wrongly, but Scots often use this particular phonetic in speech).
I was reminded of this whilst in Italy recently, when my sister-in-law remarked that despite my great age, I still had " Just the odd wee bit of modrenisation" in my makeup.
Thursday, September 11, 2008
From BA...
Dear Mr Lear,
Welcome back from your recent trip.
I'm delighted to hear that your flight from T5 departed on time, as this is something we work very hard to achieve.Punctuality is as important to us as it is for you, so every time you fly with us we'll do everything we can to ensure you arrive at your destination on time.
Thank you again for choosing British Airways and we look forward to welcoming you onboard again soon.
Warm regards,
Sarah Keyes
Executive Club Manager
The only problem is I have never been to terminal 5 nor have I flown with BA recently.
Slightly worrying.
Credit crunch
A friend in Romania emailed me to tell me that things are really biting.
His wife used to go to Brasov ( 200kms away) to get her hair done.
3 months ago she moved her loyalty to a salon in Tirgu Mures, about 60km away.
Now she gets it done in Sighisoara ( 0 km away).
Things are tough
His wife used to go to Brasov ( 200kms away) to get her hair done.
3 months ago she moved her loyalty to a salon in Tirgu Mures, about 60km away.
Now she gets it done in Sighisoara ( 0 km away).
Things are tough
Life
Overheard in Hungary.
" Man and the kitchen perform the same function. They both put life in a belly"
I think it's a tad rude.
" Man and the kitchen perform the same function. They both put life in a belly"
I think it's a tad rude.
From a Jack to a King...
I happened to be in Bridgeton,Glasgow today, which is where the 2014 Commonwealth Games will be held. The bank I used to use shut down several years ago, but has now been transformed into a very smart bookies.
I can't help but feel this is not helping the attempts to move the area upwards. The people who used to go into the bank to withdraw their weekly stipend from the government now go in and hand the money over to the bookie.
It would be a good idea for the government just to pay the money direct to the bookie, and that would take the middle man out of the equation.
I can't help but feel this is not helping the attempts to move the area upwards. The people who used to go into the bank to withdraw their weekly stipend from the government now go in and hand the money over to the bookie.
It would be a good idea for the government just to pay the money direct to the bookie, and that would take the middle man out of the equation.
Tuesday, September 09, 2008
Birthday!
You've probably noticed the name of this blog, so it isn't telling tales if I say it's my birthday. Long ago, I discovered various other people had the same date, but that's too old hat to go into.
I left Romania a day late because a horrific crash on the road to the airport last monday morning left about 6 dead and me too late for my plane to Rome from Cluz.
The only thing to do was to take the early flight the next morning to Milan, so an overnight stay in Cluz was sensible. I was delighted to discover that the muzak on the bus into town from the airport was opera.
I took the train from Milan to Via Reggio, Mrs. Lear having landed the day before at Pisa. The railway station at Milan is in the throes of renovation. If it ends up anything like the one at Kelleti it will be fantastic.
We were staying at Camaiore once more at the Oasi di Lombrici, excellently looked after by Roberto and Roberto, and, of course, the pug called Archibaldo.
The first morning, being my actual birthday, Mrs. Lear noticed a cook book in copious quantities, which she bought on being told the author was a friend of Roberta's, and a local celebrity chef.
I suggested she should cook us dinner, which she did that night , drinking two bottles of wine to every one the rest of us put away.
It was a simple meal of Fritata, Pasta in tomato, and chicken in Olives, washed down with Prosecco, local white and red and the dessert ( a scrummy panacotta cake) was assisted by an excellent sweet white, freezy cold and delicious. There are some photographs, but, unfortunately, everyone's hands were shaking a bit too much for any of them to make sense.
Various Ms. Lear's appeared over the next two days and Mrs. Lear's brother, so come Saturday we were at full family strength for dinner at Torre del Lago, where Puccini wrote most of his operas whilst slaughtering the local wildfowl. We stayed at the Hotel Butterfly, but were astonished to discover that the area hosts a famous gay beach. I just can't think of Italians as gay - I suppose I come from a generation which only knew the Italian Stallion.
Anyway, the food was excellent, the sun shone, and I nearly had enough time to finish some of the books I got for my birthday.
The most amusing thing was the endless stream of texts I got from people in UK telling me how heavy the rain was.
I left Romania a day late because a horrific crash on the road to the airport last monday morning left about 6 dead and me too late for my plane to Rome from Cluz.
The only thing to do was to take the early flight the next morning to Milan, so an overnight stay in Cluz was sensible. I was delighted to discover that the muzak on the bus into town from the airport was opera.
I took the train from Milan to Via Reggio, Mrs. Lear having landed the day before at Pisa. The railway station at Milan is in the throes of renovation. If it ends up anything like the one at Kelleti it will be fantastic.
We were staying at Camaiore once more at the Oasi di Lombrici, excellently looked after by Roberto and Roberto, and, of course, the pug called Archibaldo.
The first morning, being my actual birthday, Mrs. Lear noticed a cook book in copious quantities, which she bought on being told the author was a friend of Roberta's, and a local celebrity chef.
I suggested she should cook us dinner, which she did that night , drinking two bottles of wine to every one the rest of us put away.
It was a simple meal of Fritata, Pasta in tomato, and chicken in Olives, washed down with Prosecco, local white and red and the dessert ( a scrummy panacotta cake) was assisted by an excellent sweet white, freezy cold and delicious. There are some photographs, but, unfortunately, everyone's hands were shaking a bit too much for any of them to make sense.
Various Ms. Lear's appeared over the next two days and Mrs. Lear's brother, so come Saturday we were at full family strength for dinner at Torre del Lago, where Puccini wrote most of his operas whilst slaughtering the local wildfowl. We stayed at the Hotel Butterfly, but were astonished to discover that the area hosts a famous gay beach. I just can't think of Italians as gay - I suppose I come from a generation which only knew the Italian Stallion.
Anyway, the food was excellent, the sun shone, and I nearly had enough time to finish some of the books I got for my birthday.
The most amusing thing was the endless stream of texts I got from people in UK telling me how heavy the rain was.
Feel something you've never felt before....
... feel something extraordinary... Parliament, the cigarette for today WARNING: CAN KILL.
This is an advert for cigarettes in Romania.
I'm not sure our own Parliament can kill ( unless you happen to be a British Tommy sent somewhere with utterly inadequate equipment) but I'm sure most of us feel something extraordinary.
Mostly rage.
This is an advert for cigarettes in Romania.
I'm not sure our own Parliament can kill ( unless you happen to be a British Tommy sent somewhere with utterly inadequate equipment) but I'm sure most of us feel something extraordinary.
Mostly rage.
Gurkha Highlander, Last post for now.
I'm just back and started on the piles of letters that require thank you's for donation to the Gurkha Welfare Trust.
Just two short notes enclosed with cheques.
" My father fought with the Gurkhas in WW1 and WW2. He always said he felt safe when they were beside him. Please excuse my writing - I am not so well now, but the Gurkhas are all heroes."
" I have no connection with the military or the Gurkhas, but I was saddened and angry to read that some of these brave soldiers are handing back their medals because of the shabby treatment they receive from this Government. I just felt I would like to help their cause."
Indeed.
Just two short notes enclosed with cheques.
" My father fought with the Gurkhas in WW1 and WW2. He always said he felt safe when they were beside him. Please excuse my writing - I am not so well now, but the Gurkhas are all heroes."
" I have no connection with the military or the Gurkhas, but I was saddened and angry to read that some of these brave soldiers are handing back their medals because of the shabby treatment they receive from this Government. I just felt I would like to help their cause."
Indeed.
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