Depression? Have another glass...

I was in Manchester for the day yesterday, where quite definitely the extra glass of your favourite poison was the answer to our present woes.
I am deeply depressed by the present position. It's always darkest before dawn, but so far there doesn't appear to be any consensus amongst the banks about what would be good for them and for their customers - and by proxy the economy.
So far, they just want more and more of our money ( and make no mistake, it IS our money from both sides, higher charges and taxpayer funds) and are still pretending things are under control. Things are patently NOT under control - not least as it still appears the banks have no idea what their actual liabilities are.
Gavyn Davies is suggesting printing more money - as if it hadn't already happened - but all this will do is destroy our currency - as if it wasn't happening already.
On the other hand, the taxi I took to the station yesterday had no change and actually said " Nae worries pal, I'll get it again". I had proferred £10.
So I said I would give him the £10, and asked him to give me his number so I could ask for him again.
" Nah " he said " You keep the tenner here's my number." And he refused point blank to take the cash.
Several of our tenants are feeling the pinch, though most of them have taken avoiding action. One of the IT people has had two clients go bust on him ( property related so no surprise there) whilst anyone connected with cars is having a very tough time.Even the children's party/petting zoo man is struggling.
Two however are bucking the trend. One is a T-shirt printer ( they do bags and all sorts but call themselves such). People move downmarket in a recession.
The other is a purveyor of exotic substances.
Now that is not his business description on his lease and I am 100% sure there are none about his person or in our premises. He describes himself as an Import/Export agency and runs an immaculate office with an attractive receptionist and two other staff.Bills of lading are visible on desks. But deal in exotic substances he does.
Personally,I disapprove, but in a way its just another glass or another cigarette to help people get through.
He reports his business is up 30% since July.
PS
My friend the Burns Afficionado tells me that he has a limit as to what he will pay for wine. In Spain, he refused to take his own bottles to be filled for 20p per litre as the wine is disgusting. But the supermarket stuff at just under Eur 1 is perfectly acceptable. He prefers another bottle to a mere glass....

Which is worse?

Quite apart from Brown's unbeliievable performance at PMQs yesterday - and Balls' attempts to pull the chestnuts out the fire with the inquiry and his performance on Breakfast TV this morning ( "Why did Mr. Brown say it was a party political matter when it clearly was not?" " No no he didn't. (???) The Labour party will take the responsible attitude and has called for a cross-party inquiry..." Yeah right)-there are two most interesting bits of information that have emerged today. The first is John Major's piece in Times online which rightly shows just how bad Brown is.
Secondly, Guido has a piece about how bad Brown has been for pension funds, investment etc etc - and that's before factoring in the pension grab which must now be approaching the same amount of money as is being thrown at all and sundry to try to save the Labour Party from total disintegration.
So the first question is, who was a worse PM, Major or Brown?
More interestingly, which would you prefer over the next few years on a loan? 3% over base rate or 2% over LIBOR? Answers please.

Wifely duties.

Today, being a long day at Uni for Mrs. Lear,she is first in the bath.
I then took a shower.
Normally, it would be the other way around.
So imagine my surprise when greeted whilst she was doing her teeth by a sharp remark that I had not cleaned the glass divider of the shower.
The problem, you see, is that as she is normally the second into the bathroom, she cleans it all off, hangs up the shower mat, bath mat, repositions the loofah and so on.
I had never noticed.
So she informed me that this was just one wifely duty, and one that I had neither paid attention to nor appreciated ( only one of many I am sure).
So, as they say in the Girls Mags, chaps, be sure to notice the little things.
Because if you don't, your wife/girlfriend/mistress/partner/A.N.Other will definitely make sure you do.

Brown's Economic competence? I don't think so.

I came across this from " Burning our money"
From day one of NuLabour being in charge I have argued that they had no beliefs other than power and retaining it; that they have no understanding of economics,of how markets operate, of how trade operates; no ( see Ed Balls latest what a bloody cheek) desire to raise people up; and nothing for anyone except themselves.
How depressing that we have had a complete waste of 11 years. And probably at least another 4 or 5 to stabilise the complete and utter shambles that will be their legacy.
But then, it was ever thus. A period of Labour power, spending, taxing and ruining society, followed by a period of Conservative power sorting out the mess. And just when it's all right again, people want a change and allow Labour to bugger it all up again.
Sigh.

The Great Day

There we were all lined up in our Sunday Best - the Mayor with his sash of office and even unbroken new spectacles. It was a beautiful day, with the temperature in the low 20 Cs
It was the 10th Anniversary of the visit of Prince Charles to Mosna, and it would be marked by the dedication of a plaque.
The party the night before had primed us all nicely, and one or two had started the celebrations first thing in the morning,so there were a couple of people who where swaying slightly. Fortunately, we got through the whole thing without mishap, and then made our way to the City Hall ( for thus the Village Hall is designated) for a three course lunch - quite early too it was only about 4pm.
I say three course lunch. This is not entirely correct. We started with meat-ball and tarragon soup, followed ( naturally) by Mosna cabbage salad. This is the time of year it is best -still greenish and sweet, rather than white and more bitter as the winter rolls on. There was of course tuica, beer, cherry liqueur, wine and a sour cherry concoction that literally stripped the inside of your mouth. As it was a special occasion, Ballantines whisky was also available to those and such as those. This seems to be the preferred whisky, I think because Queen Victoria used to drink it, a lady held in great esteem in Romania.
The next course was a kind of fried white fish, which I was assured was a dog-fish, but I'm not convinced. It was quite sweet and most tasty, especially with the sauce - tomato and garlic - and some boiled potatoes.
Next up was the piece de resistance.
Ham and turkey jelly.
Now there are many people who will go " Yuck!" at such a prospect, but I am particularly fond of chicken jelly - something Mrs. Lear abhors, so I never get it. Needless to say I tucked in with a will. I'm quite sure one of the reasons everyone is so friendly towards me is I eat everything put in front of me and do my best with the various drinks.
Long before we got to this stage, the Director of the Old Folks Association, who was one of those who had partaken early, had quietly slid beneath the table with a beatific smile on his face. He would just be left there until he woke up and made his way home. I am a member of this association, honorary until I turned 60 but now a fully fledged member. We gifted them the grapes from one of our properties and they keep giving me bottles of home made wine.
Finally the special local cheese was consumed and the serious business of toasting each other could get underway.
Alin, myself and the Mayor had to slip away early as we needed to sort out some property titles.
I was asked the other day how corrupt Romania was.
I think the answer is;what is corrupt? Taking half an aid contract to your back pocket definitely is, but suppose someone has a problem ( something wrong with a property title) and bureaucracy being what it is in Romania, only a powerful friend can sort it. Is it wrong to take a payment for sorting such a thing? Lawyers do it every day....
Anyway, a visit was made to the lady in question. She and her husband had jointly owned a property and when he died she inherited his half. In Romania this is shown as her owning half the property from the date of purchase and owning the other half from the date of the grant of the equivalent of probate.
Except the state official who had given her the new certificate had messed it up saying she owned half and the other half was owned by her husband - at a date after his death. You may say how had noone noticed before now. The answer is why would anyone read it? At the time she would have had no intention of selling. Such a mistake is seriously expensive and difficult to sort out in Romania.
The only one who could help her was the Mayor, who could give a certificate in respect of the death of her husband ( such things are locally held) stamped by the Mayor's office, the regional capital's office and the land registry. And if you don't know the actual person who will be wielding the stamp you can forget it.
Quite properly, he outlined the problem, told her what the various costs would be. She, knowing what was expected, thanked him profusely and offered a percentage of what she was selling the land for for his time. Quite properly, he declined, saying it was his duty as Mayor to help his constituents. Quite properly, she then said she would make a donation to his reelection fund.
Honour being satisfied on all sides, we departed with the various papers. By the time I'm next in Mosna, I'm sure all will have been corrected.
Oh, and just in case you are wondering, the re-election fund is the Mayor's private property.
If he retires, it goes with him....

I Just spotted this...

...and I've come to the conclusion I have a warped sense of humour

Another simply beautiful day

As ever, things start very early here and go on until everyone literally HAS to go to bed.
This morning was no exception. Alin arrived at ten past seven yelling that we were late and roared me off all of a couple of hundred yards to the Rustic - I've mentioned it before - where we conduct our lower level discussions in Sighisoara. I've always wanted my own table in a restaurant like the Mafia bosses have, and I have now achieved this in various restaurants in the area. The fact that they are always the one table encased in glass and labelled "non-smoking" is not necessarily to detract from my conceit.
This morning the first meeting was with the accountant who was desperate for us to borrow a whole lot of money from a particular bank. One of the nice things in Romania is that you can keep all your cash in one bank and borrow whatever you want from another - except its almost impossible to borrow anything in Romania. But Carmen the accountant had clearly been bribed by this particular bank to get our business - you don't do anything here unless you are bribed or there is a connection.
To keep her happy I named a figure - it was a figure appoximately 5 times our gross assets here and clearly would never be accepted by any sane bank.
The next meeting was fascinating. The last time I was here I was approached by two people, one from Bucharest and one from Brasov, on a conning mission for some of our land. Not being a complete idiot, we turned them down - but luckily they could not proceed without us.
Suffice to say I spent three hours with them today and was impressed by what they had actually produced. We left saying we would do certain things and they were to do certain other things.
We spent the rest of the day in Nemsa buying land and discussing a couple of projects - I don't think either of them will come to fruition.
So at lunch time ( 6pm) we were in the restaurant behind the petrol station in Medias when the Romanian contact phone rang. This is the one of four that Alin always carries.Interesting statistic - there are 24.5 million Romanians and there are 92million mobile phones registered in the country. In Sighisoara there are 15 banks and 24 mobile phone shops....
It was the B ( Bucharest and Brasov) team - were we free for dinner?
Now in fact we were not. We had told the Mayor we had important information for him - and he didn't want to meet them. So we had a slight keystone cops scenario as we excused ourselves from their company and made our way to the BinderBubi in Medias.
We had an excellent meal with some truly outstanding local wine. For those of a culinary interest the ciorba ( soup) was tarragon and pork,and then steak with pepper sauce. The more important element was the tuica, which neither the Mayor nor I rated very highly, Cuic beer and a bottle of excellent local white wine. The Mayor insisted we would have his own tuica ( complete with bubbles which defines excellence in this deadly stuff - today's had none) tomorrow night after certain formalities are completed. What worries me is how large a bottle he is going to open - they have been working for weeks for this particular event and nothing will do but a serious blow out after it.
The Mayor's wife has a fluey cold and has been in bed for the last few days - but nothing, she insists, is going to prevent her attendance at the ceremony tomorrow - not even death. Unfortunately, she is the one supposed to produce the food for the select post-event party, and in her present state I expect little or no food, but rather more than is strictly neccessary in the drinks department.
As we made our way back to Sighisoara in time for the Steau match, the contact phone rang.
The bank had agreed to our request for the money.
Now the only thing I have to work out is how to refuse it without offending anyone.

A beautiful day

Back in Romania and ready for anything despite not getting much sleep on the train last night. For some reason I couldn't turn the lights off in my compartment. That and the ticket inspector chasing miscreants up and down the corridor.
Anyway, I arrived in Sighisoara about 9:30 in that gorgeous glow of autumn when the mist envelops and caresses the scenery whilst the sun turns everything to gold. It was the most wonderful morning, rudely shattered when Alin said I only had 10 minutes to shave and wash and get down to meet the accountant, then to get to Alma Vii and then to get to a LAG meeting.
We somehow made it, as the sun melted the mist and the countryside displayed it's full autumnal magnificence.
We finally gifted what remained in the house at Alma Vii to the old folk's home. It largely consisted of clothes which were warmly received. The wrecking crew had already been at work for 2 days removing all the old bits of concrete, wood and general detruitus from around the house, and the decision was taken to remove most of the vine which was so enormous it blocked the view. Most of the wood was being taken by one of the workers to make arks for his pigs. He and his younger brother had been in Spain working for the last 7 years but had been forced home by the economy there. Fortunately their eldest brother was a local councillor and had been able to get them jobs...
The LAG meeting mostly consisted of a diatribe against the government which STILL hasn't put in place the requirements and funding for LAGs, but we soldier on.
Much of the evening was - as ever- taken up with lunch. The Unglerus in Biertan serves the best cabbage salad and beetroot salad with horseraddish. All the men eat the horseraddish because they believe it is good for their - ehem - manhood. Mind you, there is lots of stuff they eat for the same reason but personally I have seen no evidence that any of it works. Being a macho society however, has it's required rituals.
The Mayor is much vexed by the world economic crisis. Not, as you might expect, because it is having an impact on him. Rather he is wondering how best to profit from it. Romanian banks don't really have the problems others do. Getting a loan is more difficult than a camel passing through the eye of a needle. But the Romanians keep much of their money literally under the bed ( encased in some yellow powder that stops the mice eating it) so there is in general a shortage of credit. The Mayor's latest idea is that he should go to London with the Council's cash and offer it to the highest bidder. He had heard of fabulous wealth being offered for overnight money and felt it would do his health good to spend a few weeks in London getting several thousand percent overnight for his elector's cash. I pointed out that the reason some banks were prepared to pay so much was that they might go bust, in which case he would lose the lot. He decided it would be better to leave the money under his bed until he needed to spend it.
He decided some of it needed spending this evening on a rather splendid local wine which would put most French cru classes to shame.
It was the equivalent of GBP3 .50 in the restaurant.
I helped him drink it - purely as fact finding of course.

Somme

For a very good reason ie someone is going >I hope > to buy me a slap up meal I am going over my Somme books and maps for a trip next May.
This year being the 90th anniversary of the armistice, there have been innumerable programmes not least the excellent 1914/1918 on BBC4.
Fast forward to last Friday night when Major Paul Pitchfork MC of the Royal Gurkha Rifles gave a talk to various people in Glasgow, which included descriptions of how they went about their business, how they lived and how the situation can be sorted.
I was struck not only by the differences, but by the similarities.
Our wars are fought by our youngsters, largely in appalling conditions, with terrifying judgements needing to be made daily and for little or no thanks from what I believe is largely an ungrateful nation.
There are those who say we should not fight overseas at all, that we should have no armed forces.
My reply to them is that this government, even as it pretends to be giving new landrovers ! it was already in last years budget and got put off until they have been shamed into giving them ! is quietly increasing recruitment, not least in Nepal where a doubling of Gurkhas is being promulgated over the next 5 years.
I hope to God they get not only the recognition they deserve but the proper equipment to do the job properly as well.

NOT quite the right name....

Landing in Budapest some hours late today, we taxied past a somewhat decrepit aircraft emblazoned with KRASAIR.
You might not be too botherered by this until you find out that S in Hungarian, Romanian etc etc is a "sh" sound.

What a complete Brownie.

No, I'm not referring to Andrew Marr's interview with Brown on AM which was - as ever - utterly psychophantic.

I'm referring to the non-questioning or contradicting of Brown's statement that " The oil price has come down more than 50% over the last few weeks and I'm asking the oil compnaies to respond in kind and reduce petrol prices."
What a despicable misleader of the people who elected him. The petrol price is almost entirely governed by the various taxes which make up some 70 odd % of the price of a litre at any time - with a higher percentage as the price rises. In fact, the oil price itself probably only made up about 25% of the price you pay at its highest. That has now fallen back to the more traditional 15%.
So stop trying to claim credit for what economics has made happen.
And stop trying to pretend that you can spend your way out of a recession.
You can only SAVE your way out of one.

Is this the future?

I had a most revelatory phone call this morning. This is not verbatim, but it's the gist.
" Is that Mr. Lear? This is Central Mortgages."
" Yes"
" You applied for a mortgage and I'm going to take you through security and your application."
" No I didn't"
"Didn't what?"
" Apply for a mortgage"
" Oh, must have been a personal loan then."
" No, I didn't. Where did you get my 'phone number?"
" Er da-di-da says here customer servicies 5033"
" What does that mean?"
" It means you applied for a loan"
" No, I did NOT!"
" Well you must have done, I've got your details here."
" I'm only going to say this once more - I did not apply for any kind of loan."
" Well, Mr. Lear, let me just say that as a preferred customer, we can give you £5000 immediately, provided you qualify.."
" How can I be a preferred customer if I've never heard of you, never asked for a loan, nor, I may say, given you my phone number?"
"That's as may be sir, but I can assure you we have £5000 just waiting for you.. let me put you through to the lady who will actually give you the money.." click.
" Hello? Hello?"
Click. " Hello, Mr. Lear, this is Sandra here. I'm terribly sorry you are quite correct, you are not a customer of ours so we can only give you £50 to £500 as a new customer....."
" But I don't want a loan."
"... and the APR is a very reasonable 222.5% made up of ..
" WHAT? 225%? Are you mad? Even credit cards aren't any more than about 30 odd%!"
".. and for your security and protection this conversation is being recorded.."
I put the phone down at that point.
But I'm willing to bet that there must be people who take up this sort of offer.
But how did they get my phone number?
After digging around a bit, I discovered that there is a company that collates mobile numbers. Obviously, not pay as you go, but those that are on contract can be " tagged" with a name.
And they sell this information to whoever wants it.
Makes you wish for 1984.

Ah, now things are beginning to make a bit of sense...

"Russia's richest man is having money troubles, and the country's largest nickel producer could change hands as a result. Forecasting firm Global Insight reports that Oleg Deripaska isrunning out of time and money to pay back the USD 4.5 billion he borrowed from a group of foreign financial institutions in April 2008 to purchase a 25% share in Norilsk Nickel. Deripaska used the shares in the nickel producer as collateral, but their value has since plummeted to the point that they no longer cover the money he owes; Deripaska now needs USD 1.8 billion to refinance the loan, according to the report.Deripaska's creditors have granted him an extension until the end of the month, but it is unlikely they will be so generous again. The oligarch has already sold his assets in Canadian automotive parts maker Magna andGerman construction company Hochtief, but these deals still have not produced enough funds to pay off the debt, the report states. Having exhausted every other possibility, Deripaska is now seeking help from the state."
PR Newswire 23 October 2008
Remember when Brown tried to con the meedja about the election that wasn't, about the troops coming home and they turned on him?
The same is about to happen to Mandelson.
PS
And for those of us who think Mandelson is a lying toad, I think his letter to the Times today amply proves our point.
PPS
Oh, and, of course, the News of the World's Exclusive

The US leads the way

"The spectacular dollar rebound has geostrategic implications. Heady talk earlier this year that dollar hegemony was coming to an end - or indeed that the US was losing its status as a financial superpower - now seems very wide of the mark."
It always was. I have repeatedly said, the US economy is so flexible that it will recover before anyone else. Every TV channel in the US is reporting an upturn in every State of house sales and so is the Times. Yes they are much cheaper than they were. Yes it's hard to get the mortgage. Yes it's bloody for those who have lost their houses. I sincerely wish the UK only had to fall another 9% to get better.
But it's got much more to go, and by the time US house prices start rising again, we will still be looking for the bottom.

Why was Mandelson so much with Mr.Deripaska?

I've just read the full statement from George Osborne here :http://jamescleverly.blogspot.com/2008/10/osborne-and-mandelson.html
Two things strike me. Only once in all the meetings was Mandelson not with Deripaska.
If anything, it looks very much as if Mandelson is in Deripaska's pocket.
Secondly, I can't help but feel Mr. Rothschild - who handles Mr.Deripaska's money, or some of it at least - has an ulterior motive.
Who knows?
They may all be as innocent as GO himself....

A bit of sense

OSLO, Oct 24 (Reuters) - Norway's biggest banking group DnB NOR said onFriday that it would reverse write-downs worth 2.59 billion Norwegian crowns($369 million) on its liquidity portfolio due to new accounting rules. The move follows new regulations announced by Norway's finance ministryon Oct. 16, that allowed the reclassification of trading portfolios to"held-to-maturity investments". DnB NOR said its liquidity portfolio would fitinto this category. "After the reclassification, the accumulated write-downs will be reversedover the residual maturity of the portfolio, which averages 3.25 years, and willbe recorded under net interest income," DnB NOR said in a statement. "There have been no actual losses or events of default in the portfoliosince the start of the financial crisis, and the portfolio is still of superiorquality," Dnb NOR added. "If no reclassification had been made, the group would alternatively havecharged 1.199 billion crowns to the 2008 third quarter accounts due a furtherwidening in margins." (Reporting by Aasa Christine Stoltz)
What this means is, instead of the mark to market that has decimated the banks, in Norway, they can spread the "mark to market" value over the life of the loans.
So, for example, instead of writing off $369 million TODAY, they only have to write off just over $100million today. But if NEXT year the mark to market is not $269 million loss but say only $100million, they still have 2.25 years to final maturity and would only need to write off $45million. And of course the write down helps their tax position too.
Good thinking.

Getting worse?

With the £ crashing, the FTSE crashing, the Banks sitting on their hands and the office having run out of tea bags, things are pretty bleak.
But I remain convinced now is a time to buy.
For a start, if the £ is well down, that will make exporters very happy. Because of oil's precipitous fall, inflation overall, will, I suspect, be muted, and I would be willing to bet we see interest rates of 3% or lower from the BofE within 6-8 months. All these should produce higher profits ( or lower losses) as time goes on. Quite a few seriously good businesses are now sitting on PEs of less than 4 - and yielding 11% plus. Of course they will retrench, but two in particular I like have never been on less than a PE of 10 and a yield of 3% - which probably means they are about to go bust if I like them
The other point is it's much easier to buy as a share drops than when it is going up.
We have a long way to go, and if you feel you would like to wait feel free.
But I maintain my view that 3800 on the FTSE, give or take a few points, will be it.
My left palm has been seriously itchy for a few days......
PS
Not everyone thinks left hand itchy is money coming in. My Granny always said it was and that's good enough for me.

How to lose friends and alienate people

Gordon Brown
1) Uses anti-terror law to steal Iceland's money ( see Guido and We are not Terrorists)
2) Force the Icelanders to take money from Russia ( they might want the abandoned American airforce base)
3) Lend them money to use to pay us back - er ...without releasing the frozen money.
As they now say in History lessons " And how do you think they feel about all that?
Just in case you've forgotten, the Icelanders won the various Cod Wars.....

The art show

One of the reasons I was in Romania this last week was for an art show by Ion Constantinescu. His show was in Medias in the Cultural Museum, and the great and good from round about were invited - and me.
Best known for his paintings, his works on woodblock and other gravure methods are what set him apart from his contemporaries.He uses both lime and chestnut,using the different textures of the woods to give different effects, and create other meanings to his work. His imaginations is clearly thrown forward from his soul, and many of his works display allegorical and semi-mystical themes. For only a few Lei you can have something that speaks to your mind.
We were invited for lunch on Sunday before departure for the overnight train back to Budapest. You might think the juxtaposition of " lunch" and "overnight" sounds strange, but not in Romania. We had excellent salad soup, made with lashings of cream, eggs, bacon and garlic - clearly to keep the vampires at bay - followed by sarmale, pork chops, roasted vegetables and boiled potatoes of such excellence that everyone had third helpings of them. The grand finale was a cake, made with intermingled sponges of different kinds. His own wine was decanted from wax-sealed bottles, and the tuica was made from pears rather than the more usual plums. The lunch was in his studio, surrounded by paintings, castings, wood blocks and catalogues of past and present exhibitions.
You may ask what all this has to do with doing business in Romania, and the answer is very little really. But he is a member of the Romania Artists Union, a prestigious self-help association that requires exacting standards of excellence. One of their objects is to find and promote new young talent. To this end, our company has donated a prize for the best young artist of 2009, and as a thank you, Ion intends to present a picture at the ceremony on November 4th 2008, commemorating 10 years since Prince Charles visited Mosna.
It's not business as we know it, but it's the way things get done in Romania.

A Man's World

I'm back in Romania having swung through Balaton,Vizvar and Pecs in Hungary.
Balaton I could hardly see as it was so foggy, and the overnight stay was really quite spookey. Siofok is a summer resort town where everything clearly shuts before the end of September. I had great difficulty getting anything to eat, but ended up with an above average meal in the last restaurant that was still open.
It took forever to get toVizvar through the fog. I had thought that it might be good to own a cottage there but was a bit disappointed. If you lived in Pecs or Budapest, it would be fine for weekends and holidays, but there was really nothing there - and it's a long way from anything apart from the Croatian border. Good for smugglers I suppose.
Pecs was delightful - very Austro-Hungarian empire. I stayed the night in a hotel that still rang of hussars in beautiful uniforms clanking up the stairs. Next morning the sun decided to shine, so I was able to have a quick look round before heading back to Budapest to get the train. The lovers locks were quite extraordinary and strangely moving. I wondered if anyone ever went back to remove their padlock when a love affair cooled. I was delighted to see that Capitalism flourished here - there was a shop within a few meters that offered all kinds and sizes of locks. Weirdly, they all came with three keys. One for each lover - and the third? I have no idea.
Sighisoara had put her best clothes on for my arrival - it was warm and sunny.
Everything here is seldom to be taken at face value. For example, why would two men in their early 40s buy two pieces of land beside each other within a village at a vastly inflated price - and then ask to buy some of ours? I didn't give much credence to the story that they wanted to have a house each and they needed the extra land for a swimming pool or place for their children to play. I think it much more likely that they are planning a rather large hotel as the land has superb views to one of the most attractive fortified churches, with hills beyond. Property prices worldwide may not be looking healthy, but here in Romania something that could be bought for Eur 10-15,000 a year ago is now virtually unobtainable at Eur 30,000.
If all else fails at least that will be something to fall back on.....

A true trader

"Nightmare times with huge selling pressure, a vicious downward vortex, badly advised politicians, massive regulation to come and a backward step for innovation and enterprise.
Let's hope we can do well out of this"
This is the message I got from a money manager.
Has to be the right attitude. I will repeat, this could be the once in a lifetime opportunity for us all - those with a bit of cash and what used to be called " bottom"*.
* = fundamental character; staying power .
BUY

Sou'side Bloggers

Apparently, somehow, the local community newspaper has managed to pick up on this blog.
So here's the link.

An interesting exercise

We are having some people for dinner tonight and as always there was the debate about what to give them.
Mrs. Lear - now working hard on her eco-land management degree - came up with a brilliant idea.
There is a farm shop on the campus ( as its an agricultural college covering over 2000 acres they have lots of stuff for sale all year round). So why not source the entire meal from the shop?
Starter : Melted goats cheese on salad
Main course : venison stew with onions and carrots, accompanied by mashed potatoes and cabbage.
Dessert: Tarte tatin
Cheese.
Dinner for 6 for £37 and it all came from the shop and it is all organic and looks seriously good.
Apart from the lumps of earth on anything that grows that always seem to accompany such produce.
Adds to the weight you pay for of course.

Volatility & Volume

If today on Wall Street is anything to go by, I'm right about the bottom. OK its marginally lower than I thought but the Dow traded in a range of 1100 points, at one point over 700 points down then up nearly 400, with the third highest number of shares ever traded.
Typically, huge volume churns with wild swings up and down have marked the bottom - or very close to it. The volatility index is at its highest ever - but very similar to when the bottom was reached in 2002.
I'm not for one second suggesting it will be back at 14000 anytime soom - but it WILL get back there. If you care to have a look at the chart and the notes, the really spooky thing is the October 9th Date ( I know todays the 10th but hey)
2002 - Dow post 9/11 low at 7286
2007 - Dow highest ever 14164
2008 - Dow returns to 1998 levels.
And I won't mention 1987 because that was October 19th - biggest percentage one day fall ever of 23%. But the biggest one day points fall was 30th September 2008 - 778
Keep your rabbits foot handy in future between the end of September and beginning of November.
PS
Actually its not that easy to buy stock. The MMs got rid of theirs long ago and are effectively short - so if you want to buy, up goes the price - which is roughly what happened in the States with the huge swing.
PPS
Someone has suggested to me that the reason for keeping the rabbit's foot handy is that if things get much worse we might need to eat it.

Lehman's CDs Part 2

OUCH! The settlement just cost approx. $367 BILLION.
That means that collectively the people who insured these have to pay this money to those who bought the insurance.
Now in fact, in aggregate, this is a zero sum game - those who bought insurance get the cash and those who sold it lose the cash.
The problem, of course, is where someone doesn't have the oh lets say about $1billion, so they go bankrupt - which means their counterparty is down $1billion which might put them into liquidation. And so on.
What's quite sure is no bank is going to lend any other bank or counterparty any money until the reverberations have died down in a few weeks.
They really need a clearing house so these things can be offset.
Otherwise we really are in the Ice Age.
PS
That just reminds me of the book of the same name by Margaret Drabble. It harks back to the 1974/5 debacle. A beleaguered property developer can't sell anything and the bank won't help ( so what's new?) his marriage falls apart etc etc etc. One of the sites they owned, a gasometer, attracts him strangely with its brooding bulk and silence. He feels most attached to it.
At the very nadir of events, he is suddenly offered a price for the site, and he takes a long last sad look at it.
But the gasometer has befriended him and looked after him, and pulled him through. Excellent story, excellently written.

Icelandic Banks again

I just spotted this about Icelandic Banks. In essence, Government Ministers were asked about deposit guarantees months ago, and even state that Icelandic Banks are safe.
Shows how much they know.

British Government cited for Fraud

Just had a call from Barclaycard, wanting to verify a card transaction.
It was for companies house for online filing.
The most polite young lady took me through all the security, then said :
" Ve are suspecting this transaction - it saysCompanies House UK Gov."
Clearly snake oil sellers.

Doing what comes naturally.

I just love this story. Two monkeys, both sad and lonely, start to bond.
Then things progress and hey presto! baby monkeys.
I do like a happy ending.

Lehman's CDs

Guido has a good bit on this. He is soooo right.
The banks need all their cash to cover this one. It looks as is the pain will be broadly distributed - but if you're retiring soon, forget the last projections you saw for your pension.They will be down about 40% next time you look.
On the other hand, in theory it should all balance out and if Fannie and Freddie are anything to go by it might go without too many hitches.
Maybe.

Got it slightly wrong

I apologise for the mistake - the bottom wasn't 4250, it was about 3800 but now at 10am its about 4100.
I still say this is a superb opportunity for those with a little cash and guts.
Mrs. Lear asked me this morning what I was doing about it.
I replied that as I was offically now a senior citizen, I was retired.
Somewhat.

This is perhaps the most disgraceful thing about this Government

Icelandic banks have been taking wodges of cash from UK citizens for years.
Now it transpires that - in total contradiction to International Banking protocols -
the Icelandic Government & Central Bank won't cover them. And , er, it transpires our own FSA hasn't checked any of it because er, its part of an EU piggyback. And , er, the EU isn't coughing up either.
In other words, if you have money in eg Icesave, a) you can't get it out and b) you will need to claim compensation from that nice Mr. Darling - which may take some time. Unless ING simply hand it out willy-nilly.
I suspect you won't get the interest you thought you were going to get and I'm willing to bet that - as always with these sort of things - the records are in a bit of a mess, so I'm really really sorry but you will have to wait.
Jonah's really done it this time hasn't he?
PS
And Councils and Transport for London have given them money as well! Are they collectively mad?

Bottoming out.

Just in from Nasdaq.com:"Just reported, August pending home sales rose 7.4% month-over-month on a seasonally adjusted annual rate, compared to the expected decline of 1.3%. Pending home sales were down 2.7% in July. Pending sales are up 8.8% compared to last year. The pending home sales report is released by the National Association of Realtors and is based on signed real estate contracts for existing single family homes, condos and co-ops."
In other words people in the US are now seeing value in property, so it "should" be bottoming out.

At last!

Finally, everyone has woken up to the fact that
a) They all have to pull in the same direction
b) Sticking plaster is no good when amputation is required
and c) it certainly isn't over yet.
This is, to paraphrase Churchill, not the beginning of the end, but it might just be the end of the beginning.
My own view is that the next year or so could be that once in a lifetime opportunity that we all long for.
I doubt assets will be able to be bought as cheaply in the years to come. My own chance was in 1974/5, but, of course, as a young married man I had no money and I was too busy with my own business to raise my eyes to the bigger picture. The difficulty will, as ever, be separating the wheat from the chaff, and in getting the money to make it work.
But it will happen.
Just don't hold your breath.
PS
It remains to be seen how on earth all this is actually going to be paid for. It certainly makes Brown's Golden Rule look utterly ridiculous.

Just a feeling

I have a twitch in my nose that tells me we are about at the bottom.
Not of the housing crash of course - that has a long way and a long time to go yet-but the banking and stockmarket turmoil may be close to achieving some kind of equilibrium.
As Guido has rightly pointed out banning short sales has actually made matters worse if anything.
It does slightly beg the question what all the hedge funds are going to do for an encore...

Country upgrades

Fitch ( a ratings agency) has upgraded the Republics of Komi & of Karelia. Komi is 70% forests and 15% swamps.Karelia is 85% forest and about 5% lakes/swamps/rivers.
I assume that wood and fresh water are becoming more valuable. Winchester Whisperer is very into water at the moment -perhaps an area for investigation?

Fannie's good

Actually, it's Fannie and Freddie - their swaps ( about $500 billion) went well yesterday.
Now if only the $400 odd billion of Lehman's go as well later in the week.......
IF..

Only another couple of percent...

..and the FTSE will be around the 4250 I suggested as a buying level. The same applies to the Dow to get to 9500. We're nearly there. Capitulation has started. Bolton and Buffett have both started buying ( they can afford to) so in a very short while it will stabilise - and hopefully move up thereafter.
I hope.

Blame everyone - except me

You may have noticed that I have blamed both Bill Clinton and the EU for the present utter debacle.
In fact, everyone is running round blaming everyone else, and trying to exonerate themselves.
I think it's worth noting though, that despite being connected, Clinton and the EU bear different reponsibility.
Clinton's administration put in place the problem with the mortgages. In itself, even $1 trillion of mortages being in bother wouldn't normally be the end of the world. Just write off $500 billion ( which the banks have done) and you have something remaining which quite possibly might make you a fortune.
What has created the present disaster is the requirement to mark to market. So if you have say $10billion in mortgages in whatever guise, and the underlying assets are say 41% DOWN as they are in California in the last year, then in practice you have to write off $4billion odd.
The problem is these are unsellable at the moment - so their value is effectively zero. So instead of a $4billion write off you have a $10 billion write off.
Even very very big banks can't write off many billions without eroding their capital bases enormously. And they have to do it every day by close of business.
Unless there is a suspension of the mark to market requirement, not only won't there be any banking system left, there won't be any banks left.
Don't want to worry you or anything.....

Blame the EU banking rules

Christopher Booker in today's Sunday Telegraph points out that the " mark to market" rules brought in under Basel 2 for banks have effectively destroyed every banks' assets. When there is no market, the value drops technically to zero.
What you have is solvent banks without any ability to borrow or lend - which is what we have at the moment. According to various sources, the German Government has guaranteed all private savings, and , as the sainted Robert Peston says on the BBC news, " If they really have done this then the UK will have to follow suit."
So much for EU members pulling together.
Maybe now our incredibly naive and stupid government will realise that our EU partners only implement the bits that suit them - unlike ourselves.
Unless there is some clarity before tomorrow morning, the markets will disappear through a hole in the floor. There is already talk of Barclays charging small businesses 15% for money - whether they already have it agreed or not - and just see how long a cheque now takes to clear fully into your account.
UPDATE.
FTSE opened approx 5% down

Which psychic...

...dot com is a domain we own.
I have been fascinated to watch its traffic slowly increase over the last couple of weeks, as the credit crunch has bitten deeper and deeper.
Suddenly today, not only has the traffic jumped but so have the clickthroughs.
I can only suggest Ben and Hank, Alistair and Jean-Claude are trying to find the answers.....

Tim Fortescue

I missed the obituary of Trevor Fortescue - always known as Tim. His school masters had always referred to him as Weary Tim and the name stuck.
I knew him best when he was working for Nestle in Vevey, and was a frequenter of their chaotic household, overseen by his first wife Marjorie, whose culinary skills were somewhat challenged. Her Garbage Soup was definitely an acquired taste, and her younger son, when in our house and offered scrambled egg, demanded to know where the black bits were.
Tim was the essence of the patrician English Gentleman. Polite and thinking in leaps and dives, he was always good company. That he was given substantial obits in three national newspapers ( The Guardian and The Times as well) merely emphasises his position.
It speaks volumes that he was the MP for Liverpool Garston, a Labour/Conservative marginal, and which is now firmly Labour. An extremely able and astute man, we lost touch after he divorced and remarried.
RIP

Blame Clinton for this mess.

I've just read a most illuminating article that I missed earlier in the week in Coffee House. Iain Dale drew it to my attention.
It is quite long, but the thrust of it is that because the Democrats in the shape of Bill Clinton came in in 1992, their positive racial discrimination led to lots of poor white, black and Hispanic people in the States getting mortgages. In effect, the new rules laid down meant not only 100% mortgages but significantly higher loan to earnings offers.
That was fine for a few years. Unfortunately, poor Americans are worse off now than they were then - their earnings have declined in relative terms. So, strapped for cash, they remortgaged say 7 years ago, and then again 2 or 3 years ago against the equity in the house. Unfortunately again, they were no longer remotely able to meet the payments - and the equity was gone, and now has become negative.
I have to say I had long wondered how it all became quite so dire, but this explains it. In effect, the Clinton Administration forced Banks and mortgage companies to abandon what might be described as prudent banking in pursuit of a chimera - everyone must own a house.
This is patently absurd. Most people can manage to make regular payments - but many can't. Whether we like it or not, Capitalism's way of dealing with a loan is to make regular payments.
So, as the article says, don't blame the Republicans. Blame the Democrats and their Politically Correct views that have now destroyed America's banking system.
As ever, Government interference destroys, rather than creates.

Mrs. Lear's first day at University

Mrs. Lear has gone back to Uni to study eco-land management.
She is doing this at a place called Auchincruive, from whence many years ago I used to buy all manner of vegetables and salad stuffs for the Fruit Market.
So today was enrollment, and off she toddled down the road to register.
I won't bore you with too many details, apart from the contents of the goody bag handed out to all students.
A diary and some sweeties.
A stress ball and a list of do's and don'ts for students.
A Tunnocks Caramel Wafer - an icon of Scotland's culinary firmament.
And finally, two condoms.
Of a brand I'd never heard.
Makes one almost long for those days again....

Total despair

I cannot believe Mandelson is coming back. The epitome of lying conniving twisted politicians is being allowed to strut the stage once more.
Surely the British people are not SO stupid as to think this is clever or a good move?
UPDATE
I should have known. The Daily Record, Scotland's Daily Mirror, praised the appointment in its leader as " terrifying the Tory Toffs" or words to that effect, and praising Brown for leading the fight against world financial panic. I think they mean his statements that " Er, yes well, we will do everything necessary" Except he isn't.

It's an ill wind...

The present credit crunch is having a most salutary effect, as far as I can see, on people's spending habits, and their saving habits too.
I had two people lined up to take up some property in Romania, and they both withdrew. I don't blame them. I probably would too if I hadn't been out there ( which neither of them have).
More interestingly, the drop in food sales hopefully presages a more commonsense approach to food ( don't throw so much away) and the news that Northern Rock has withdrawn some of its savings offers because they have been inundated with cash, says more about UK2008 than any survey.
I was in the Glasgow office of HSBC today. The reason I was there was because there have been lots of posters all around Glasgow, roughly saying that HSBC wants your business account - and is prepared to do quite a lot to get it.
The office was completely mobbed with people trying to fix up mortgages. They had extra staff on just screening out the no-hopers and handing out forms that needed completing before any interview could be granted.
Fortunately, I had an appointment with their business manager, who was not only affable, but also helpful.
I'm looking for development finance for the domain names business, with a view to developing a mega-site which will attract lots of people and earn lots of money. The problem is it will cost quite a lot to develop. I am a great advocate of Other People's Money making me rich and them a modest return.
Astonishingly, he was really enthusiastic as I showed him some of the things we do. It transpired that, as a Bank, they are largely funded by deposits and trading companies in the East ( Their real name of course is Hong Kong and Shanghai Bank Corporation and founded by a Scot) and are looking to spread their loans into different areas, not only of the globe, but of businesses). Their deposits have apparently rocketed in the past few weeks - so much so that they can't actually give a return on lots of them ( they won't lend huge chunks to other banks, so its down to getting lots of people like me on board. Mortgages? No problem - as long as you have 25% to put down ( as it always used to be. ) Oh, and no interest only - capital and interest only.
Sigh. How nice to talk to an old-fashioned banker.
Of course, their guiding light was a Scot, Willie Purves, who set in tablets of stone how HSBC would do business. No one has ever dared to question it - even though he retired 10 years ago.

First catch your pig...

I've spent the last two days looking at some of the things that LAGs ( Leader action Groups) have done in Scotland. The idea was that I would be able to take some of their ideas back to Romania.
Unfortunately, the problems here are not the problems there.
I would mention three projects in particular.
The first was an inter-village bus service. They already exist in Romania - it's the only way for most people to travel about, so the buses are mostly full and are therefore cheap & frequent.
The second was a sort of pig experience. Not quite a city farm, money had been given so that children could find out about pigs. Romanians would laugh at this. Every family - even most of those that live in the city - have a pig stashed away somewhere.
Finally, one that just might get the nod. A project was put together to have horse riding trails marked out, with specified stops for overnight accommodation, both for riders and horses. Romania could do with this from a tourism point of view, but at the moment there are so many other things that need doing, I think it unlikely this will get done in the short term.
You never know, though.

I once gave away more money than Andrew Carnegie or Bill Gates

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.

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.

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

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.

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.

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.

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.

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.

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.

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.

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....

Seen on a billboard

" Help your loved one stop smoking!"

Underneath someone had written " Murder them"

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.

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.

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

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.

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.

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.

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

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.

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.

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.

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.

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.