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Thread: global financial crash yay!

  1. #16
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    Default Excellent Larry Elliott piece from the Guardian...

    "Those who say this is just a stock market wobble that will soon blow over, are in denial."

    http://commentisfree.guardian.co.uk/...markets_h.html

  2. #17
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    My understanding of economics is less than basic but reading the comments below the article has been an education nonetheless, so thanks for pointing that out.

  3. #18
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    Quote Originally Posted by gek-opel View Post
    Quote Originally Posted by Gabba Flamenco Crossover View Post
    I don't think the UK housing market is anything like as robust as people think.
    I suspect it is cushioned by supplyside issues to a much greater extent than the American market, may be up to 30% of value to be lost tho.
    Is it though? This strikes me as one of those 'reasons the bubble will never burst' arguments.

    Because:

    1/ So much of the UK housing stock is being bought by corperate investment houses to turn a quarterly profit. The minute the housing market starts to seriously decline, they will shift thier properties like shit off a shovel - long term investment isn't what they're about.

    2/ Another big driver of growth has been people in late middle age who are financially stable, buying multiple properties as an alternative to investing elsewhere. They would like to invest long term for thier kids, but I suspect they will increasingly be forced to offload property to bail out thier underperforming pensions.

    That's why the supply could be a lot more volatile than people think. Where demand is concerned, commentators tend to assume that wealth distribution in the UK is a linear scale from the richest to the poorest - in fact, the UK's wealth is increasingly polarised. So we coudl run into a situation where practically everyone who can possibly afford a house has already got one.

    They also ignore the elasticity in the demand among young buyers - these people are buying a house because they want one, and because for now it's a good investment. They don't need to own property - they could easily rent or live with thier parents if they had to.

    There's also wider economic factors such as what an economic downturn would do to economic migration into the country (esp. London) and the knock on effect on rentals.

    There is a long term issue with the number of houses being built in the UK, but bubbles and crashes are all about the popular perception of the facts, not about the facts themselves. I think the UK risks getting into a situation where middle-class retirees start to sell at a rate too great from cash-strapped younger buyers to take up, prices drop, the corperate property sector panics and sells en masse, and suddenly the supply/demand relationship is turned on it's head.

  4. #19
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    Anyone got savings with Northern Rock? How about shares in Alliance and Leicester?
    This is all part of the wobble I guess but how far is it going to go?

  5. #20
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    In Dublin savers are camping outside Northern Rock, Wonderful Life stylee, to withdraw all savings, ignoring Downing Street's/Exchequer's underwriting guarantees.

  6. #21
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    Quote Originally Posted by dHarry View Post
    In Dublin savers are camping outside Northern Rock, Wonderful Life stylee, to withdraw all savings, ignoring Downing Street's/Exchequer's underwriting guarantees.
    Presumably what Downing St says counts for nish in Ireland anyway...

  7. #22
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  8. #23
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    In the Banking sector, most of the 10 top tier got caught out believing the hype of packaging good debt with bad (CDO) to make a fast buck - the trend for the last 5 years has led to huge returns (and huge rewards for those who did it), but that now has come to a crunch. Most banks have taken it on the nose (in some cases to the detriment of their staff to shore up their 3rd Q results)) and the "message" is that it will benefit the banking sector if they are clever enough exploit the market. This is the usual profit -annoucing bluster, and no one in the sector believes that we are out of the woods in any sense. Whether it leads to a big bang, who knows, but we should care - anyone welcoming it must either be self-sustainable or mad.

    Government have also lived off this trading method as well, down to local/council level (as seen by the Northern Rock debacle - which is why the BoE had to bail them out).

    There is a lot to run in this story yet.

  9. #24

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    In the UK - I think that the US credit-crunch, naturally impacting on UK lenders (through their diversified portfolios), will lead to rising mortgage rates, a fall in house-prices and probably collapse in the buy-to-let market.

  10. #25
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    The problem with any of the banks announcing losses right now is that it is conjecture. They are announcing losses on assets that they cannot price, cannot sell, and are merely guessing at what their value is as best they can. Each bank will be pricing differently, and every bank will be wrong. The credit markets are closed, and they are teetering on every bit of news that comes out. The US is pretty much likely on the way into a recession, and it would be a weird change of history if it doesn't drag others in with it. People experienced enough to know are marking this back to being comparable to 1990 rather than 1998. It is really bad right now.

    At the same time you have petrochina as the biggest market cap firm in the world on the base of some very weird, protectionist small percentage IPO. You have oil at $97. You have commodities booming, You have SWFs looking to pour money into everything. You have hedge funds and (especially) Private Equity firms over capitalised. There are many things that could turn this around, but as delinquencies on loans begin to seep into credit cards and housing negative equity sets in, it isn't pretty.

    For NR, they had no problem other than a market on which they depended closing up on them. The assets they have are good quality, but you can't sell anything in that market unless it is through a state guarantor (FanMae, FredMac - that's it) and that doesn't exist in the UK.

    CDO's and CDOsq were something that was a symptomatic bad of the SWFs and seek for earning money in a non-volatile market. Many people were responsible, but it was dependent upon one thing. Housing prices went up. And for the first ever time, the whole US (bar NY) ha correlated to one on housing declines. A big house of cards.

  11. #26

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    Quote Originally Posted by 3underscore View Post
    You have oil at $97.
    Low price of the dollar taking care of that, though.

  12. #27
    nomadologist Guest

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    I'm glad I put money on the fact oil would go above $100 a barrel before the end of the year!!

    Vim, nothing is going to take care of the coming energy crisis.

    Those towelH**** are going to have all the power. We'll be kissing Iran's ass within a couple of months.

  13. #28

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    Quote Originally Posted by nomadologist View Post
    I'm glad I put money on the fact oil would go above $100 a barrel before the end of the year!!

    Vim, nothing is going to take care of the coming energy crisis.
    Maybe not, but you have to admit that, after adjusting for inflation, the price of oil has hardly risen at all over the last few decades.

    Those towelH**** are going to have all the power. We'll be kissing Iran's ass within a couple of months.
    It shouldn't worry you, though. America only gets about 10% of its oil from the Mid East.

  14. #29
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    Quote Originally Posted by vimothy View Post
    It shouldn't worry you, though. America only gets about 10% of its oil from the Mid East.
    They gonna go kissy-ass to Putin or Chavez first?

  15. #30
    nomadologist Guest

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    Quote Originally Posted by vimothy View Post
    Maybe not, but you have to admit that, after adjusting for inflation, the price of oil has hardly risen at all over the last few decades.



    It shouldn't worry you, though. America only gets about 10% of its oil from the Mid East.
    This is wildly untrue. ADJUSTED for inflation, oil prices are still $15-10 higher than they were during the energy crisis during the mid-70s.

    The whole point is that our oil reserves have run out. It's Iran and Putin all the way. Luckily Iran has a huge natural gas reserve that we'll probably tap out, too.

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