Northern Rock

If I had some money I might buy shares in a couple of the really big banks - HSBC, Lloyds, or RBScotland/NatWest. They are probably going to swallow up the minnows like NR - the former Building Societies, which will only do their shares good in the long term. NR shares are now worthless I'd say, and I wouldn't touch any of the other smaller banks' shares either

The reason NR is going bust is that it was virtually 'pyramid selling' - borrowing money short term to lend long term: quite mad, esp if the property bubble burst, which it was bound to in the end. So yes, NR and any other bank operating in this way was conning people, who naturally assume that the bank has its own funds as collateral for deposits/loans.

The real villains however are the politicians who have allowed the mad property boom to develop. And as I've been saying for years, it's happened almost entirely because people can see NO OTHER WAY to keep their money safe for their old age, esp given Gordon's raids on pension funds. It's become the national way of saving; that is the tragedy. Everyone loses.
 
Originally posted by Headstrong@Sep 16 2007, 10:14 PM
The real villains however are the politicians who have allowed the mad property boom to develop. And as I've been saying for years, it's happened almost entirely because people can see NO OTHER WAY to keep their money safe for their old age, esp given Gordon's raids on pension funds. It's become the national way of saving; that is the tragedy. Everyone loses.
Click to expand...
The politicians are certainly culpable, but then it isn't something unique to 'New Tory' the old Tories did exactly the same thing in the so called Lawson boom, when prices doubled in the space of a couple years.

The other thing you've missed is that people aren't using their houses as a savings scheme. Quite the opposite. They're using them to borrow against and sustain an expenditure habit that their conventional incomes wouldn't otherwise be able to. It is this that has led to us running up 3 trillion pounds worth of debt, all secured against a speculative bubble built around an artifically induced, and cosmetically presented value of a house. So long as prices remain high, this debt can be secured, if they fall however, then the banks will come knocking and the whole lot could implode (albeit this time on a scale much worse than the early 1990's). It's one of the reasons why the property rich class (including Government) have no incentive to make new supply available. Indeed, you might remember prescott wanted to build whole swathes of new homes, precisely to avoid this over heating. The Treasury held sway though, and needed the short term security of a credit based spending boom to fuel the myth of economic management (the tories did the same thing in 1986)

What this mad lending has spawned of course is the 'buy to let' purchaser which has taken even more supply out the market and pushed prices even further beyond the reach of a generation. Historically, poorer people have always struggled to afford houses, but this is biting middle, and middle/ upper income earners now. It is here where the politicans are less culpable, and the finance institutions take responsibility, especially since nayone from a bank to a supermarket, to motor car breakdown service seems to be able to offer a mortgage these days.

The relationship between the two is insidious. The Government has cut off the supply, and private sector market failure has ensured that greed has driven and unsustainable demand

As it happens I'm in the middle of putting a proposal together that's advocating the sale of 9 acres of land in a hideously under supplied city for housing development. It's going to mean the loss of some playing fields.

You should have seen the look on the faces of my property rich, I'm alright Jack, colleagues. Suddenly they became all indignant at the loss of this low quality green space. Clearly it offended their middle class sensibilities (they tried getting environmental on me) :laughing: Not that any of them use the fields concerned, (nor do the locals either). I'm sure given a choice between some affordable housing and a shite football pitch the locals would come down on my side. We'll see if I'm even allowed to give them that choice :laughing: Some how I don't think I will be, esepcially if it threatens to reduce the price of the homes of those who could grant permission for it.

Next stop - The Property Riots (2020) as widespread looting and civil disturbance sweeps the country. Radical opposition leader Red Warbler, calls Estate Agents the "enemy within"
 
If I had some money I might buy shares in a couple of the really big banks - HSBC, Lloyds, or RBScotland/NatWest. They are probably going to swallow up the minnows like NR - the former Building Societies, which will only do their shares good in the long term. NR shares are now worthless I'd say, and I wouldn't touch any of the other smaller banks' shares either
Click to expand...

I would. This is almost certainly a typical market overeaction. Good time to pick up some shares i think (but not in NR itself)

NR isnt going bust...thats nonsense.

The ultimate problem here was with the dismal performance of the credit rating agencies when assessing the original sub prime market. The whole business became self serving and is perfect proof of how banks and their supposedly cleveer staff are just as likely to follow the herd rather than think for themeselves
 
Northern ROck's shares have fallen approximately 40%. Whilst I agree they are not going bust, the share price wont be rising any time soon. I do not understand why people are withdrawing money, it makes no sense to me. Watching the breakfast news this morning, some people had cued since 3am. this is insane, the clearly dont know what there doing & are led by the media. another exmaple of stupid Britain.
 
With respect jft2005, I would much rather have my life savings in a company that the Bank of England didn't feel the need to publically state was solvent.
 
I don't think NR are the only bank either. Rumour has it one or more of the major banks are also looking for or have recently taken on massive loans. All is probably not well in the banking industry right now.
 
Expect the queues to start at Alliance & Leicester from tomorrow if they haven't already started - share price down 31% today.
 
Anyone know how this is likely to affect EU interest rates? If interest rates climb here, we can but hope all the little englanders will be screaming out for the stability of the eu rates. Contrary to what Blair and Brown always stated, we'll end up joining the euro when all the economic pointers are negative, but a crash is about the only way the "we're too good for Europe" mob would ever come round to the idea.
 
Originally posted by Homer J@Sep 17 2007, 04:26 PM
Expect the queues to start at Alliance & Leicester from tomorrow if they haven't already started - share price down 31% today.
Click to expand...

They are one of them, and I think there may be a couple of others too.
 
Originally posted by clivex@Sep 17 2007, 04:25 PM
Banks habitually loan huge sums to each other. Thats the way the system works....
Click to expand...
This is true, but it's normally done at about 2 or 3%, about 3 weeks ago that interest rate suddenly went through the roof (about 6%) or tripled in about a fortnight or something. It was this that started the collywobbles as suddenly the industry got twitchy about how deep some were in, and how deep others weren't. In that respect, they lost confidence in themselves, and sought potection in higher rewards, for what they now perceived to be bigger risks
 
Drove past a branch today with a large queue. If i had an account there and hadn`t been on my way to work i`d have joined it and put money in just for a laugh.
 
So the morons lose out on the early withdrawal penalties by taking their money out of the best funded bank in the market. Serves them right. Unfortunately their actions have precipitated the need for an HMG guarantee for those still with money in there.

Even worse are those who are spreading or talking about the existence of rumours of other banks in trouble. As I stated earlier the share prices are falling because the cost of interbank borrowing , which in normal times is trillions every day, has gone up. This impacts bank's profits and therefore the shares go down, not sfa about going under, otherwise the share price would not exist.

Kathy you confirmed that A&L were one of the bank's that were in difficulties, could you please let me and the BoE know who the other banks are as you are so well informed. Or could it be that you get a kick out of repeating unsubstantiated rumours of the type that can cause runs on banks which could severely damage not only the banking system but also the economy of the UK which is hugely dependant on a stable financial market for a great amount of its income.

Irresponsible actions in this scenario must be roundly condemned as how can every bank pay back all its depositors from its own funds when they have been lent out. No bank can sustain a prolonged run on its deposits without borrowing. T
 
Warbler, interbank rates have not tripled, check the FT archives. The SPREAD or margin on interbank loans has increased substantially. For general information most large loans are priced at interbank plus a margin, thus if interbank costs had tripled most medium amd large companies would now be paying over 15% pa interest if Warbler was correct.
Unlike the basis for theories on disappeared children the facts are freely available on this topic.
 
At that price NR has to be prime for a takeover, plenty of business I would have thought others would want to take under their wing - although as one analyst on the radio said, the brand is next to useless now.
 
TS,
I`m afraid you are fighting a losing battle in trying to douse the ridiculous, ill-informed gossip and speculation on this and other subjects. The facts are nowhere as juicy and titillating as the gossip. Thus the gossip will always thrive.
 
Excellent posts, Tout Seul. These rumours are a load of cobblers. Barclays had to borrow at the emergency rate from the Bank of England in the middle of last week. But that is more a reflection of a lack of liquidity than anything else.

Interbank rates have been going up. But as Tout Seul says, they have gone up by about 1% from 5ish percent to 6ish percent, rather than tripled.

Libor rates have actually started to come down in recent days.

Trust me, if somebody posted on the Racing section the ill-informed piffle that I have read here, they would be laughed off the forum.

Honest Tom,

It looked a sure fire bet two months ago that the ECB would hike rates twice before year end. Now it looks like they will stay on hold for the next while at least. If the crisis spreads to the broader economy, then they will have to cut.

But if the clouds blow over, they will resume their tightening bias and hike rates to curb inflation.
 
My understanding was that it was 2% to 6%, I haven't clicked on your 'facts' link yet Lawrence, so please accept my apologies for misleading people into thinking that the collapse of the capitalist world is nigh

If the finances are so well controlled and regulated though, I'm sure we'd all be interested to know how a 1% increase in the rates of inter bank lending threteans to bring down Northern Rock and the Alliance and Leicester. Heaven knows what 1.75% might do?
 
Last edited:
Sorry it's not a link, it's just been underlined :eek:

Now where as I accept you work in finance (I don't) I'm still yet to be convinced that the crux of what I wrote is wrong?

Lay on McDuff

I'm more than happy to hold my hands up! "though thy wounds wear better on t'others" - But then I am of woman born
 
Originally posted by Tout Seul@Sep 17 2007, 06:31 PM
Kathy you confirmed that A&L were one of the bank's that were in difficulties, could you please let me and the BoE know who the other banks are as you are so well informed. Or could it be that you get a kick out of repeating unsubstantiated rumours of the type that can cause runs on banks which could severely damage not only the banking system but also the economy of the UK which is hugely dependant on a stable financial market for a great amount of its income.
Click to expand...
So it's my fault is it, TS? Yes ok, you have me banged to rights, I personally started these rumours to damage the banking system and consequently the economy of the UK and then (eventually)the collpase of the government. What a claim to fame!!! :clap:

TS, if I were you, you could do always do like I do, and just keep my eyes and ears open.

As a saver and an investor I find it prudent to keep an eye on the financial market, and to see through all the spin. You would probably be surprised to hear I have shares in Northern Rock and I haven't sold one of them!

Desperate Dan, Bar the Bull and TS can rubbish my posts all they like. It's fast becoming a habit, and I still really don't mind. This forum is about discussion and discussions about news items quite often. It's just a shame they often verge on being extremely rude and probably puts other people off of posting. Not me though! :)
 
I read in a Portuguese paper online this morning the police are saying they expect the Banco de Portugal to go bust.
 
Back
Top