# Sub-Prime Apocalypse spreads to the UK



## wayneL (14 September 2007)

Northern Rock, UK's 4th biggest home lender is in deep doodoo, having to go to the BOE for emergency funding... it's shares are down 20% on the LSE taking the rest of the banking sector down the chute with it.

http://money.guardian.co.uk/businessnews/article/0,,2169170,00.html

Anecdotally, there is a bit of a run on the bank as people que up to withdraw funds.


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## JeSSica WaBBit (14 September 2007)

Is something burning - TOASTED!!!

Breaks ya heart to see a bank on its knees


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## wayneL (14 September 2007)




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## wayneL (14 September 2007)

That one is photoshopped...

But this one is REAL:




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


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## springhill (14 September 2007)

Could i just question the use of the word 'apocalypse' in the title of this thread? Slightly melodramatic i think, even inflamitary. Imagine all the peasants shaking in their boots!!! Subprime is hardly the end/destruction of the world as we know it
Time to get out the rosary beads :evilburn:



Apocalypse Abbr. Apoc. Bible The Book of Revelation. 
Any of a number of anonymous Jewish or Christian texts from around the second century b.c. to the second century a.d. containing prophetic or symbolic visions, especially of the imminent destruction of the world and the salvation of the righteous. 
Great or total devastation; doom: the apocalypse of nuclear war.


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## numbercruncher (14 September 2007)

This whole fiasco is just so frustrating because it was so predictable yet no one (in a position to do so) for so many years was prepared to do anything.

It begs belief that people actually believed that this would all pan out smoothly, that Realestate could keep gowing at double digit figures every year, that you could buy a house and use it as an endless ATM machine and a day to pay the piper would never come.

Im certain this little sideshow has alot more play in it yet, just depends what central banks do, do they choose to make a mockery out of the whole capitilist system by continual bail outs or do they let nature run its course.

One thing has proved itself to me lately though, the US Fed has lost alot of its ability to manipulate the worlds financials, the World has wised up, or woken up should we say. Lower Interest rates ? No Problemo mr Fed up go Oil and Gold etc , Increase the money supply ? No Problemo mr Fed up we go again, Losers in there own game, quite funny infact !


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## JeSSica WaBBit (14 September 2007)

Maybe they will change the name to 'Southern Rock' as their reputation sinks into the Abysse.

Investors appear to be in for a 'Rocky' ride in the next few months................

Whoops, we appear to have a problem   my heart is bleeding


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## wayneL (14 September 2007)

springhill said:


> Could i just question the use of the word 'apocalypse' in the title of this thread? Slightly melodramatic i think, even inflamitary. Imagine all the peasants shaking in their boots!!! Subprime is hardly the end/destruction of the world as we know it
> Time to get out the rosary beads :evilburn:
> 
> 
> ...



A bit of harmless embellishment springhill. Look at my blog title, and my avatar. It's slightly tongue in cheek OK. 

Here's a photo someone took outside Harrow branch (real)


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## wayneL (14 September 2007)

Here's the queue outside another branch. (this one's a joke, for the benefit of the humourless and gullible )


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## springhill (14 September 2007)

wayneL said:


> A bit of harmless embellishment springhill. Look at my blog title, and my avatar. It's slightly tongue in cheek OK.
> 
> Here's a photo someone took outside Harrow branch (real)




No doubt Wayne i do see the humor in it, but i do get a little frustrated with the doom n gloom all the time and decided to head of, equally humorous i hope, in the other direction. :run:
Cheers


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## dhukka (14 September 2007)

Nothing like a good old fashioned bank run. I bet NAB are glad they didn't grab this back when they were shopping in the UK with the proceeds from their $5 billion sale of Michigan National Bank.


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## numbercruncher (14 September 2007)

> Northern Rock has fared badly because without a large savings base to use as collateral on loans, it must seek support for loans on the debt markets. Until last year it was considered a stock market darling for its ability to tap into new markets, particularly among borrowers with few assets.
> 
> It became famous for its mortgages with *130% loans *to the value of the property that helped thousands of first-time buyers on to the property market. Borrowers would combine unsecured loans with their mortgage in order to buy a home. But the deal remained vulnerable to increases in interest rates and easy availability of credit on international money markets.




http://business.guardian.co.uk/story/0,,2169141,00.html


130pc loans what a pack of Muppets, I bet certain people at Sinking Rock have got some huge bonuses over these last few years because of these new "Innovative" products theyve engineered.

That would be like the perfect crime, move to UK get 130pc mortgage on a joint, skim the 30pc flee back to your mother country, thanks for coming! I bet its happened too !


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## wayneL (14 September 2007)

> "... People in the queue burst out laughing when one staff member asked them: "Does anyone want to pay money in?"




ROTFL!


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## wayneL (14 September 2007)

Another UK lender is off > 25% today as well... Paragon Group, and they are much bigger than Northern Rock.

Something going on there too, or just sympathy dumpage?

Stay tuned.


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## Kimosabi (14 September 2007)

Recent Picture of the Worlds Bank Managers


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## numbercruncher (14 September 2007)

> "Given that the US sub-prime mortgage market is $1.5 trillion in size, a reasonable estimate of losses could be $100-150bn."





haha i love this line from the Article, why are these denyers always so optimistic ? Maybe they have never had bad news in there entire lives ...


Would you not expect that if subprime is 1.5 t, that potential losses could be the entire amount or even more , I mean US house prices are in pretty much free fall, the temptation to walk away from mortgages that are way higher than the assets value must be huge!


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## wayneL (14 September 2007)

wayneL said:


> Anecdotally, there is a bit of a run on the bank as people que up to withdraw funds.



Has hit the news just now

http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=481778&in_page_id=1770


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## wayneL (14 September 2007)

On Paragon:

http://business.timesonline.co.uk/tol/business/markets/article2452355.ece

The UK has gone from smug to scared in the space of 3 days.

Not 4 weeks ago, "they" were proclaiming that there is no sub-prime in the UK.


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## JeSSica WaBBit (14 September 2007)

Kimosabi - that's the funniest thing i've seen all week!!!

What a bunch of numpties!

Still laughing, its gold


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## numbercruncher (14 September 2007)

1.5 trillion of this toxic waste floating around out there somewhere, its surely going to turn up in some surprising places ! I bet there is thousands and thousands nay millions of retail investers that dont even realise this stuff is sitting in there portfolio!


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## reece55 (14 September 2007)

wayneL said:


> On Paragon:
> 
> http://business.timesonline.co.uk/tol/business/markets/article2452355.ece
> 
> ...




Absolutely Wayne, here is the central point that I think most people just aren't understanding - low lending standards and excessive asset prices leading to rising inflation and rising interest rates = poor collateral. It doesn't matter how you inventively diversify and financially engineer it, if the pool of loans is poor, then you will have principal risk. This is going to be a worldwide problem - I am just waiting for another speech from good ole Costello assuring us that it's just the US and UK, not Australia. IMO, it's just a matter of time - be prepared to pay for the excess, because we need a financial purge......

Cheers


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## wayneL (14 September 2007)

A west London branch has allegedly just closed its doors to customers.


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## toothfairy (14 September 2007)

Northern Rock's share price graph does look like a Rock 
Very bad name for a company.


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## theasxgorilla (14 September 2007)

wayneL said:


> A west London branch has allegedly just closed its doors to customers.




They didn't by chance happen to close 2pm every Friday? 

Sorry.


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## wayneL (14 September 2007)

theasxgorilla said:


> They didn't by chance happen to close 2pm every Friday?
> 
> Sorry.



At this stage it's apocryphal... no confirmation yet.

They might just be letting the printing press cool down. :


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## theasxgorilla (15 September 2007)

wayneL said:


> At this stage it's apocryphal... no confirmation yet.
> 
> They might just be letting the printing press cool down. :




Are you updating the word of the day thread as you go?  I had to look that one up.


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## CanOz (15 September 2007)

toothfairy said:


> Northern Rock's share price graph does look like a Rock
> Very bad name for a company.
> 
> View attachment 13137




hmmmm  looks like Southern Rock to me.


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## Mofra (15 September 2007)

wayneL said:


> Not 4 weeks ago, "they" were proclaiming that there is no sub-prime in the UK.



Well, they may be technically correct. There may not be any sub-prime - but this still have to source their funds from the good ol' USA of A that has plenty. Surely _someone_ in the organisation has at least a year 10 education? 

PS: Northern Rock, Globalisation says hi


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## Aussiejeff (15 September 2007)

numbercruncher said:


> 1.5 trillion of this toxic waste floating around out there somewhere, its surely going to turn up in some surprising places ! I bet there is thousands and thousands nay millions of retail investers that dont even realise this stuff is sitting in there portfolio!




Yup. All these might be/would-be/will-be screwed ***hole dodgy loan lenders will be dumping "their" investment share parcels (many at big losses just to stay alive a few more weeks before they fold anyway) like lead bricks.... so some innocent, seemingly well-performing companies that might have nada to do with sub-prime directly will indirectly feel the pinch of plunging SP's in the sell-off of "assets".

The BIGGEST concern for "innocent" investors is that China/Japan will continue to nudge up their interest rates, thus sealing the fate of most of these idiot sub-primers who thought they could borrow supa-cheap asian currency and reap massive credit windfalls in "the West" indefinitely from unwary/desperate borrowers. Sometimes, unadulterated greed is not always good for you... 

AJ


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## Kimosabi (15 September 2007)

numbercruncher said:


> 1.5 trillion of this toxic waste floating around out there somewhere, its surely going to turn up in some surprising places ! I bet there is thousands and thousands nay millions of retail investers that dont even realise this stuff is sitting in there portfolio!




I already know one guy who lost $20,000 out of his super fund from this toxic sludge...


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## numbercruncher (15 September 2007)

UK forum user gets strange message in the night ......





> I had a strange visitation in the night-
> 
> It leant to me a message, and the message went thus
> 
> ...


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## noirua (15 September 2007)

The UK's Alliance & Leicester and Bradford & Bingley Mortgage Banks are next in line, as the run on Northern Rock takes the stock down a further 32%. 

Australian Banks and Institutions have not yet come clean on their participation in various loan vehicles. The sector looks very vulnerable. Many Australian Banks have interests in the UK and USA.


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## Uncle Festivus (15 September 2007)

LONDON (Reuters) - A survey pointing to a sharp slowdown in Britain's property market put further pressure on beleaguered mortgage lenders on Friday, dimming confidence in the country's economic outlook.
       Coming hours after financial authorities stepped in to rescue ender Northern Rock (NRK.L: Quote, Profile, Research), the survey highlighted the potential nightmare scenario facing mortgage providers -- the combination of rising funding costs and falling house prices.

Let's not forget the Spanish property *crash* too


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## wayneL (15 September 2007)

UK Front pages for Saturday:


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## 2020hindsight (15 September 2007)

anyone got any guesses on what will happen to MBL?
I got out mid last week
only to watch it go up 6% yesterday  what's new lol
but Monday? guesses anyone.


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## numbercruncher (15 September 2007)

My guess is think Divine Brown.


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## 2020hindsight (15 September 2007)

numbercruncher said:


> My guess is think Divine Brown.




ahh well - I kept BHP - can't see them going down due to the bean counters of the world getting their maths screwed up.  -  happens all the time at my bank lol.

of cors, BHP might go down as well , I could be wrong. In fact if I guessed right it would be a bloody first.


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## numbercruncher (15 September 2007)

Im pretty bullish on BHP too 

Just interesting to see what the Fed does, the more money they print and dilute the current supply with just tends to push things up (>:

Drop rates = up. Feds power of financial manipulation has got severly reduced as of late it seems !


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## 2020hindsight (15 September 2007)

You know what will ACTUALLY happen , don't you ? lol
resources will go down, and banks will go sky high.
:eek3::eek3:
ahh don't you just love the logic of the stock market
still it beats the nags
and you can gamble in your pj's if needs be lol

PS Dow unaffected - but did banks suffer?


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## Lucky (15 September 2007)

Anyone have any idea if/how this may affect HBOS in the UK?  and if HBOS were to become a casualty would this have an effect on BankWest here in Oz?

The whole affair seems to be pretty messy, but I'm wondering what sort of time frame we have here in Oz before it raises it's ugly head?

Am seriously thinking of putting a fair whack of cash into gold/silver in the next week or so.


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## wayneL (15 September 2007)

What panic looks like:

*Northern Rock: Businessman barricades in branch manager for refusing to give him £1 million savings
*
http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=481852&in_page_id=1770



> The starkest illustration of the panic gripping Northern Rock customers came in Cheltenham, Gloucestershire.
> 
> There, a couple barricaded a bank manager in her office after she refused to let them withdraw £1 million from their account.
> 
> ...


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## Uncle Festivus (15 September 2007)

Lucky said:


> Anyone have any idea if/how this may affect HBOS in the UK?  and if HBOS were to become a casualty would this have an effect on BankWest here in Oz?
> 
> The whole affair seems to be pretty messy, but I'm wondering what sort of time frame we have here in Oz before it raises it's ugly head?
> 
> Am seriously thinking of putting a fair whack of cash into gold/silver in the next week or so.




Just from anecdotal evidence from their aggressive push into the Eastern markets I would think that BankWest would be one to keep a very close eye on. A few years ago I was in the position of trying to find funding for a new business venture, and BankWest were only too happy to oblige, to the order of $500k or so, even though the business I was looking at buying had very poor record keeping. I didn't go through with the transaction, but I thought at the time they were fairly lax with their lending standards, ie chasing new business at any cost.


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## wayneL (16 September 2007)

The cruelty of this whole greed induced mess is exemplified in this photograph.

As the doors shut at Northern Rock on Saturday, dozens of worried customers were turned away by police after waiting hours.

This poor old lady will probably not be able to sleep this weekend. I really hope all is OK and she (and everybody else) can get their money out. 

It really sucks IMO.


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## krisbarry (16 September 2007)

I guess there is very little difference here in Oz, with the collapse of Westpoint, Fincorp and ACR.

Plenty of oldies lost money too.

So much for the catch-cry "Safe as houses", maybe that should extend to banks and finance companies as well.

*By the way my family lost $50k in the collapse of Westpoint...Filthy prick bastards I say.  Send the bosses of these companies to the slaughter houses:behead:*


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## wayneL (16 September 2007)

Stop_the_clock said:


> I guess there is very little difference here in Oz, with the collapse of Westpoint, Fincorp and ACR.
> 
> Plenty of oldies lost money too.
> 
> ...



Yeah agree, but there is a difference. Northern Rock is a bank, whereas Westpoint, Fincorp & ACR were not.

People should have been aware of the risks in those institutions. (but doesn't make the losses any less painful)

It should be noted that Northern Rock has not failed... yet, just a good old fashioned run.  But it could suspend redemptions or indeed fail at any moment, so a high degree of worry for these folk.

Investors are casting a worried eye over Allied & Leicester and Bradford & Bingley as well, so there could be runs on other institutions.

We are seeing something here that none of us have ever seen in our lifetimes, and the great majority never thought they would ever see in the modern economy.

But there you go.


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## noirua (16 September 2007)

Investors in the Northern Rock Mortgage Bank are covered by guarantees that they would get at least 85% of their money back, whatever happens.

Quite a lot of Banks and Institutions, borrow money in the financial markets and only cover a percentage from those individuals who invest with them. So, if no one will loan money to them and investors all demand their savings back, then, that's curtains for them.

Northern Rock's name is too badly tarnished now and they could be broken up and sold off.

A warning to those who have internet only Bank Accounts, ie virtual Banks.  You'r basically stuffed if you can't access your account or it freezes when you try and transfer.


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## Sean K (16 September 2007)

wayneL said:


> We are seeing something here that none of us have ever seen in our lifetimes, and the great majority never thought they would ever see in the modern economy.
> 
> But there you go.



Wayne, can you think of any other periods, or situations, that have resulted in some corporations losing money, or winding up, due to systematic problems like this?


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## explod (16 September 2007)

kennas said:


> Wayne, can you think of any other periods, or situations, that have resulted in some corporations losing money, or winding up, due to systematic problems like this?




Check out Google on the Great Depression, some of the older codgers have been avering to these scenarios for some time on the threads but no one has wanted to take any notice.  We are heading for very bad times ahead and it is time to learn about some of the ways it has played out in the past.  

Every set of circumstances is differrent.   Alan Bond went to gaol for similar to what is occurring in the US.  Interesting, Alan Greenspan is blaming the policies of George Bush overnight for the problems.  The beginning of the blame game says that everyone is now seeing pear shaped sh.t happening big time.

But just an old codgers humble opinion


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## 2020hindsight (16 September 2007)

noirua said:


> Northern Rock's name is too badly tarnished now and they could be broken up and sold off.



hi noi, well if they keep hammering em like this, it will be a shattering experience. 



explod said:


> Alan Bond went to gaol for similar to what is occurring in the US.



hi explod - I recall people still investing in / with Bond, even when he was shown on 4 corners to be on some disastrous slippery slope - (and his empire was built on sand and a painting or two) - but (back then) some folks just didn't believe he'd go under.  I think we're all gettin wiser with age. 

some are born wise,
some achieve wisdom
and some have wisdom thrust upon them ?


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## noirua (16 September 2007)

2020hindsight said:


> hi noi, well if they keep hammering em like this, it will be a shattering experience.
> 
> 
> hi explod - I recall people still investing in / with Bond, even when he was shown on 4 corners to be on some disastrous slippery slope - (and his empire was built on sand and a painting or two) - but (back then) some folks just didn't believe he'd go under.  I think we're all gettin wiser with age.
> ...




Bond had a controlling interest in Endeavor Resources ( St Barbara Mines ) that he sold for 3.5 cents a share. Not long after that they shot up close to $3.00.

SBM saved my life, financially, after massive losses following the 1987 crash. It was only because of the publicity surrounding Bond that I bought a lot of stock. God bless Bond or should it be, Sir Bond.


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## Who Dares Wins (16 September 2007)

springhill said:


> Could i just question the use of the word 'apocalypse' in the title of this thread? Slightly melodramatic i think, even inflamitary. Imagine all the peasants shaking in their boots!!! Subprime is hardly the end/destruction of the world as we know it
> Time to get out the rosary beads :evilburn:





I agree with this. Definitely inflammatory and some. It was originally WayneL that used this term and as usual started this doom and gloom thread. You know ever time there is bad news Wayne its you who takes it upon yourself to let everybody know. 

Isn't anybody else tired of it? 

My advise to all is not to let this guys crazed wailings of the end of the world affect your financial thinking or judgement.

I think WayneL that you actually derive pleasure from spreading the fear and worry, you feed off it. Whats your agenda WayneL, perhaps you have alot of gold already and desire to see things go belly up? 

And kenna's, I've seen countless times on this site where you reprimand people for ramping up particular stocks - well doesn't it work the same way when one person continually down ramps the whole market and economy?

wdw


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## Aussiejeff (16 September 2007)

noirua said:


> Investors in the Northern Rock Mortgage Bank are covered by guarantees that they would get at least 85% of their money back, whatever happens.
> 
> Quite a lot of Banks and Institutions, borrow money in the financial markets and only cover a percentage from those individuals who invest with them. So, if no one will loan money to them and investors all demand their savings back, then, that's curtains for them.
> 
> ...




Well, not just virtual banks either, in the worst case. If a bank locks it's doors and shuts down its card cash points, non-virtual account holders are also stuffed - ala what happened in The Great Crash & Depression of yesteryear. 

All this situation shows (once again) is how primal FEAR is BY FAR the greatest motivating human factor of all (thus has it always been for all known time - it's why the human race havs managed to survive even this long!). Even though people these days have near instant access to finance, near instant "knowledge" of situations via the electronic media and "guarantees and safety nets" galore, just one little drop of FEAR into a market sends the masses into a wild panic. All thoughts of China's and the developing world's insatiable demand for goods and services and potentially massive short to mid-term growth is INSTANTLY forgotten in the mad rush created by the FEAR of the moment.

So, it takes a BIG dose of optimism or euphoria to counter a tiny drop of FEAR - and to get us all back on the "stairway to heaven". God bless us all for our human failings.....

Time to top up my secret cash stash again eh?  

AJ


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## numbercruncher (16 September 2007)

Who Dares Wins said:


> Isn't anybody else tired of it?




Personally I could never grow tired of the truth.


I think the problem now a days is the whole psychology of it, a whole Generation has never had bad news, they are as emotionally dependant on good news as a new born is on its mother.

About the only bad news people get on any sort of regular basis is that there football team lost a game, weve become addicted to continual good news, everyday stocks up, housing up, job growth up etc etc a total barrage of good news.

When bad news come along especially as frequently as it is lately people are just subconsciously ill prepared.


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## noirua (16 September 2007)

numbercruncher said:


> Personally I could never grow tired of the truth.




I new a very devout Baptist who always said "There is only one truth"

If you don't know what the truth is you end up saying nothing. However, if others say what you think are lies, is defending yourself not knowing the truth, infact, a lie?


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## noirua (16 September 2007)

Aussiejeff said:


> Well, not just virtual banks either, in the worst case. If a bank locks it's doors and shuts down its card cash points, non-virtual account holders are also stuffed - ala what happened in The Great Crash & Depression of yesteryear.
> 
> All this situation shows (once again) is how primal FEAR is BY FAR the greatest motivating human factor of all (thus has it always been for all known time - it's why the human race havs managed to survive even this long!). Even though people these days have near instant access to finance, near instant "knowledge" of situations via the electronic media and "guarantees and safety nets" galore, just one little drop of FEAR into a market sends the masses into a wild panic. All thoughts of China's and the developing world's insatiable demand for goods and services and potentially massive short to mid-term growth is INSTANTLY forgotten in the mad rush created by the FEAR of the moment.
> 
> ...





"Don't keep all your eggs in one basket" or "all your money in a virtual Bank", I suppose.


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## Sean K (16 September 2007)

Who Dares Wins said:


> springhill said:
> 
> 
> > Could i just question the use of the word 'apocalypse' in the title of this thread? Slightly melodramatic i think, even inflamitary. Imagine all the peasants shaking in their boots!!! Subprime is hardly the end/destruction of the world as we know it
> ...



WDW, please read the 'perhaps we'll ride out this correction' thread to see my deliberately biased angle. I'm getting smashed for concentrating on the positives. Perhaps you could help me in there? Cheers!


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## wayneL (16 September 2007)

Who Dares Wins said:


> I agree with this. Definitely inflammatory and some. It was originally WayneL that used this term and as usual started this doom and gloom thread. You know ever time there is bad news Wayne its you who takes it upon yourself to let everybody know.
> 
> Isn't anybody else tired of it?
> 
> ...



So you don't think this is a significant event worthy of informing people of?

I won't take offense at your ludicrous allegations as it is fear talking. I have had a view that the world economy is headed for trouble due to massive malinvestment and a credit bubble for some time.

I (among others) have taken it upon myself to inform people of potential trouble. Why? Well I have taken steps to set myself up for it and have suggested others do the same... at least try to insure themselves. 

If people like you don't like it, tough titty, it's valuable information.

Now run along and take have a look at the true picture. Get angry at those who are responsible for what is approaching.

Only muppets shoot the messenger.


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## reece55 (16 September 2007)

wayneL said:


> So you don't think this is a significant event worthy of informing people of?
> 
> I won't take offense at your ludicrous allegations as it is fear talking. I have had a view that the world economy is headed for trouble due to massive malinvestment and a credit bubble for some time.
> 
> ...




I say keep the info coming Wayne, I'm with you in relation to the fact that the underlying economy has had serious problems for a long time now and I appreciate people informing me issues that are around in the world......

And Who Dares Wins, the beautiful thing about a forum is that if you disagree with him, start a post about the aspects of the economy that are so wonderful instead of attacking Wayne.......

Cheers


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## wayneL (16 September 2007)

kennas said:


> Wayne, can you think of any other periods, or situations, that have resulted in some corporations losing money, or winding up, due to systematic problems like this?



K,

Without researching:

There was Barings Bank when Leeson took them out. Not really a systemic problem though.

But I recall Westpac was in a great deal of trouble in the early 90's because of a poor quality loan book.

Then there was the Argentina situation a few years back.

Of course there are hundreds of corporations who have died from self inflicted harm. But the significance here is that it is quite a large bank in a developed western economy. It directly affects the confidence of a whole population, not just those involved with a particular company.


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## Nick Radge (16 September 2007)

I think something that everyone should take note of is that this doom & gloom predicament has been rife since about 2000. The same old people have been talking the same old stuff for a long time and yes, they will probably get it right eventuially. I have a had a client since 2000 or so who, at age 60, was unable to invest his super because he's listened and believed in this extreme  doom and gloom story so much that he's stayed in 100% cash. To this day, aged 67 or so, he is still in cash. The damage now done to this gentlemans future is quite extreme to say the least.

Whilst there are certainly signs that things are not all rosy, the bottom line is that the US _*is*_ paying its debt, at this stage anyway. Speak to any serious market player throughout the world and you'll get the story that its not that bad. The other issue that I think is quite remarkable amongst such apparent doom, is that during the recent/ongoing credit debacle the US dollar was, for a brief day or two at least, the flight-to-quality currency. If the USD remains the flight-to-quality currency then I really don't see that the super sized investors, such as Japan,  are overly concerned about the peripheral doomsayers.

My 2c...


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## numbercruncher (16 September 2007)

Basically youve just got to play the game subject to central bank manipulation - If the US is lowering rates and Increasing money supply well obviously things have to go up so you need to be in assets, If they raise rates and tighten money well things can easily pull back.

The potential for really high Inflation is very real atm, next week should be interesting imho


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## wayneL (16 September 2007)

Nick Radge said:


> I think something that everyone should take note of is that this doom & gloom predicament has been rife since about 2000. The same old people have been talking the same old stuff for a long time and yes, they will probably get it right eventuially. I have a had a client since 2000 or so who, at age 60, was unable to invest his super because he's listened and believed in this extreme  doom and gloom story so much that he's stayed in 100% cash. To this day, aged 67 or so, he is still in cash. The damage now done to this gentlemans future is quite extreme to say the least.
> 
> Whilst there are certainly signs that things are not all rosy, the bottom line is that the US _*is*_ paying its debt, at this stage anyway. Speak to any serious market player throughout the world and you'll get the story that its not that bad. The other issue that I think is quite remarkable amongst such apparent doom, is that during the recent/ongoing credit debacle the US dollar was, for a brief day or two at least, the flight-to-quality currency. If the USD remains the flight-to-quality currency then I really don't see that the super sized investors, such as Japan,  are overly concerned about the peripheral doomsayers.
> 
> My 2c...




Nick,

We can all pull up individual anecdotes, but they mean nothing on their own.

There is a constant theme in the criticisms of those who are bearish in that their view of nothing short of total financial collapse. Although there are a minority who hold this view, this is nothing more than a disingenuous straw man argument.

Most "doomsayers", as you inelegantly refer to them, are concerned about nothing more than a contraction of the credit cycle, as proposed by the Austrian economic model. Some may believe the contraction may be more painful than others. This would seem to follow, in view of the massive credit expansion we have experienced. Wouldn't you agree we are seeing the beginnings of a credit contraction? Could this develop into a full blown credit crunch? Of course it could.

As far as major players saying things are not that bad; why is there discussions of emergency rate cuts and assurances that CBs will step in to guarantee liquidity?

As far as degree bearishness is concerned, this is the colour that represented by the diversity of opinions. Nobody knows who will be lucky enough to have the correct opinion and be able to trade off that for the next decade, as you yourself proffered up only last year at 5400.

I'm a bit surprised that you stoop to such terms as "doomsayers" in the current discussion. That term is usually reserved by those  interested only in manipulating sentiment.

Things may settle down, of course, but there are credible voices, much more credible than yours or mine, who are voicing concern at the moment. We should not flippantly disregard that.


----------



## Nick Radge (16 September 2007)

I am not a critic of those who have an opinion Wayne. I'm simply pointing out that it is well documented that this story has been traveling a long time. The time may well be now, but that drum was being beaten back in 1999 as well is all I'm saying.


----------



## explod (16 September 2007)

Nick Radge said:


> I think something that everyone should take note of is that this doom & gloom predicament has been rife since about 2000. The same old people have been talking the same old stuff for a long time and yes, they will probably get it right eventuially. I have a had a client since 2000 or so who, at age 60, was unable to invest his super because he's listened and believed in this extreme  doom and gloom story so much that he's stayed in 100% cash. To this day, aged 67 or so, he is still in cash. The damage now done to this gentlemans future is quite extreme to say the least.
> 
> Whilst there are certainly signs that things are not all rosy, the bottom line is that the US _*is*_ paying its debt, at this stage anyway. Speak to any serious market player throughout the world and you'll get the story that its not that bad. The other issue that I think is quite remarkable amongst such apparent doom, is that during the recent/ongoing credit debacle the US dollar was, for a brief day or two at least, the flight-to-quality currency. If the USD remains the flight-to-quality currency then I really don't see that the super sized investors, such as Japan,  are overly concerned about the peripheral doomsayers.
> 
> My 2c...





The following excerpt from Chuck Butler are facts as he relates them from the US.   JUST THINK ABOUT 2 BILLION A DAY TO SERVICE THIER FORIEGN ACCOUNT DEFICIT.    Facing up to the facts is not DOOMSAYING.

The flight to US Dollar is because the sheeple do not know what else to do when in panic. they just want cash, but they will soon work it out later on./



> ...
> 
> "...Let me take you back 7 years... The Tech bubble was in its hey-day, I would go to Investment Conferences and talk to basically an empty room... No one wanted to think about anything but the latest Qualcomm, or Yahoo... Investment flows into the U.S. were by the truck load, and the dollar was King... But I kept pointing to a chink in the dollar's armor, and that was this rising Current Account Deficit... And when it got to 4.5% of GDP, I remember screaming at the top of my lungs for people to buy euros!
> 
> ...


----------



## It's Snake Pliskin (17 September 2007)

> The British Government, the Bank of England and industry regulator the Financial Services Authority have all stressed that Northern Rock's problem is one of liquidity rather than profitability or a lack of assets.



http://www.theaustralian.news.com.au/story/0,25197,22428536-643,00.html

From the link: what does this really mean?

Assets
Profitability
Liquidity

Experts care to elaborate on the three?


----------



## wayneL (17 September 2007)

*ROTFLMAO!*


----------



## wayneL (17 September 2007)

Queues at 5:30 AM outside NR branches again.

http://www.bbc.co.uk/mediaselector/...tm&news=1&nbram=1&bbram=1&nbwm=1&bbwm=1&asb=1


----------



## Trembling Hand (17 September 2007)

WOW!! A run on a bank. What a joke.

Northern Rock 'shredded' as savers withdraw £9,600 a second


:bricks1:


----------



## BSD (17 September 2007)

It's Snake Pliskin said:


> http://www.theaustralian.news.com.au/story/0,25197,22428536-643,00.html
> 
> From the link: what does this really mean?
> 
> ...




Hardly an expert, but this is hardly an apocalypse.

*Assets *- the assets of Northern Rock are its loans. While they continue to pay interest, they are worth something. I havent seen much comment on asset quality. 

But if the loans default, the homes become the banks assets. While they will get hit on some high LVR loans, the majority of loans would typically be for far less than the asset value. In Australian, high risk lending on high LVR stock is often insured, so the risk is spread to other parties. 

*Profitability *- assuming the loan interest rates beat the funding costs, the Northern Rock business is profitable. It appears they are struggling to roll short term corporate loans, so the profitability of this company may be declining, but it is not necessarily terminal (assuming liquidity returns). 

The business may be very profitable in other hands. 

*Liquidity *- the real issue. Apparently this bank's loans are 70%+ funded by short term corporate paper. If they cannot refinance their current loans, they can't lend more money and their existing credit lines become their current bank's problem. 

The short term corporate paper market in the US is currently in logjam. Previously highly rated borrowers are struggling to get finance rolled over or extended at reasonable rates. This is a short term issue. 


If it gets really bad, this bank's assets (its loans) are worth a lot of money to a more credit-worthy institution (NAB for instance).

 A better/more suitably financed bank/insto would be able to make a margin on the existing loan book due to their ability to finance the thing with a decent margin. 

This is why, despite the wailing of the panic merchants, the price of the shares in this bank and our Rams (RHG) is not $0. 


Not as exciting as an apocalypse, but still interesting.


----------



## wayneL (17 September 2007)

BSD said:


> this is hardly an apocalypse.




What, so we are all freakin' literalists now? FFS!

The word Apocalypse is a word that comes from the book of Revelation. Obviously, it is highly symbolic. Only the literalist nutters believe there will be four horsemen galloping around wreaking havoc upon humanity.

Likewise, my use of the word is symbolic. Like the Apocalypse signifies the "end times" in Revelation, my use of the word is symbolic of the end of the massive credit expansion and accompanying boom, NOT THE END OF THE WORLD AS WE KNOW IT. It is tongue in cheek. 

Now bearing in mind the above, and again speaking symbolically, don't folks think that the first horseman of the Apocalypse may be visiting now? I mean doesn't 150 + mortgage lenders in the US down the gurgler, massive defaults, crashing prices in several countries, a bank run in the UK count as the beginning of an Apocalypse? (Again, making sure folks know I'm speaking symbolically as per above)

The first horseman is riding.



BSD said:


> This is a short term issue.



You are one of a minority who think so, depending on what you call short term. Most commentators are thinking this could take months, and perhaps years to play out fully.



BSD said:


> If it gets really bad, this bank's assets (its loans) are worth a lot of money to a more credit-worthy institution (NAB for instance).
> 
> A better/more suitably financed bank/insto would be able to make a margin on the existing loan book due to their ability to finance the thing with a decent margin.
> 
> This is why, despite the wailing of the panic merchants, the price of the shares in this bank and our Rams (RHG) is not $0.



In fact NR tried to find a purchaser, no takers.

However, someone will pick up the debt at the right price.

This will not be a one off. there will be more to come.


----------



## BSD (17 September 2007)

wayneL said:


> You are one of a minority who think so, depending on what you call short term. Most commentators are thinking this could take months, and perhaps years to play out fully.




Short term in this context is 12 months. 

If these business models cannot survive for twelve months perhaps they should be taken over.

A business model may have failed. Lending long at ultra competitive margins  and borrowing short at skinnier margins than historically available has not been sustainable through a dislocation of risk (percieved or otherwise) and returns in credit markets. 

Equity holders lose money, people pay more for their mortgages, less loans get written - no real catastrophe. 

That said, watching the short term US Treasury rates rise from silly lows and seeing deals like RIO and NCM in Australia and Countrywide in the States getting closed - I would say the credit markets will be fine in 12 months. Not as conducive as recently, but OK for real businesses.

Many businesses should never have recieved such easy terms and those who took advantage of the free lunch are now paying-up.

This is mainly a liquidity issue.

My personal lesson from the last 3 months has been to concentrate deeply on the concept of liquidity and in particular, its effect on risk and pricing when it dissapears.




wayneL said:


> In fact NR tried to find a purchaser, no takers.
> 
> However, someone will pick up the debt at the right price.
> 
> This will not be a one off. there will be more to come.




Of course more will follow - these guys rode this business model to become the fourth largest lending in the UK. 

Nobody would takeover this business at the first requests, would you?

As an equity player - I would prefer to see a lot more blood on the carpet and more mugs lined up to get their deposits before I offered an equity deal to bail these guys out.


----------



## dhukka (17 September 2007)

Nick Radge said:


> I am not a critic of those who have an opinion Wayne. I'm simply pointing out that it is well documented that this story has been traveling a long time. The time may well be now, but that drum was being beaten back in 1999 as well is all I'm saying.




Nick I see you are resorting to the same platitudes as those on bubblevision. Are you scheduled for a segment on Kudlow & Co this week? 

Their are some very legitimate reasons to be concerned about the outlook for financial financial markets that were not around 8, 5 or even 3 years ago. To lump everyone predicting a bearish scenario in the one camp (ie. they'll eventually be right camp) is simply disingenuous.


----------



## Garpal Gumnut (17 September 2007)

wayneL said:


> What, so we are all freakin' literalists now? FFS!




Dear Wayne,

I think you are getting a bit hot under the collar with what sounds to me like reasonable counterarguments to your opinion which appears firmly held. 

For what its worth I tend to agree with Nick Radge's view on this.

Garpal


----------



## wayneL (17 September 2007)

BSD,

OK that makes sense.

What could drag the whole process out... not in liquidity terms, I think 12 months is a pretty good time frame (FWIW from someone sitting at home in his underwear )... is the ensuing recession.

In my opinion recession is a certainty, as is at least the lengthy stagnation of house prices. I think this will force institutions to further re-evaluate risk, not just in property deals, but in business finance as well. The criteria for obtaining finance must surely tighten significantly.

****Opinion only*******


----------



## wayneL (17 September 2007)

Garpal Gumnut said:


> Dear Wayne,
> 
> I think you are getting a bit hot under the collar with what sounds to me like reasonable counterarguments to your opinion which appears firmly held.
> 
> ...




Garp, 

As I have consistently stated everywhere in this forum, everyones opinion is welcome and respected. However I will expose language designed to subtly (whether intentional or not) to discredit the opposing view. e.g. Straw man & ad hominem arguments. 

You can agree with Nick all you like, and I respect his opinion, but my issue was with the language.

We can then have discussions on merits of the actual arguments rather than introducing extranneous irrelevant and purely adversarial language.

Cheers


----------



## theasxgorilla (17 September 2007)

wayneL said:


> What could drag the whole process out... not in liquidity terms, I think 12 months is a pretty good time frame (FWIW from someone sitting at home in his underwear )... is the ensuing recession.
> 
> In my opinion recession is a certainty, as is at least the lengthy stagnation of house prices. I think this will force institutions to further re-evaluate risk, not just in property deals, but in business finance as well. The criteria for obtaining finance must surely tighten significantly.
> 
> ****Opinion only*******




Recession in the US, yes...global...hmmm, Aust weathered the last US recession thanks to a resurgence in commodity prices.  We've got a lot of currency and interest rate measures wound into our economy that can buffer us AGAIN against US triggered weakness IMO.

Now you're trying to distract us from a good logic backed debate!


----------



## dhukka (17 September 2007)

BSD said:


> Short term in this context is 12 months.
> 
> If these business models cannot survive for twelve months perhaps they should be taken over.
> 
> ...




Good points BSD. The above is the crux of the problem with Northern Rock and the same with the implosion of more than 150 mortgage companies in the US in the last year. Borrowing short and lending long on unltra-thin margins is simply unsustainable. It is just a good old fashioned ponzi scheme that works only as long things go in one direction and there is a willing suspension of disbelief. 



> That said, watching the short term US Treasury rates rise from silly lows and seeing deals like RIO and NCM in Australia and Countrywide in the States getting closed - I would say the credit markets will be fine in 12 months. Not as conducive as recently, but OK for real businesses.




Precisely, of course credit markets will work themselves out eventually however the excessive risk taking and easy credit environment will not return to what we've seen in recent years....that is until the next bubble. 




> Many businesses should never have recieved such easy terms and those who took advantage of the free lunch are now paying-up.
> 
> This is mainly a liquidity issue.





I would disagree slightly on this point and argue that it is more than just a liquidity issue but very much a solvency issue also. Nouriel Roubini had an excellent post on his blog explaining why it is more than just a liquidity problem. The main points are below but I recommend reading the full post.



> But the current market turmoil is much worse than the liquidity crisis experienced by the US and the global economy in the 1998 LTCM episode.  Let me explain why. Economists distinguish between liquidity crises and insolvency/debt crises. An agent (household, firm, financial corporation, country) can experience distress either because it is illiquid or because it is insolvent; of course insolvent agents are – in most cases - also illiquid, i.e. they cannot roll over their debts. Illiquidity occurs when the agent is solvent – i.e. it could pay its debts over time as long as such debts can be refinanced or rolled over - but he/she experiences a sudden liquidity crisis, i.e. its creditors are unwilling to roll over or refinance its claims. An insolvent debtor does not only face a liquidity problem (large amounts of debts coming to maturity, little stock of liquid reserves and no ability to refinance). It is also insolvent as it could not pay its claim over time even if there was no liquidity problem; thus, debt crises are more severe than illiquidity crises as they imply that the debtor is insolvent, i.e. bankrupt, and its debt claims will be defaulted and reduced. In emerging market crises of the last decade, we had liquidity crises (i.e. a solvent but illiquid sovereign) in Mexico, Korea, Brazil, Turkey; we had debt/insolvency crises (a sovereign that was both illiquid and insolvent) in Russia, Ecuador, Argentina.
> 
> Today we do not have only a liquidity crisis like in 1998; we also have a insolvency/debt crisis among a variety of borrowers that overborrowed excessively during the boom phase of the latest Minsky credit bubble.
> 
> ...


----------



## IFocus (17 September 2007)

Hi Wayne



> What, so we are all freakin' literalists now? FFS!




Sorry can't let you off the hook its your thread title LOL But at least its simulated some debate

I strongly disagree with Nick, I remember dooms sayers from back in the 80's. What really annoyed me is I didn't understand the psychology until the late 90's.

Surely the out come is reversion to the mean in the cost of credit. The recent years are not the norm and there will be unfortunately losers as a result, Apocalypse I don't think so thats more likely to stem from a nuclear Iran

Focus


----------



## numbercruncher (17 September 2007)

*Alan "have a chat" Greenspan now predicting pain and suffereing for UK house prices !!*




> Alan Greenspan, the former head of America's central bank, the Federal Reserve, issues the prediction in an exclusive interview with The Daily Telegraph today.
> 
> 
> Alan Greenspan warned recent increases in house prices were unsustainable
> He warns of "difficulties" ahead for UK home owners, as rising interest rates bring house price growth to a shuddering halt.




http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/17/cngrspan117.xml&CMP=ILC-mostviewedbox


Whos next on his radar ?? us perhaps ?


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## Shane Baker (17 September 2007)

I seem to recall in the distant past a lot of investors in the UK suffering from "negative equity syndrome" and walking away from mortgages. Nothing new under the sun as they say.

As a country the UK doesn't seemed to have performed too poorly in recent years 

A not too bad summation of the history of recent terrible financial calamities that will bring upon the apocalypse can be found here. At least one every decade or sooner it seems 

http://www.ex.ac.uk/~RDavies/arian/amser/chrono18.html

No peak oil as it stops in 2002 but give it time 

Cheers and pass another glass of good red please. If only the fundamentalist Iranians could learn to appreciate a nice Cab Sav then I am sure that the world would be a better place. Not only that , but then perhaps the French to export their fine cheeses to Iran instead of nuclear processing components. 

Kind regards,

Shane

PS Might be  a good time to stock up on some of that nice Beaujolais in case it becomes a bit pricey on the freight.


----------



## It's Snake Pliskin (17 September 2007)

BSD said:


> Hardly an expert, but this is hardly an apocalypse.
> 
> *Assets *- the assets of Northern Rock are its loans. While they continue to pay interest, they are worth something. I havent seen much comment on asset quality.
> 
> ...




Thanks for the detailed answer BSD.

Liquidity as a filter seems prudent. 

I disagree with bank runs and the masses who perpetuate runs. If only they knew what they were doing. If there is profiability and there are assets then surely a run on a bank is not required. Liquidity can be arranged. Yes, no?


----------



## numbercruncher (17 September 2007)

Only if a central bank or someone else agrees to provide it.

Essentially sinking rock is no longer a Business, there name is Mud, no one will want to bank with them, they will surely have to be dismantled.


----------



## It's Snake Pliskin (17 September 2007)

numbercruncher said:


> Only if a central bank or someone else agrees to provide it.
> 
> Essentially sinking rock is no longer a Business, there name is Mud, no one will want to bank with them, they will surely have to be dismantled.




Most with a GENERAL knowledge, thanks to the media would probably think so. If enough say so it must be right, no? 

So,
Assets: houses
Profitability: business model has worked and can be changed as the environment changes
Liquidity: central bank, in this case has come to the rescue. 

The problem lies with the bank run and those propelling it.


----------



## numbercruncher (17 September 2007)

No the problem lays with sinking Rock and its ridiculous business model, expanding its debt base at warp speed using crazy products like 125pc mortgages.

They deserve to burn like every other institution thats pursued dangerous unsustainable lending pratices.

If Central banks keep on bailing these people out all it does is encourage it to continue until the time to pay the piper really comes along.


----------



## wayneL (17 September 2007)

It's Snake Pliskin said:


> Most with a GENERAL knowledge, thanks to the media would probably think so. If enough say so it must be right, no?
> 
> So,
> Assets: houses
> ...



Not really.

NR are experiencing a liquidity crisis because other banks do not want to loan them short term funds, hence the need to acquire emergency funding from the BoE.

So those withdrawing their funds are thinking; if other banks don't trust them with their money, why should we.

I don't blame them. Their funds are probably safe enough, but some people have their entire life savings in NR... it may be irrational but they figure it's not worth the risk.

Also politicians and businessmen are not known for speaking the truth. Pleadings to not panic are probably invoking a sense of "they doth protest too much".


----------



## wayneL (17 September 2007)

theasxgorilla said:


> Recession in the US, yes...global...hmmm, Aust weathered the last US recession thanks to a resurgence in commodity prices.  We've got a lot of currency and interest rate measures wound into our economy that can buffer us AGAIN against US triggered weakness IMO.



It would seem Aus may be less affected if demand for commodities remain high. If demand decreases, Aus could be affected to a much greater extent.

Much of Europe will have a severe recession, sure as eggs (at least those countries where the poms have been pushing up property prices) and UK itself I think will cop it badly.

But who really knows who will fair well or not, we don't know exactly how this will play out, so the above is purely opinion.



theasxgorilla said:


> Now you're trying to distract us from a good logic backed debate!



I need every advantage I can get.


----------



## nomore4s (17 September 2007)

Anyone watch 4 Corners tonight, thay did a bit on the Sub prime issues in America and how it's affecting the rest of the world, pretty interesting, nothing new for most on this forum but it explained it well. My other half even found it interesting and now understands some what I've been going on about for the last few months:


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## numbercruncher (17 September 2007)

Heya nomore4s,

Yes like you i watched it with the Mrs, I got something along the lines of " thats what youve been going on about"


----------



## wayneL (17 September 2007)

NR share price in free fall down 40% at one stage... on top of ~30% on friday.

http://finance.yahoo.com/q?s=nrk.l


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## Shane Baker (17 September 2007)

> NR are experiencing a liquidity crisis because other banks do not want to loan them short term funds, hence the need to acquire emergency funding from the BoE.




The problem is none of the banks want to lend to anyone till they are certain that they don't need the funds for themselves or their subsidiaries. Look at the hardball KKR is having to play.

NR is just the obvious tip of the iceberg as is RAMS. The real info will come out for Q3 bank results after March when they can no longer hide the bodies.

Cheers

Shane


----------



## It's Snake Pliskin (18 September 2007)

wayneL said:


> Not really.
> 
> NR are experiencing a liquidity crisis because other banks do not want to loan them short term funds, hence the need to acquire emergency funding from the BoE.
> 
> ...




Wayne,

I don't profess to being an expert on this topic, so please excuse my naievity. (see red part) Not sure how it all works but it seems that other banks are starting to cover their bases from here on. That may not be a representation of the real business, but then again it may be. Only time will tell and those who are in the know. 

Thanks for your comments and opinions. Unlike some I saw your usage of apocalypse as you stated.

Snake


----------



## It's Snake Pliskin (18 September 2007)

wayneL said:


> NR share price in free fall down 40% at one stage... on top of ~30% on friday.
> 
> http://finance.yahoo.com/q?s=nrk.l




Has anyone shorted it?


----------



## chops_a_must (18 September 2007)

It's Snake Pliskin said:


> Has anyone shorted it?



Yeah... its customers...


----------



## It's Snake Pliskin (18 September 2007)

chops_a_must said:


> Yeah... its customers...



Chops your humour just kills me. 
Hows the booklist going?


----------



## wayneL (18 September 2007)

The plot thickens:

Allied and Leicester has closed down 31% http://uk.finance.yahoo.com/q/bc?s=AL.L&t=1d

Bradford and Bingley has closes down 15% http://uk.finance.yahoo.com/q?s=BB.L

Could be sympathy dumpage or it could be that there is worries here too.

We will have to see what comes out in the wash.


----------



## wayneL (18 September 2007)

This makes a certain amount of sense:



> Question: What connects Northern Rock and Allied & Leicester?
> 
> Answer: Lehman Bros (they both originate subprime loans for- e.i. supply CDOs for - the brokerage).
> 
> ...




Just passing it along.


----------



## noirua (18 September 2007)

The British Government has announced that they will cover all savings should Northern Rock be forced into liquidation. 
Howard and Costello, will of course, do the same for those who have saved with any Australian Bank that gets in trouble?

Northern Rock has had to give up its Mortgage Loan Portfolio of A$72 billion in exchange for an A$58 billion loan package from the Bank of England, that is thought to have been set at a 9% rate of interest.


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## moXJO (18 September 2007)

If there was ever a time to expect a terror attack, then all this volatility would probably be a good time to damage the west.US must be keeping a careful eye on suss market activity.


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## explod (18 September 2007)

moXJO said:


> If there was ever a time to expect a terror attack, then all this volatility would probably be a good time to damage the west.US must be keeping a careful eye on suss market activity.




Would be very interested to know why you think the current market activity is sus

....................................................................


----------



## moXJO (18 September 2007)

explod said:


> Would be very interested to know why you think the current market activity is sus
> 
> ....................................................................




I meant on unusual activity in the markets.Not the current market as a whole


----------



## Kimosabi (18 September 2007)

*World Bank Managers and the Sub-prime bomb*


----------



## TjamesX (18 September 2007)

Nick Radge said:


> I think something that everyone should take note of is that this doom & gloom predicament has been rife since about 2000. The same old people have been talking the same old stuff for a long time and yes, they will probably get it right eventuially. I have a had a client since 2000 or so who, at age 60, was unable to invest his super because he's listened and believed in this extreme  doom and gloom story so much that he's stayed in 100% cash. To this day, aged 67 or so, he is still in cash. The damage now done to this gentlemans future is quite extreme to say the least.
> 
> Whilst there are certainly signs that things are not all rosy, the bottom line is that the US _*is*_ paying its debt, at this stage anyway. Speak to any serious market player throughout the world and you'll get the story that its not that bad. The other issue that I think is quite remarkable amongst such apparent doom, is that during the recent/ongoing credit debacle the US dollar was, for a brief day or two at least, the flight-to-quality currency. If the USD remains the flight-to-quality currency then I really don't see that the super sized investors, such as Japan,  are overly concerned about the peripheral doomsayers.
> 
> My 2c...




I think a lot of differeing opinions come down to time frames that people are talking about.... and actually defining what they are actually talking about

The US has had fundamental imbalances since at least 2000, some would argue that the US recession in 2001-02 would have been a hell of a lot worse had Greenspan not dropped rates to 1% and started the housing bubble. Buffet has made huge bets against the USD and has moved a lot of his cash into overseas companies (both historic and ongoing bets against the US economy).... are the doomsayers wrong about the US???

Regardless of Fed interventions, for people inside the US, just holding your assets (any assets) in USD has been disastrous relative to cash in just about any other currency. So had the example of the 60 year old man been of one in the US, then the outlook and hindsight would be totally different...

For aussies we did not have the imbalances and boom that the US did in 1999-2000, so our situation is totally different. We share some of the imbalances that the US are grappling with now (along with just about any western economy) but we have the buffer of a commodity led economy - so to a certain degree we get the best of both worlds.

regardless, all western economies have embarked on the same path where rapid inflation in an asset class (housing ) has underpinned a large component of wealth creation. This has been facilitated by the convenience of not reporting housing 'inflation' as actual inflation in CPI.... so the argument of whether this wealth creation has been 'real' or not depends on what stage of life you are at.... as most people only buy a house once, this wealth has been very real for most established households, however it basically is at the expense of non established households (future generations).

I'm not saying its a consipracy, just a quirk and consequence of how inflation is calculated... but it has very real consequences for anything relating to inflation (whether that be comparing investment gains, measuring standard of living, measuring GDP etc). Note that Greenspan has commented he believes reported inflation may be on the increase (return to double digits) over the medium term... how central banks chose to fight this will have a large determinent on investment class results.

Why the long ramble....

I suppose it comes down to the example of the 60 year old and how he has done;

- relative to aus equities, he has performed very badly
- relative to aus houses, he has performed very badly
- relative to CPI, he has done so so
- relative to US denominated investors, he has done well
- relative to Westpoint/Fincorp investors, he has done very very well

How he will go in the future??? the best investments are obviously only known in hindsight...



TJ


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## Uncle Festivus (18 September 2007)

TjamesX said:


> I suppose it comes down to the example of the 60 year old and how he has done;
> 
> - relative to aus equities, he has performed very badly
> - relative to aus houses, he has performed very badly
> ...




Also, if he was being influenced by the doom & gloomers, they would have been recommending gold & gold stocks, which have done very well over the time period concerned, so probably not the best example. Not that the example was relevant to the topic but anyway...


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## wayneL (20 September 2007)

On a couple of UK forums there have been folks buying into Northern Rock at "bargain basement" prices of around 300 pence. My suggestions to look at US sub-prime lender charts were scorned.
	

		
			
		

		
	



OOPS!


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## numbercruncher (20 September 2007)

Theres a certain sort of poetic justice in being correct after people give you an eyefull isnt there


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## tech/a (20 September 2007)

numbercruncher said:


> Theres a certain sort of poetic justice in being correct after people give you an eyefull isnt there





Youll have your day.

we all do.


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## theasxgorilla (20 September 2007)

TjamesX said:


> For aussies we did not have the imbalances and boom that the US did in 1999-2000, so our situation is totally different.



I'm not quoting you TJ because I disagree with your post...quite the opposite, I appreciate that it was well balanced.

On this point...for those who were market participants prior to this bull market (and perhaps invested outside Aust), do you remember where the AUD was around '99-'00.  It was at .60 USD, in a down trend, attempting to tread water on it's way to a low of 47 cents US!  Do we remember the despair?

ASX.G


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## Awesomandy (20 September 2007)

wayneL said:


> On a couple of UK forums there have been folks buying into Northern Rock at "bargain basement" prices of around 300 pence. My suggestions to look at US sub-prime lender charts were scornedOOPS!




Good luck to them. It's sitting at 200p as we speak. I'm assuming that they were around back in the 70s/80s, which was, if remember my studies correctly, that's the last siginficant time when people would line up at a bank for hours.


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## TjamesX (21 September 2007)

theasxgorilla said:


> I'm not quoting you TJ because I disagree with your post...quite the opposite, I appreciate that it was well balanced.
> 
> On this point...for those who were market participants prior to this bull market (and perhaps invested outside Aust), do you remember where the AUD was around '99-'00.  It was at .60 USD, in a down trend, attempting to tread water on it's way to a low of 47 cents US!  Do we remember the despair?
> 
> ASX.G




Was a Uni student back then....

But I do remember watching the financial news and it was all about how low will the AUD go. The rave was the new world economy, tangible things no longer mattered as we were going hi tech and web, dotcom in the US.... Aus was just a farm and a quarry - old world stuff.

The tables have well and truly turned, dotcom busted (some survived), the new world vision didn't materialise (except that little thing called China and globalisation), now its all about had assets, resources (Aus, Canada) and turning those resources into things (China).

------------------------------------------------------

Back to doom and gloom now (for the US)

The US Fed's fund rate move will most likely do nothing to mortgage rates as the long bonds have actually gone up in response to the recent drops (I believe US mortgages are tied to 10+ year bonds)

The US is now grappling with the fact that the game it is playing relies on screwing someone somewhere.... everyone sparked up at the stock rally in the US - without compensating for the fact that its actually going nowhere relative to gold, oil, EUR, AUD etc etc... So the game is screwing the US consumers purchasing power and creditors to the US.... Longer term that game will rely on major creditor nations playing nice... 

on that note.... the Saudis are disingaging from US rate movements, couple that with the fact that by pegging the yuan to the dollar, the Chinese are following the USD down relative to all its trading partners... both countries are struggling with local inflation.

How does a communist country deal with inlfation?

http://www.chinadaily.com.cn/china/2007-09/20/content_6122281.htm

So in a global economy built on the foundation of free markets, we are incresaingly becoming reliant on a significant market player that doesn't actually believe in free markets setting the price (whether that be its currency or local goods and services)???

Its all getting very interesting..

http://www.itulip.com/forums/showthread.php?p=16333#post16333

-----------------------------------------------------------

Meanwhile back in AUS, we can sit back and watch the game as intersted observers knowing that if the US tanks, we should be OK (relatively)

TJ


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## Uncle Festivus (21 September 2007)

TjamesX said:


> So in a global economy built on the foundation of free markets, we are incresaingly becoming reliant on a significant market player that doesn't actually believe in free markets setting the price (whether that be its currency or local goods and services)???




This is interesting now - 

communists become capitalists - privatise public assets

capitalists become communists - bailing out private entities with public money ie privatise the profits, socialise the risk.

communist's who were capitalist's become communist's again when it doesn't work - price freeze!

China is toast


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## dhukka (21 September 2007)

TjamesX said:


> The US Fed's fund rate move will most likely do nothing to mortgage rates as the long bonds have actually gone up in response to the recent drops (I believe US mortgages are tied to 10+ year bonds)




It's a good point that a lot of people miss. Mortgage rates have actually risen since the Fed cut rates as shown below. The chart is courtesy of  bankrate.com as at September 19th.


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## wayneL (21 September 2007)

dhukka said:


> It's a good point that a lot of people miss. Mortgage rates have actually risen since the Fed cut rates as shown below. The chart is courtesy of  bankrate.com as at September 19th.



I trade the CBOT 10yr t-note and the Eurobund and was expecting them to go up (bonds go the opposite direction to interest rates for those who don't know) but they have been selling off savagely since Tuesday.

In effect he has thrown the Wall Street @ssholes a treat and those on struggle street a hand grenade. Well done!! 

Ten year bond yields:


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## wayneL (21 September 2007)

The UK Sub Prime problem was on Channel 4 News last night, here is the link:

http://www.channel4.com/news/articles/business_money/subprime+borrowers+take+a+hit/825952 then press "Watch the report"


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## wayneL (21 September 2007)

Here is another interesting video

http://www.parliamentlive.tv/Player/index.aspx?Encoding=7356

It's the New Labour goons giving Merv and the boys (From the BoE, FSA etc) a grilling. Merv explains the actions taken by the BoE over the crisis so far.

(long)


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## theasxgorilla (21 September 2007)

TjamesX said:


> the Chinese are following the USD down relative to all its trading partners... both countries are struggling with local inflation.
> 
> How does a communist country deal with inlfation?
> 
> http://www.chinadaily.com.cn/china/2007-09/20/content_6122281.htm




This is exactly the question to be asked IMO.  How does a communist country invoke it's not-so-invisible hand to keep things adequately on track?  They get to do out of hand what the US needs a full state of war in order to justify.  Contemplate the power China wields through not being bound to the requirements of being seen to be holding the free-market high ground...of which the likes of Thomas Friedman self-appoints the US keeper of.


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## Uncle Festivus (21 September 2007)

I stand corrected, but I thought I heard on the radio that the British CB has bailed out/gauranteed/promised the savings/funds of Northern Rock to an amount equivalent to 3/4 of the British defense budget. Just hope another bank doesn't get run;, it doesn't look like a very sustainable method of arresting the collapsing confidence of the British consumer?


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## Uncle Festivus (22 December 2007)

Experts warned about the state of Britons' finances yesterday after figures showed households setting aside more cash for debt payments than at any time since 1991.

Families are having to spend an average of 13.6 per cent of their incomes on regular repayments, according to the Office for National Statistics. 

*Other figures indicated that the 12-year housing boom is ending abruptly.* 

Mortgage lending for the year to November has fallen, the first 12-month drop since July 2005, the Council of Mortgage Lenders said.

http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2007/12/21/ndebt121.xml


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## Uncle Festivus (16 April 2008)

House prices are experiencing their most widespread decline since records began because of the fallout from the credit crisis, a report released today shows.
Almost four out of five chartered surveyors saw a fall in values in March, research by the Royal Institution of Chartered Surveyors has found. RICS disclosed that they were the worst figures since it started compiling such data 30 years ago.
The widespread nature of the decline has eclipsed the house price crash of the early 1990s, when two thirds of surveyors registered drops, it said.

http://www.telegraph.co.uk/money/ma...YourView&xml=/money/2008/04/15/nprices115.xml


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## wayneL (16 April 2008)

Uncle Festivus said:


> House prices are experiencing their most widespread decline since records began because of the fallout from the credit crisis, a report released today shows.
> Almost four out of five chartered surveyors saw a fall in values in March, research by the Royal Institution of Chartered Surveyors has found. RICS disclosed that they were the worst figures since it started compiling such data 30 years ago.
> The widespread nature of the decline has eclipsed the house price crash of the early 1990s, when two thirds of surveyors registered drops, it said.
> 
> http://www.telegraph.co.uk/money/ma...YourView&xml=/money/2008/04/15/nprices115.xml



Hah!

Listening to BBC4 just now, the industry VIs are telling the medja to shut up about it.

Apparently, according to them, it's nothing to do with the credit crunch, over-valuation, amazingly stretched LVRs and income/debt ratio, or anything like that... it's the medja talking people into it.



The Brits will only tolerate being mushrooms for so long though, they are waking up and seeing the situation as it is... 'cept the over indebted who continue to be in denial.

On another note, there are continuous rumours regarding various mortgage providers popping up. Names mentioned: Bradford & Bingly, Nationwide, HBOS.

Just rumours a this stage as BoE are now permitted to conduct covert funding... we don't know who they are propping up atm.


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## Kauri (16 April 2008)

wayneL said:


> Hah!
> 
> Listening to BBC4 just now, the industry VIs are telling the medja to shut up about it.
> 
> ...




  V The principal request from UK lenders at their meeting with Gordon Brown yesterday is that the BoE widens the collateral it will accept to include lesser quality mortgages and to make more longer-term funding available (*Daily Telegraph* ). Bankers and traders are expressing concerns that the London inter-bank offered rate is becoming unreliable (*WSJ*). V

As for the rumours... well... haven't heard a one... true..  
Cheers
...........kauri


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## Kauri (16 April 2008)

wayneL said:


> Hah!
> 
> Listening to BBC4 just now, the industry VIs are telling the medja to shut up about it.
> 
> ...





 I do hear that Mooddys are going to downgrade A+L credit rating... finally..
Cheers
...........Kauri


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## Kauri (16 April 2008)

Just another fine spring day.. 
what's all the fuss over..
sub-prime what??...

http://business.timesonline.co.uk/tol/business/ 

Cheers
...........Kauri


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## wayneL (16 April 2008)

Gordo (which incidentally is the Spanish word for "fat"... apt, to describe the contents of his skull), is definitely sub-prime. 

IMO


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## Kauri (17 April 2008)

I have the felling that "Fat Head" has gone to NY not to urge the banks etc to come clean on losses but to get the Fed's and Bush's game-plan for tackling the crisis (have they admitted there is one yet??) first hand, as I _strongly thunk_ that he and the Old Lady will shortly be taking the exact same path to address what is a delayed copy-cat situation in the UK.. as such any chance to sell the pound and I am in there with my gaelic smile pinned back..
     ...... OPINION ONLY>>>> uninformed.....

Cheers
............Kauri


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## Kauri (17 April 2008)

Kauri said:


> I have the felling that "Fat Head" has gone to NY not to urge the banks etc to come clean on losses but to get the Fed's and Bush's game-plan for tackling the crisis (have they admitted there is one yet??) first hand, as I _strongly thunk_ that he and the Old Lady will shortly be taking the exact same path to address what is a delayed copy-cat situation in the UK.. as such any chance to sell the pound and I am in there with my gaelic smile pinned back..
> ...... OPINION ONLY>>>> uninformed.....
> 
> Cheers
> ............Kauri




*Reuters* saying a UK Treasury source told them that the UK authorities mortgage intervention plan could be announced as early as next week..

Cheers
............Kauri


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## wayneL (17 April 2008)

Kauri said:


> *Reuters* saying a UK Treasury source told them that the UK authorities mortgage intervention plan could be announced as early as next week..
> 
> Cheers
> ............Kauri



Yep getting the same info independently as well.

Moral hazard has apparently been banished from the financial lexicon. 

El cabeza gordo is fighting for his pathetic political life.


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## Uncle Festivus (7 May 2008)

Do you want the good news or reality - depends on who you ask?







> Citi chairman Sir Win Bischoff has joined a growing chorus of Wall Street executives in believing that the worst of the crisis that has gripped financial markets since last summer is over.



.... meanwhile, back in the real world..... 



> :bad:Lloyds TSB, the country's fourth largest mortgage lender, heaped new misery on homeowners yesterday after forecasting a 10pc fall in house prices over two years.





> :bad:Home sales are falling through at a “significantly higher” rate, Bovis Homes warned today, as British lenders make mortgages harder to secure. The housebuilder said that conditions in the housing market have deteriorated sharply in recent weeks, with the number of sales agreed tumbling 30pc so far this year, and the number of deals actually completed, dwindling.





> :bad:U.K. house prices posted the first annual decline since 1996 in April as mortgage lending dried up and the construction industry shrank the most in almost a decade, industry reports showed.
> 
> An index of building activity fell to 46.1 from 47.2 in March, the Chartered Institute of Purchasing and Supply said.
> 
> The reports show Britain's worst property slump since the end of the last recession is deepening as lenders tighten credit standards. Mortgage approvals fell to the lowest level since at least 1999 in March and Persimmon Plc, the U.K.'s largest homebuilder, said April 24 it's postponed construction on new sites after an increase in cancellations.





> :bad:U.K. personal insolvencies increased in the first three months of the year as the dearth of credit and rising loan rates left consumers unable to meet their debts.             Individual insolvencies in England and Wales rose 1.7 percent from the previous quarter to 25,264, the U.K. government's Insolvency Service said today on its Web site.
> ``We will see personal insolvencies climbing to a record this year of around 130,000,'' said Sue Maund, a partner at accountancy firm Baker Tilly. ``The credit crunch will push more people into bankruptcy, and these figures are just the tip of the iceberg.''


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