Growing Evidence That The Upturn Is Upon Us

[ChrisLKKB]

Again, everyone’s getting bent out of shape at falling property values; it’s only relevant if you’ve trying to move!

or if you can't meet you repayments and have to sell up to pay off your debt.

I wonder if the next property slump will bring a new problem caused by the fairly recent increased popularity of interest only mortgages?

[Shlarm47]

ix touring, I don't disagree with you. There is however a whole other world outside of owner occupied and BTL residential properties. This whole situation started as a result of secondary property and BTLs. The banks in the US and UK over funded in this sector and couldn't sell their debt, thus not being able to created more liquidity (I think you could argue securitisation has a lot to answer for). Suddenly individuals couldn't afford to keep their BTLs AND because of the lack of liquidity individuals couldn't refinance. Too much supply v not so much a lack of demand but lack of affordability and lack of finance = residential values fall. (investment sector)

This has inturn had an impact with commercial property, falling property values, tenants unable to pay rent etc. suddenly the cost of debt (interest payments) cannot be serviced from rent and banks start to call in their loans causing a spiraling effect on values and the economy.

A further potential issue is that a lot of pension funds invest in commercial property, borrowing significant amounts to increase the return on their equity. If commercial property values fall or tenants (like Lehmans, HBOS, Northern Rock, AIG, XL, ZOOM etc) default what happens to the pension fund? We the public lose!

Let's hope the Banks gain confidence in one another soon as this would greatly assist the situation.

[Wee Weasley Welshman]

ix touring - what you need to understand is the effect of Mortgage Equity Withdrawel on the wider economy. I posted exact figures many pages ago.

Roughly speaking last year there was £9BILLION borowed against existing mortgages. Nearly all of which was spent on either more inflated property, goods or services. This has now stopped. Dead. Like a turned off water tap.

The money tap that was MEW, becoming blocked, is way way way big enough to create a small recession in itself without an oil spike or a credit crunch. Recessions are like black holes. This is a cluster. Even airlines with solid foundations could be made to go bust if their maintenance service provider cannot get the credit needed to adequately stock spare parts needed to comply with regulatory requirements. The complex spiders web that allows people to click a button on a website and then as a result be whisked at 600mph through the sky to a foreign land is familiar yet hideously complex and dependent on credit.

You would be a fool not to be very afraid right now. I expected things to get this bad (most thought me odd) but its worse and the repurcussions are more sinister than I ever understood. A small shock now like the testing of a nuclear weapon or a declaration of war or major West-coast quake and the whole system could tip over. Really. No working ATM's, delayed pay cheques, queues for food. Three meals from civil disorder... etc.

Anyone. ANYONE. Under any circumstance thinking about splurging £70k on a flying training course is in need of a jacket with strap up sleeves and a window to start licking.


WWW

[ChrisLKKB]

I found this 9 min video with Gordon Nixon, Royal Bank of Canada Cheif on FT.com very interesting FT.com / View from the Top

It's his view on the $700bn injection, what the problems are that the financial system faces and it's knock on effects (which effect everyone including airlines).

In short his view is the banks can and do function with their liabilities exceeding their assets, the problem is one of lack of liquidity and confidence. Something needs to to be done to restore liquidity and confidence to get things moving again.

[ChrisLKKB]

[London Sharecast]

Lower cargo volumes and reduced flight schedules over the winter in Europe have prompted John Menzies to warn on profits this year. "Menzies Aviation is unlikely to meet current market expectations for the full year. Based on current expectations the board believes that the divisional earnings for the year will be in the range of £14m to £16m," it said. Trading at Menzies Distribution continues to be in line with expectations. "At Menzies Aviation we are operating in turbulent markets. Airlines are significantly cutting schedules and cargo volumes are poor driven by the price of oil and falling consumer demand. This is inevitably having a material effect on earnings," chairman William Thomson said.

[biaeghh]

WWW/Chrislkkb

With two financial gurus adorning the pages of pprune would it not be an idea to go and find some jobs with the american gov and indulge them with some of your patronising diatribe.

The world is not about to end, and yes one would be a fool to bury their heads in the sands but the scaremongoring you specialise in is akin the moneygrabbers in the financial capitals.

[Wee Weasley Welshman]

Is it because you are a Bournemouth based Flying Instructor that you dislike my scaremongering (correctly warning of a House Price Crash and a major Recession BEFORE they happened) ?


Or is it some other reason?


WWW

[biaeghh]

Negative my friend on all counts, one further question i trust you have prospered with your ability to predict the future???.. and it is not a crash merely a long overdue correction .

[ChrisLKKB]

With two financial gurus adorning the pages of pprune would it not be an idea to go and find some jobs with the american gov and indulge them with some of your patronising diatribe.

The world is not about to end, and yes one would be a fool to bury their heads in the sands but the scaremongoring you specialise in is akin the moneygrabbers in the financial capitals.

If you want scare mongering try reading some of the comments in the broadsheets or financial forums, some of them paint a much worse picture. If they're right, a few years pause in the trainning industry and in aviation recruitment is the least of anyones worries.

If you have information that suggests any of the information presented here is wrong or that the aviation industry is going to buck the trend then why not post it. I could use some good news as much as anyone.

edit: calling it a long over due correction doesn't make the situation any less real or painful and doesn't mean it's going to be over any quicker.

[DUXBY]

where is this going?

I think this thread is grinding to a halt, people saying the same things over and over again.

There are some well read and informed people on this thread with pretty good predictions, but all we have now is people copying and pasting exerpts to show why things are bad. I don't think there are any wannabes left who are not in the picture.

What would be impressive if one of these experts sticks their necks on the line again and predicts a little more into the future and give reasons behind their arguments. I think we need an update as it's been up and down for the past couple of weeks what with the 700bn US bailout fiasco and the situation has been changing day by day.

Can we expect to see any more airlines going bust and if so the type of outfits in the frame (obviously not who) and your reasons why?
I for one would be grateful for any advice about the future, yes we know it's going to be bad for a while, but for how long now?

Is it now just a matter of waiting a couple of years for the wannabe or is the problem far deeper than this?

www not telling anyone how to run the forum.

[biaeghh]

I just think there is a huge degree of negativity in this thread... for sure we are in for an interesting time over the next 12-18 mnths, and some people are going to suffer but in terms of the house prices they could not carry on rising at the pace they were.

[ChrisLKKB]

I just think there is a huge degree of negativity in this thread...

Sadly there's not a lot to be positive about, believe me i've been trawling through the media and financial pages looking for some grains of hope. I thought this discussion had moved onto the state of the economy because of how closely it effects when recruitment will start again but apparently that offends people. I'll wait until I can find something positive before posting again.

[Wee Weasley Welshman]

To quote Nouriel Roubini today http://en.wikipedia.org/wiki/Nouriel_Roubini

We are now facing:

- a silent run on the huge mass of uninsured deposits of the banking system and even a run on some insured deposits are small depositors are scared;

- a run on most of the shadow banking system: over 300 non bank mortgage lenders are now bust; the SIVs and conduits are now all bust; the five major brokers dealers are now bust (Bear and Lehman) or still under severe stress even after they have been converted into banks (Merrill, Morgan, Goldman); a run on money market funds; a serious run on hedge funds; a looming refinancing crisis for private equity firms and LBOs);

- a run on the short term liabilities of the corporate sector as the commercial paper market has totally frozen (and experiencing a roll-off) while access to medium terms and long term financings for corporations is frozen at a time when hundreds of billions of dollars of maturing debts need to be rolled over;

- a total seizure of the interbank and money markets.

This is indeed a cardiac arrest for the shadow and non-shadow banking system and for the system of financing of the corporate sector. The shutdown of financing for the corporate system is particularly scary: solvent but illiquid corporations that cannot roll over their maturing debt may now face massive defaults due to this illiquidity. And if the financing of the corporate sectors shuts down and remains shut down the risk of an economic collapse similar to the Great Depression becomes highly likely.

Although he is very much a bears bear he's not some lunatic with no idea about the real world. I think this is the big one that people have talked about for decades.

The reason the UK Government doesn't want to provide an unlimited guarantee for all bank deposits is simple. They can't cover it. If people were to realise that the banks have much more money/debt than the Government then the Wizard of Oz that stands behind the Wizard of Oz Banks would be exposed for the puny man he really is. FIAT money itself then experiences a run and people only by gold, beans and shotguns.



For quite some time I've said this is 1990 all over again. Today I'm winding that prediction back 60 years and digging out old episodes of The Waltons for tips. (50/50 chance)

Several low cost, charter, legacy, private, small and large airlines will go bust in the Winter in the EU. That is a predicition which I will stand by and its the reason I wouldn't be a Wannabe right now. If things get as bad as I fear they will then at least I have a farm.

WWW

[Black Knat]

I have followed this thread with interest. Don't know who WWW is but he/she seems to be pretty much in touch with what is going on 'below the surface' of world events.
If people choose to 'shoot the messager' so be it. There is a big difference between being negative and being realistic. Before each flight I work on the assumption that things will go wrong and work out my options if this happens. Is that being negative?! If I choose to ignore weather/tech/payload/fuel issues etc then I am not doing my job properly. Likewise, those of you starting out on this game must weigh up the information you see regarding the state of the world economy,airlines, training options etc and decide your best course of action to achieve your aims. You will make your career decisions and the direction of your life will be affected by them. Ultimately you are responsible for the path you take and will stand or fall by your decisions. Bit like flying.

[flyer914]

a word of encouragement

Having followed and getting reasonably depressed by various “am I too old” and “economic downturn” threads for a year now, I think it’s about time for a little encouragement. I’m an almost 40 years old central European, changed my career, did my FAA commercial license a couple of weeks ago (not very helpful if you want to fly in Europe), sent my CV to one operator only (a small regional airline in Asia), got one interview and one job offer (which I happily accepted of course!). No, I have no connection whatsoever to the management, no relationship with the CEOs daughter and my CV is not that impressive at all (certainly not my TT). The point that I’m trying to make is, that while many of the posts in these gloomy threads are true- the jobs are still out there!
Now that I got my foot in the door, I believe what it really comes down to is: “network like there is no tomorrow” -like one guy in this forum wisely put it, don’t give up, stay positive and go wherever the jobs are- don’t wait for them to chase you – they won’t anytime soon.

[Wee Weasley Welshman]

Congratulations. Your story really suprises me but I'm glad and heartened by reading it.

Enjoy your new job.


WWW

[MIKECR]

Well done flyer914. Theres still jobs there. I know of 2 low hour(250) chaps who've just got TP jobs here north of the border, and another low hour who's been job hunting for 3 years now and just landed a nice corporate/biz job. Even little ol' me got a phonecall today!!! Woke me up of a nightshift but a pleasant wake up call none the less!

[flyer914]

...forgot an important factor that helps alot : TIMING
a bit hard to influence this one. Looks like many small operators don't plan that far ahead. Suddenly they run out of pilots or open a new sector and then they start to realize that someone has to fly the plane after all and call you up at 2am. Another guy here from the UK just got a job on the RHS with even less hours then me-and having less hours then me is not easy... "When your shower is cold, the electricity is off and the mosquitoes are getting through the mosquito net, total flight time does not matter." - more the kind of person you are. A fellow who flew in Africa summed it up quite nicely.

[spinnaker]

Originally Posted by WWW

FIAT money itself then experiences a run and people only by gold, beans and shotguns.

And this is what, for me, is the real issue behind the American $700b vote. Its not the amount of money involved, but the political confidence in the monetary system. The first vote resulted in $1.1t being wiped off the value of wall street in a single heart beat. They sent out a political vote of no confidence, that potentially strikes at the heart of the monetary system. Wholesale/retail investors are now moving money out of the system, mints cant hammer out gold coins fast enough. The Irish 100% guarantee on deposits is not credible, because they cant cover that amount if the have too. The Irish economy, although relatively small, has started to distorted the markets and caused a mini run on the wholesale investments. So in a way a run has already started on fiat money, small, but nonetheless apparent.

The US politicians have made it clear, self interest comes first. Ireland gives a guarantee it can never honour. The UK will increase its Guarantee next week, to a level that may start to look shaky in the credibility stakes. This weekend looks bleaker than last week end, and that wasn't a pretty sight.

[ix_touring]

So a few weeks back I posted about the ability to still get a remortgage at a sensible rate etc.

Then the last 2 weeks of mayhem has happened, there's been loads of chat about lack of lending etc.

So, this evening I have just done the remortgage of my other house, the cost has gone up by .54% over what I was paying, roughly £175 extra (a "jump" of about 11%.

So not really the death jump that the press would suggest, clearly the fall in prices is a pain, neither property is in the sub 75% LTV band now... had they been in it, the rates would only be about .25% over the expiring ones - Doh!

It’s just not doom and gloom out there! warnings of lights not working if there's an earthquake somewhere etc are pointless. The facts speak for themselves: if you were stupid and highly leveraged, you are still stupid and highly geared. Had you lost your job last year you'd be out, if you lose your job now you still be out (but you may get gov't help now).

Yes your pension will take a hit, yes it costs more to run your car etc But the pension is not affecting you now or for the next few years and will recover; we as brits drive too much anyway, you can save 20% on your fuel just in altering your driving habits (as aviation enthusiast you know all about fuel efficiencies don't you). If you're about to retire, you shouldn't have a mortgage anyway but if your pot takes a hit, work another couple of years or take the cash and make out on 6% bank interest.

If your at the "not able to buy" end of the market, then your laughing as rents are cracking good value compared to interest and house costs.

Just how is this causing a big impact on the man in the street (estate agents excluded) going about their normal (not those jacking it all in to retrain as a fATPL) day to day life?



iX