Growing Evidence That The Upturn Is Upon Us
I think I'll stick to my guns when I said that at least the borrowers have the defence of being a bit thick.
By definition half the public are below average intelligence.
Historically the finance industry has been controlled by law from exploiting people. The OFT the BoE the TSO the consumer standards people, the media have all acted to stop clever bankers from enslaving - I choose that phrase explicitly - the general populace.
That control was allowed to fail when it came to mortgages and credit cards in recent years.
That is now being corrected.
WWW
ps bankruptcy is a way of rewarding the feckless, it will become very popular next year and its going to be very lucrative for those that play the system.
By definition half the public are below average intelligence.
Historically the finance industry has been controlled by law from exploiting people. The OFT the BoE the TSO the consumer standards people, the media have all acted to stop clever bankers from enslaving - I choose that phrase explicitly - the general populace.
That control was allowed to fail when it came to mortgages and credit cards in recent years.
That is now being corrected.
WWW
ps bankruptcy is a way of rewarding the feckless, it will become very popular next year and its going to be very lucrative for those that play the system.
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Yes, 99joelegg, but...
What did you think of the sailing mettyfor!?
I agree with you re: banks having obligations to point out risk. In fact I suspect this requirement is defined by law. The problem I think comes with how they tell you about it. Like on the telly when the voiceover guy tells you that "your home may be at risk if you don't keep up with repayments", but tells you so quickly at the end of the ad, that you literally have to tape it, then playback slowly to hear what he said!
Likewise, having tried to push my brain through the terms and conditions of loans I have had in the past (post-grad education, demonstrably reasonable IQ) I can easily see how the "bad bits" of an agreement get missed out in the reams of legalese.
So yes, I agree that banks could have been a bit, nay, a LOT more honest.
However, it doesn't take much for even a grossly uneducated person to arm themselves with a few precepts that might avert disaster.
"you don't get something for nothing" Six words. The credit crisis encapsulated?
And I didn't say your analogy was ridiculous. I don't know you, so it would never occur to me to insult you like that. I don't agree with it, but that's different.
Regards
JR
I agree with you re: banks having obligations to point out risk. In fact I suspect this requirement is defined by law. The problem I think comes with how they tell you about it. Like on the telly when the voiceover guy tells you that "your home may be at risk if you don't keep up with repayments", but tells you so quickly at the end of the ad, that you literally have to tape it, then playback slowly to hear what he said!
Likewise, having tried to push my brain through the terms and conditions of loans I have had in the past (post-grad education, demonstrably reasonable IQ) I can easily see how the "bad bits" of an agreement get missed out in the reams of legalese.
So yes, I agree that banks could have been a bit, nay, a LOT more honest.
However, it doesn't take much for even a grossly uneducated person to arm themselves with a few precepts that might avert disaster.
"you don't get something for nothing" Six words. The credit crisis encapsulated?
And I didn't say your analogy was ridiculous. I don't know you, so it would never occur to me to insult you like that. I don't agree with it, but that's different.
Regards
JR
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I think WWW has it on the nail, but there is a sequitur. If the financial industry as a whole has failed to predict the outcome of their actions and also failed completely to spot the coming downturn how can their predictions be relied on now? One has to conclude that all those clever bankers with their economic theories can't predict squat.
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can't predict squat...
Interviews with those who worked in the system then left would seem to lend weight to this assertion, assuming those doing the telling aren't just bitter at being fired.
Of course, as previously posted, Peston would be the exception to this.
Of course, as previously posted, Peston would be the exception to this.
Not all are culpable nor played along. HSBC for example have sod all exposure to US sub prime, UK sub prime, the CDS or CDO market and haven't needed on penny of public bailout.
They were also the canaries in the coal mine when they declared the exposure that they did have to falling US house prices (through one bad acquisition).
Claims that the banks didn't know or understand what they were investing in is just spin with extra smoke and a side order of mirrors. They knew. They just concluded that if enough of them got in deep enough then the government would bail them out.
That worked.
Hank Paulsons plan almost worked too.
That was a close run thing. It will all be explained in a really good book in about 10 years times.
Just like with Enron - these guys were the smartest people in the room. Suggestions that they were ignorant and stupid are just the cleverest trick the devil ever pulled.
WWW
They were also the canaries in the coal mine when they declared the exposure that they did have to falling US house prices (through one bad acquisition).
Claims that the banks didn't know or understand what they were investing in is just spin with extra smoke and a side order of mirrors. They knew. They just concluded that if enough of them got in deep enough then the government would bail them out.
That worked.
Hank Paulsons plan almost worked too.
That was a close run thing. It will all be explained in a really good book in about 10 years times.
Just like with Enron - these guys were the smartest people in the room. Suggestions that they were ignorant and stupid are just the cleverest trick the devil ever pulled.
WWW
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Alex Whittingham
An economist will always be able to tell us why something went wrong, but they never say what will go wrong.
Whilst I can see the discussion turning to who is responsible, well for my money, we all are.
The banks for lending money they never had, and the rest us for going along with it.
Are the credit cards still doing 0%? I made over £5500 from that stupid game.
An economist will always be able to tell us why something went wrong, but they never say what will go wrong.
Whilst I can see the discussion turning to who is responsible, well for my money, we all are.
The banks for lending money they never had, and the rest us for going along with it.
Are the credit cards still doing 0%? I made over £5500 from that stupid game.
As an aside - a Collateralized Debt Obligaton is when I lend £10 to Alex who then lends £10 to Spinnaker. I then sell the right to collect my £10 debt from Alex to helimutt. As long as helimutt is paid £10 by Spinnaker then the whole system is fine.
A Credit Default Swap is when Grass Strip Basher bets £100 with 99jolegg that Alex won't pay me back my £10.
Multiply all that by a billion over 5 or so years, 30 currencies and 40 countries and you're still not close to the complexity of what will have to be undone. This isn't even the Ladybook level one of high finance and yet 98% of the population wouldn't have a clue about this sort of thing.
The world is not as you know it.
WWW
A Credit Default Swap is when Grass Strip Basher bets £100 with 99jolegg that Alex won't pay me back my £10.
Multiply all that by a billion over 5 or so years, 30 currencies and 40 countries and you're still not close to the complexity of what will have to be undone. This isn't even the Ladybook level one of high finance and yet 98% of the population wouldn't have a clue about this sort of thing.
The world is not as you know it.
WWW
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Originally Posted by WWW
Claims that the banks didn't know or understand what they were investing in is just spin with extra smoke and a side order of mirrors. They knew. They just concluded that if enough of them got in deep enough then the government would bail them out.
The world is not as you know it.
I've heard positive views for a full recovery of the economy from those who are well aware of CDOs and CDSs and I have little doubt that the government are aware of them, fortunately we aren't reliant on the ineptitude of Clown and Darling to get us out of this mess. They have advisers who have advisers and with the stakes as high as they are they'll be too scared not to listen to them this time (I hope).
We're all going to have to swallow a bitter pill and it'll make us sick but there will be an upturn in a few years and we'll all feel better for it. I hated the times of easy credit and rocketing house prices, it made me uneasy and grumpy and if I knew what the concequences were going to be I could have made money out of it...hey ho, there's always next time
Last edited by ChrisLKKB; 21st Oct 2008 at 13:36.
Who knows it ? If anyone hasn't heard about CDSs or CDOs even if it isn't by name they'd have to have been living under a rock (or with the pprune wannabee zombie army).
Most people live under rocks then. Think how thick the average UK citizen actually it. Then consider that half the population is thicker than that.
Mentally these people are children. Letting them run loose with leveraged finance and credit cards was malicious, unprecedented and deliberate.
WWW
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Letting them run loose with leveraged finance and credit cards was malicious, unprecedented and deliberate.
Banks 30%
General public 20%
This Government 50%
Lets face it everyone has been greedy here.
You have to say that the banks have only done what they have always done and that is to try make money come rain or shine.
That's their business they are inherently greedy. They offered us debt knowing full well that years down the line that the taxpayer would foot the bill, well that time has come.
Unfortunately as mentioned by www aound 50% of the general public are thick. When majority of them couldn't even tell you who the current chancellor is then we can only rely on them to be interested in the X factor, Face Book and adverts for companies offering IVA's and consolidation loans.
The other 50% should know better.
The government can take the majority of the blame for the current situation, for failing to regulate the banks, letting the utility companies shaft us and introducing the IVA into the equation.
You see the story goes like this:
Bank wants to find new ways of making money so bank offers loans to lowest common denominator knowing full well that they can't repay. They repackage the debt and pass it on knowing that when the music stops the tax payer is the person without the chair.
Government knows this and does nothing to stop this going on knowing that it's extra tax receipts in the coffers when lowest common denominator spends the loan.
To the government people taking out loans is just another form of tax.
Goverment further ecourages this by bringing in the IVA. This encourages thick joe public to take on debt without taking on responibility for it hence there is nothing to deter them for getting in over their heads.
Ultimately we and the government have been shafted by the banks but you have to say that the majority of the blame lies with the government for failing to govern.
After 11 years in charge can you see one positive thing this government has done for us.
Nope neither can I.
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Originally Posted by chickentikkamasala
I think the problems we have today should be apportioned thus:
Banks 30%
General public 20%
This Government 50%
Banks 30%
General public 20%
This Government 50%
Banks 29.9%
General public 19.9%
This Government 59.9%
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Switch the general public and banks round to 30/20 respectively and i'd agree with that.
It is the responisbility of the banks to tell the borrower what their repayments will be, how they will change during the term of the loan and what the consequences will be if they don't keep up repayments and financial advisers do this (or in the case of a credit card application it's written in on the form).
Banks can't be expected to know every last detail of a persons finances now or in the future, they have to rely on application forms being filled in honsestly and that the applicant has read and understood everything on the application form (including the small print) when they sign on the dotted line, and lets be honest, lots of people will stretch the truth when it comes to filling out loan applications to get that car, house or the holiday they want.
Where banks went wrong was 3.5X+ 100% and even 125% mortgages but they were only doing their job in competing with the rest of the high street, keeping their share holders happy and keeping the government happy. Regulation or lack of it failed there.
I should have written If anyone hasn't heard about CDSs or CDOs by now even if it isn't by name they'd have to have been living under a rock. I hadn't heard of them until a few months ago but they should have had significant coverage on the media by now for all but the most reclusive of recluses not to have heard of them. (well maybe not Sun readers).
It is the responisbility of the banks to tell the borrower what their repayments will be, how they will change during the term of the loan and what the consequences will be if they don't keep up repayments and financial advisers do this (or in the case of a credit card application it's written in on the form).
Banks can't be expected to know every last detail of a persons finances now or in the future, they have to rely on application forms being filled in honsestly and that the applicant has read and understood everything on the application form (including the small print) when they sign on the dotted line, and lets be honest, lots of people will stretch the truth when it comes to filling out loan applications to get that car, house or the holiday they want.
Where banks went wrong was 3.5X+ 100% and even 125% mortgages but they were only doing their job in competing with the rest of the high street, keeping their share holders happy and keeping the government happy. Regulation or lack of it failed there.
Originally Posted by WWW
Most people live under rocks then. Think how thick the average UK citizen actually it. Then consider that half the population is thicker than that.
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"HSBC for example have sod all exposure to US sub prime"... errrrr hello WWW.... what about their acquisition of Household in the US 3-4 years ago... that is one of the biggest sub-prime lenders in the world! c$100bn of loans big enough for you??
Yes, as I said, apart from one unfortunate purchase (which was Household) they when led the way by writing off those debts way before it became fashionable. They made one mistake by acquisition, realised it, took the hit and overall have got their act together very well. They will certainly emerge from this period as a stronger global player than many of their peers.
I'd rate HSBC very highly out of the global banks.
We are now going to see the whirlwind unleashed on the big insurers. I doubt all of them will survive. Time to make sure those pension funds are in safe hands..
The is the end of the beginning. Nothing more.
WWW
I'd rate HSBC very highly out of the global banks.
We are now going to see the whirlwind unleashed on the big insurers. I doubt all of them will survive. Time to make sure those pension funds are in safe hands..
The is the end of the beginning. Nothing more.
WWW
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# www "A Credit Default Swap is when Grass Strip Basher bets £100 with 99jolegg that Alex won't pay me back my £10."
What if I take a bet (CDS) with ChrisLKKB for £1000 that 99jolegg will loose on his CDS. And then I default on my payment of £10 to helimutt. I win £1000.
What if I take a bet (CDS) with ChrisLKKB for £1000 that 99jolegg will loose on his CDS. And then I default on my payment of £10 to helimutt. I win £1000.
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Helimutt,
It depends on how long you plan to invest it. In a recent NYT Op-Ed, Warren Buffet writes that equity stocks are the surest bet. There are some real bargains with sub-15 P/E ratios right now. One thing for sure, cash in an interest bearing account is not going to keep up with inflation and putting it in bonds will lose against inflation by several percent, though both are reasonable places to avoid the short term volatility. Too bad a share of Berkshire Hathaway costs a lot more than your £10K.
It depends on how long you plan to invest it. In a recent NYT Op-Ed, Warren Buffet writes that equity stocks are the surest bet. There are some real bargains with sub-15 P/E ratios right now. One thing for sure, cash in an interest bearing account is not going to keep up with inflation and putting it in bonds will lose against inflation by several percent, though both are reasonable places to avoid the short term volatility. Too bad a share of Berkshire Hathaway costs a lot more than your £10K.
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What if I take a bet (CDS) with ChrisLKKB for £1000 that 99jolegg will loose on his CDS. And then I default on my payment of £10 to helimutt. I win £1000.
There are some real bargains with sub-15 P/E ratios right now.
So say I had £10k to invest in shares. Where would be the best place to buy? Maybe I can make something out of this misery?
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For those who are interested (as this thread seems to have evolved that way) what has happened is as follows:
Loan providers pool the loans, which are then structured into various assets that can be sold on in various tranches. In growing so rapidly, the first stage (pooling the loans) fell apart as proper assessment of the borrowed failed, resulting in the technical analysis to pool the assets falling apart, and losses exceeding those modelled and expected based upon historical losses.
This was compounded by portfolios of assets being further pooled post-securitisation into sub-pools, which were further pooled and securitised, and holdings highly-leveraged based upon the high degree of analysis involved in their construction. A true situation of being precisely wrong, instead of approximately right in their analysis.
Positions in these highly-leveraged structured investment vehicles were hedged through credit default swaps bought from "monolines" (portfolio insurance against default) - the problem being that such a vast quantity of these assets existed that the insurers could not possibly cover the losses involved.
Increased repossesions, falling prices, and huge growth in the industry collided to produce a massive crunch. Nobody knows what exposures sit where, or who the suckers were who bought the assets (AIG were one).
Loan providers pool the loans, which are then structured into various assets that can be sold on in various tranches. In growing so rapidly, the first stage (pooling the loans) fell apart as proper assessment of the borrowed failed, resulting in the technical analysis to pool the assets falling apart, and losses exceeding those modelled and expected based upon historical losses.
This was compounded by portfolios of assets being further pooled post-securitisation into sub-pools, which were further pooled and securitised, and holdings highly-leveraged based upon the high degree of analysis involved in their construction. A true situation of being precisely wrong, instead of approximately right in their analysis.
Positions in these highly-leveraged structured investment vehicles were hedged through credit default swaps bought from "monolines" (portfolio insurance against default) - the problem being that such a vast quantity of these assets existed that the insurers could not possibly cover the losses involved.
Increased repossesions, falling prices, and huge growth in the industry collided to produce a massive crunch. Nobody knows what exposures sit where, or who the suckers were who bought the assets (AIG were one).