Oil extends gains by another dollar towards $129
 

http://africa.reuters.com/wire/news/usnSP280973.html

http://www.pprune.org/forums/showpos...1&postcount=20

midnight cruiser wrote, 21st Dec 2007:


Will you give it a rest, www. Figures you are quoting are from analysts on the outliers eg -40% for house prices in 3 years (which of course tabloids seize on) - the concensus is far less severe. Equally M4 supply has been hit by an exceptional divergence of the LIBOR from base rates - which is predicted to re-converge somewhat next year, as banks and other asset holders regain confidence to loosen their purse strings in the wake of Northern Rock - The LIBOR/EURIBOR - base rate gap is unsustainable in the long run. Unemployment will remain very low and I do not agree that inflation will rise significantly. So many of the fundamentals are sound compared to previous recessions, but you are selectively emphasising the worst bear points.


LIBOR still reflects the credit markets view of the crisis and the BoE will be following the ECB in raising interest rates later this year. Unemployment is sky rocketing but is not shown in the government statistics because funny enough its not worth signing on for £47 a week when that can be earned in a single 14 hr shift in McDonalds. The fundamentals and the inflation are very very bad and the only fix is a serious recession and unemployment.

As for houses - todays Guardian, Mail and Independent (centre, right and left wing) run:


http://www.guardian.co.uk/business/2....interestrates

House prices fall at fastest rate since 90s crash



http://www.dailymail.co.uk/news/arti...-25-years.html

Property plunge: House prices are falling at fastest rate for 25 years



http://www.independent.co.uk/money/m...nt-841383.html

Housing crash worse than feared as prices slump by 2.4 per cent



I don't think I need say any more on the HPC - its mainstream now and the panic phase is just beginning.


WWW

WWW, have you been taking lessons in hyperbole from the newspapers?! I'm well aware you are an enthusiast for the apocalyptic style of housepricecrash.co.uk, but there's no need for that kind of frenzied approach here.

UK unemployment is not 'skyrocketing'. It has risen, certainly, but even if you have no time for the official number of unemployed, the rate of change reported does reflect reality. The change in January (last reported figures) was up 0.1%, and affected 0.006% of the working population. That's insignificant by any stretch of the imagination. Unemployment will probably increase over the next few months, but let's keep the descriptions within reasonable bounds.

House prices are declining 'at the fastest rate in 25 years', but as the banks' records only go back 25 years, that doesn't tell me very much. I was a house owner during the last 'crash' in 1990-92, and I, like most house owners, watched the newspaper reporting with some bemusement as, apparently, the world was falling in around me. It wasn't, of course. The price correction of that period was severe, but materially affected a far smaller percentage of people than the newspaper reports would like you to believe. "So my house is worth less? That's a shame! Hey ho," was the general reaction. Sure, some people got caught by the negative equity trap (exacerbated by increasing interest rates which were way out of step with the real economy), but the vast, VAST, majority did not! Many of those who did go into negative equity held on to their homes because they could either afford to continue paying the mortgage, or came to an arrangement with their lender. In time, the problems went away. That will be the case now, even if we hit the worst-case scenario of 40% reduction in value.

So, let's calm down on the end-of-the-world-as-we-know-it predictions. A longer, more balanced perspective will show that, even in 1929, the vast majority of people were just inconvenienced, not thrown out on the street without a penny to their name. The 2008/9 economic hiccough will leave most of us with a bit less spending money and maybe a smaller car, not living in tents, selling the Big Issue and foraging for food in McDonalds' bins. It will be tough for airlines, and a significant but small minority of pilots will find themselves out of work, hopefully temporarily. Wannabes' plans will need to be reassessed, as will those of all investors, but not abandoned.

The world is not going to end!

Do you actually know any estate agents, land buyers or building trade workers who have lost their jobs in the last 3 months because I know 4. Not one is signed on to the dole. Did you know any last time or were you safely tucked up in the RAF, fighting Gulf War One and totally immune from the ravaging effects of recession? (to be fair neither did I as I was in school uniform at the time)

This time we have a nation who have been financing a lifestyle they cannot afford by means of Mortgage Equity Withdrawal. MEWing just was not possible in the late eighties. Neither were Buy To Let mortgages and nor were 5 times joint income mortgages and actually self certification (liar loans) were incredibly rare.

In fact house prices affordabilty has NEVER been as strained as it is now in all of history. Even the basic multiples of average income to average price has never poked its head above 7 as it did last year. EVER.

Of course many will be unaffected. Me for one. My parents, my parents in law, several friends, most of my extended family and the bulk of the people at work or play. But that is not the point. Airlines operate right at the margin of the economy for their profits. With the margin contracting the profits evaporate and the airlines have to contract fast. Game over for most wannabes.

For wannabes this is an apocalyptic crisis. You're fine, I'm fine, many are fine and the world will not end. But for Wannabes with £80k of debt and an expiring IR this will be cold comfort.


I agree - plans for being a pilot need not be abandoned. But unless you shout quite loudly Wannabes don't want to hear an important message..

WWW

Expect BA website to open up again for DEPs in the next few weeks. Keep your eyes open.

I hope they've got a *really* stable server!

WWW

ps

Norwich Union to slash 1,800 jobs

guardian.co.uk, Friday June 6 2008


I bet all of about 5 of them will sign on the dole and show up in the unemployment stats.

Yes, I do - including the guy that sold me the house I'm in now. None that I know has signed on either, as they've all got new jobs in other fields. However, some of their ex-colleagues have signed on because they haven't been re-hired and they need the money. That's how it goes; not all job losses mean a rise in unemployment.

Yes it was. I did it, and so did several of my mates - for exactly the same reasons as people have done it over the last ten years!

That's true - at least in the quantity we've seen over the last couple of years. But I well remember the rush to buy terraced properties in university towns in the late eighties, which amounted to the same thing. Not as significant in the market, I agree, but it did happen.

Afraid you're wrong there too. As the bubble started to rise exponentially, mortgages got very nearly as silly in 1988/89 as they were in 2006. The more outrageous loans weren't quite so easy to find as they were in the last few years, but they were there.

That's true, but the ratio of monthly mortgage repayment to average earnings is not remarkably high just now, and that is the real measure of affordability once you're on the ladder. It seems to me that the number of people who will be severely stretched is likely to be broadly similar to last time. BoE interest rates may well rise, but no more than 0.5% - and as mortgage lenders' interest rates are currently decoupled from base rates anyway, it's the inter-bank lending rates that will determine mortgage rates in the short term. My bet is that that will be down.

Anyway, this is all esoteric crap for the average Wannabe! We could willy-wave over the property market all day, and it will make no difference to them. The fact is, the airline industry is going to take a bit of a pounding over the next year or two, and new jobs will be much scarcer than they have been. Therefore they should plan accordingly.

Yeah, fair enough. The housing markets discussion is just a proxy for the airline sector and shouldn't become the focus of discussion.

I think it is factual to say that a HPC preceded the 1991/1992-era recession which caused the demise of several large airlines in the UK (Air Europe bust in March 1991 as the UK's No2 holiday airlines, Dan Air bust in Oct 1992 as the No2 slot holder at Gatwick) which in turn spelt disaster for the Wannabes of that time and for some year to follow.

The peak (Nationwide figures) for the last boom put average house prices at £114,478 in Q2 1989. The low was hit in Q1 1996 at £71,935. A drop of £42,543. Check the figures yourself at:

http://www.nationwide.co.uk/hpi/historical.htm


From the peak in Q3 2007 of £187,886 a 37.16% fall (same as last time - not worse) will take us down to £118,068. The last data available for Q1 2008 stands at £179,363. Do you see how far we are going to fall? Can you imagine the negative equity, the belt tightening the job losses involved? Does the raw data not give you cause for concern?

Oh, and BTW those figures are all adjusted for RPI inflation so reflect inflation and buying power. These are not nominal sums that look horrific but fail to account for increased affluence.

We've only just crested the top of the roller coaster, the ratchet just stopped making its noise and the passengers are just opening their mouths to scream.

I know its alarmist but I'm right. Unfortunately.


WWW

It isn't a rollercoaster, it's a log flume. When we get to the bottom our trousers will be wet. :eek:.

Hey ho.

Rollercoasters go back up. Log flumes don't.

I enjoy both though ;)


WWW



ps This time last year the following was printed by the www.money.scotsman.com

Since then mortgage rates (the base rate means diddle squat these days) including fee has jumped from 4.75% to 6.3% - pick up the phone, call charcol, ask them and tell me that I am wrong..

People with less than 5% equity (10% equity two months ago) will be looking at SVR's of 7% and wincing. Quite a bit of flying is discretionary spending. Airlines operate on fragile margins with high fixed costs. It will be more brutal and quicker than the early 1990's.

Protect youself - avoid debts.

Ooooh now you are just plain wrong, you're dealing with someone who grew up 4 miles from Blackpool Pleasure Beach. I can categorically say that log flumes do go back up. That would be a rubbish ride, one descent! I think you may be confused with a standard one shot, get absolutely soaked type ride.

:E

Now I MUST stop being distracted from ATPL study. I'm never going to pass at this rate.

We can compare notes on the housing market in a year or two's time, I guess. Personally, like many home owners, I'm not particularly concerned about the value of my house as I'm not selling it and have no intention of doing so. Should I have to, for instance because my job has disappeared, the capital I shall release will be less than it might have been a year ago - but I knew then that its value was artificially inflated by a distorted market which couldn't last (but will come back a few years down the line). But the cost of any replacement (and much smaller) house will be that much lower. Other than that, it's really of academic interest only.

More important is overall sentiment. That's primarily what affects airline customers, whether leisure or business. It doesn't actually need someone to have less money in their pocket to stop them spending, just for them to feel that they might have less money in the future, so they'd better hang on to it. That's why there are all sorts of illogicalities in recessions - and booms - and why it's so difficult to forecast what's going to happen. The price of oil, which so affects our lives, is itself one of those illogicalities!

You're right that airlines operate on small margins. Not the lowest in the business world, by any means, but they aren't generous. BA's 10% target is extremely optimistic, and has been achieved by only a few airlines in history - usually those with monopoly positions. 3-5% is typical for well-run airlines. Therefore they are indeed vulnerable to changes in market sentiment, and the weak (at least in the more free trading areas of the world) will perish. 24 have gone in the last six months, according to IATA, and undoubtedly more will follow over the next couple of years.

It's extremely difficult to predict which airlines will suffer most over that time. Will it be the new market of the low-cost airlines that contracts so much they struggle to survive? Will it be the more established markets of the charter carriers? Or the business-driven custom of the legacy long-hauliers? Who knows? All - customers and airlines - will tighten their belts, but most will continue flying. Air Europe and Dan Air went last time, and there are some great hindsight-filled explanations of why that was. The marketplace was very different then, however, and now more previously-insulated carriers are exposed to the full force of the market. In the transatlantic marketplace my airline largely inhabits, much capacity has already gone, particularly in business class. More will follow. I can see significant consolidations about to happen in the European low-cost/shorthaul sector. The American carriers, with the exception of Delta & Northwest, seem to have decided that the costs of consolidation are too great, and that wholesale surgery of the current businesses is the only way they can survive. At the moment, the Middle East and Far East carriers are little affected, but they are beginning to make statements downplaying future profits.

How different will the airline field look in a couple of years? Well, after 9/11, everyone forecast that there would be a huge shakeout, and mergers and closures would happen by the bucketload. They didn't, so maybe they're now due. Lufthansa and BA are turning predatory, looking for competitors with access to new markets to swallow. Singapore and Emirates will likely do the same, as may Ryanair and EasyJet in Europe. The net result, in the short term, will be fewer aircraft flying a higher loadfactor - and needing fewer pilots to do it. Pilots' pay and conditions will once more be under severe pressure. Wannabes will be asked for even more money to do licences and type ratings with the hint of a job attached, and the more gullible will front up the cash. And pay for their mistake over the next 30 years!

Go work in McDonald's if you have to; sit this dance out. There'll be another hiring boom in a couple of years. I hope!

I certainly can't argue with that even with my argumentative hat on.

Oil has leapt today :(

WWW

I hope the same, but I'm afraid that the golden age of air travel is gone forever. Oil supply's are stagnant, and I don't think anyone believes that they can be increased much more. At the same time global population is increasing, and the living standards (car's etc.) throughout the world are increasing especially in China and India, but also in oil producing nations. It's only a matter of time that supply's are dropping significantly and then the real fireworks start. And I don't think it is realistic to expect a hiring boom with $300- $400 oil. We are entering an energy crisis (Gordon Brown's words) without a solution in sight. Things like air travel, driving car's, globalisation, food production etc will change in the post peak world.

Why the h*ll did we build a society that is addicted to oil without ever questioning ourself whether we could come up with a replacement for oil??

I think cars, road haulage and ships can all be changed to run on none Geological energy and that much of industry and electricity generation can transition. Leaving Kerosene for the world of aviation and other specialist areas.

I like the look of the Algae bio-fuel numbers as well.


At the end of the day multi trillion dollar companies such as Airbus and Boeing are spending money today developing aircraft that will be flying in 40 years time. If they think aircraft will still be able to fly then I'll go with their assessment.

The world won't end because of a full scale house price crash and deep recession. Its just part of the cycle - no need to fret unless you've borrowed £80 to buy a piece of paper that expires in a few years..


WWW

Oil Supply
 

I've got three engineers staying with me. They are working on land based wells, or proposed wells in NE Scotland. They reckon that there is the same amount of oil, or more, to be had out of the North Sea as that we have already had. Its the price that is now making it economical to extract. Maybe this explains why the government is doing as little as possible to reduce fuel costs, to encourage further oil development. Nice little backfire for the green brigade.

A colleague runs a medium sized house building company and he has not sold a house this year. Normally he sells 300 units per year.

New build will probably make 110,000 units this year down from about a norm of 160,000 and a government target of 240,000.

Most of the major house builders are laying off up 15% of staff.

And then it snowballs into the suppliers like the brick makers

http://www.building.co.uk/story.asp?...de=3115350&c=1

If anyone is in denial about the housing market be assured, it is f*cked.

I'm sorry, but you're quite, quite wrong!

There is no shortage of oil presently, and none is forecast for any time soon. No cars, ships or aeroplanes are laid up for lack of fuel, no plastics or clothing companies are on short time for lack of raw material, no power stations are struggling for lack of natural gas. The oil producers are comfortably exceeding the world's demand for oil - which is the primary reason why oil price behaviour at the moment can be considered aberrant.

Oil demand worldwide has been increasing only marginally over the last decade as oil consumers become more efficient, despite the rapid increases in China and elsewhere.. Demand in the USA is now dropping faster than China, India and all the developing world can compensate for. Add to that the increasing supplies of alternatives to oil-based fuels, and the problem of 'peak oil' - if it actually exists - shifts rapidly to the right. Replace just 5% of the world's oil consumption with something else and there is not now, nor will there be in yours or my lifetime, any doubt about the ability of the world to provide for its energy supplies, geopolitics aside.

I appreciate your concerns, but it's knowledge that you need to make and dispel your argument, not uninformed speculation.

With apologies to a blog on the finance industry, from which I pinched this, a great anecdote that seems to translate directly to this industry...and some wannabes' attitudes...:

First Year MBA student#1: "Did you hear about the [big foreign bank] presentation yesterday?"
First Year #2: "No."
First Year #1: "This managing director is up in front of the podium answering a question about work-life balance someone asked, the junior guys are sitting in chairs on the stage behind him. Fifteen, maybe twenty seconds after the question one of the junior guys literally passes out and falls out of his chair onto the stage. They called the paramedics and everything. It was crazy."
First Year #2: "Is he ok?"
First Year #1: "Fine, apparently. Exhaustion. Just got off the plane from London, no sleep for a week because of a deal he was working. Right after the managing director just talked about how great the work-life balance is."
First Year #2: "They have a London office? Are they hiring for the London office?"

This just in:

The price of oil has made a record jump to nearly $139 a barrel, amid reports it could reach $150 by July because of rising demand and political tension.

Crude oil in New York gained more than $10 to hit $138.54.