Unfit for human consumption

I enjoyed this letter which was printed in the Times last Saturday.

Sir, The selling and buying of Northern Rock mortgages between banks reminds me of a wartime story. It involved the busy exchange of corned-beef between black-marketeers.

One purchaser complained that the beef he had just bought was unfit for human consumption. He was told that the beef was not intended for human consumption, …

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Over the edge

In this comment early last month, I posed the question as to whether the UK housing market was on the brink. Well, today’s data leads me to the conclusion that it has gone over the edge and we are entering a bear market for homeowners. This view is based on one of my favourite indicators of the future direction of the housing market – the level of mortgage approvals. Mortgage approvals are akin…

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The knock on effect of falling house prices – crystal ball breaking

US house prices fell by 5.5% in the year to the end of September, according to the S&P Case-Shiller Composite-10 Index (see opposite chart). The pace of decline is quickening – prices fell by the most in at least 20 years during the third quarter, a very painfull event for the US home owner.

Prices will need to continue falling until the huge excess supply on the market is cleared. This chart s…

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The People’s Post Office

A couple of weeks ago I wrote about the possibility of the Post Office and National Savings taking a larger and larger share of the UK’s savings if confidence in the banking sector continues to wobble (see here). In the Japanese recession their Post Office at one stage held 25% of all the world’s savings! The weekend press has been full of adverts for the “People’s Post Office“, offering an int…

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Banking collapse wiped out my fortune

Over a pint with relatives the other night in the Anglesea Arms in Hammersmith (incidently the best pub in London), I discovered that the Leaviss family fortune was wiped out by a banking collapse. Whilst the size of the supposed fortune has doubtless grown with the telling over the years (from "miniscule" to "tiny"), some googling shows that the bank holding Great Grandpa Leaviss’s savings did…

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The global economy has reached a “Minsky Moment”

US economist Hyman Minsky came to the public eye after his model on asset bubbles unerringly predicted the boom and bust of tech stocks (unfortunately Minsky didn’t live to see his fame – he died in 1996). The credit bubble deflation that global financial markets are now facing is following a similar pattern.

Minsky’s underlying theory was that stability breeds instability. Long periods of econ…

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Not so fine!

Sotheby’s share price fell a whopping 37% in one day last week. Surely this was something of an overreaction to a poor auction? – cue a discussion with our resident art specialist Jim Leaviss. It turns out that in the increasingly competitive art world, auctioneers have turned to underwriting auctions in a bid to keep business flowing. Sotheby’s, it seems, went into the autumn auctions after ge…

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Anarchy in the UK – it&#39s coming sometime, maybe

Not another bearish comment on the financial system, it’s just that I went to see the Sex Pistols at Brixton Academy last night, and that song was their encore. They were ace, but now I can’t hear. Back when they got famous in inflation-ridden 1976, oil was only $50 a barrel in today’s money. Them were the days.

OK – I can’t resist. Let’s turn it into a bearish comment on the UK financial syste…

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SIVs and sub-prime explained – by John Bird and John Fortune.

This is a link to a recent sketch between John Bird and John Fortune on ITV’s ‘The South Bank Show‘. They discuss in brilliant satirical style the problems we have seen in the financial markets in the last few months. At the time of writing, the clip has been viewed by almost a quarter of a million people (and judging by the comments, many of these viewers are from the US).

 

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Now we know how much &#39AAA&#39 rated CDOs are really worth

Carina Ltd, a CDO managed by State Street, is being liquidated after the credit quality of its collateral fell below predetermined levels, allowing senior note holders to force a fire-sale of assets. Carina was originally a $1.5bn CDO when it was launched in September 2006, and is the first CDO to begin unwinding since the credit crunch began. The rating on an AAA rated portion of the CDO was d…

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