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Collapsing Global Credit Bubble Churns up Financial "Whales"

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  • #16
    Re: Collapsing Global Credit Bubble Churns up Financial "Whales"

    Originally posted by Chris Coles View Post
    GR,

    I was only quoting a reporter with the BBC who made that comment.
    _________
    Chris.
    I wonder if the Beeb gets a Reuters feed?
    80 Billion Pound notional mortgage book on 2 Billion of equity + 78 Billion of short term loans = ...

    ...LONDON (Reuters) - Shares in embattled British bank Northern Rock tumbled 20 percent to an all-time low on Wednesday as speculation of a cut-price takeover bid combined with stake sales from two investors stoked concerns over its future. The latest leg down by its shares was blamed on talk of opportunistic cut-price bids for the bank from rivals Lloyds TSB , HBOS or HSBC . A bid could be pitched at 200p a share or lower, according to dealers.

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    • #17
      Re: Collapsing Global Credit Bubble Churns up Financial "Whales"

      Originally posted by Chris Coles View Post
      GR,

      I was only quoting a reporter with the BBC who made that comment.
      _________
      Chris.
      Chris: I see the nationalization debate is still going strong. Did you see this in the Telegraph this morning?

      http://www.telegraph.co.uk/core/Cont...&site=1&page=0

      I would think that Brown, the Exchequer and especially Governor King would like this carcass to be hauled away soon...
      GR.

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      • #18
        Re: Collapsing Global Credit Bubble Churns up Financial "Whales"

        GR,

        Thanks for finding that, I was worried that I had misheard the quote and that it would backfire on me. But I return to my original point, if I had duff paper on my hands I would immediately cover it through Northern Rock. They have to accept for the time being they have the great gift of being able to turn the proverbial sow's ear into a gold bar. As every loan they take on earns them money and they cannot lose, no matter how hard they might try, I would move everything into their hands. And, the faster the better. Once it is on the books, whoopee!! As the Telegraph states, as good as UK Gilts.....

        You wanna buy some dodgy paper pal?? Going cheap...... nice return! You cannot lose.

        Comment


        • #19
          Re: Collapsing Global Credit Bubble Churns up Financial "Whales"

          Chris,

          Hope you already had an account there.

          The weaseling has already begun: No guarantee on new accounts.

          http://www.ireland.com/newspaper/bre...breaking14.htm

          The next step will be no guarantee on deposits over existing balances as of 'xx/xx/xx' date.

          Then the limit will be set to deposits under 'xx,xxx'.

          Comment


          • #20
            Re: Collapsing Global Credit Bubble Churns up Financial "Whales"

            Originally posted by c1ue View Post
            Chris,

            Hope you already had an account there.

            The weaseling has already begun: No guarantee on new accounts.

            http://www.ireland.com/newspaper/bre...breaking14.htm

            The next step will be no guarantee on deposits over existing balances as of 'xx/xx/xx' date.

            Then the limit will be set to deposits under 'xx,xxx'.
            But of course, they have to do this. Imagine what would happen otherwise:
            - word gets out that this is the place to safekeep your savings;
            - people begin to line up outside high street branches so they can put their money into Northern Rock;
            - TV camera crews show up to find out what's going on;
            - The BBC runs the story as the evening news opening feature;
            - next morning people line up in the dark 5 hours before branches open, so they too can put their money into Northern Rock;
            - savings accounts at every other bank in England are drained as people rush to move their savings to Northern Rock;
            - police are called to restore public order;
            - Governor King, the Chancellor of the Exchequer and PM Brown broadcast statements;
            - these efforts fail; indeed they just fuel the mania;
            - a Parliamentary investigation is started to look into the whole sordid affair.
            - years after the fact Alan Greenspan announces mysterious "global influences" caused it all.

            See, they really have no choice...
            Last edited by GRG55; 09-22-07, 03:34 PM.

            Comment


            • #21
              Re: Collapsing Global Credit Bubble Churns up Financial "Whales"

              This should give you a better idea of the debate here in the UK.
              Bank gives the details of its watered-down rules


              http://business.timesonline.co.uk/to...cle2508102.ece

              100,000 guarantee to cover all savers

              http://www.timesonline.co.uk/tol/new...cle2508003.ece

              (But please note the comment by one of the Times readers to the effect of asking if the guarantee is for just one person per UKP100,000, or per tranche of UKP 100,000 per bank account).

              The general point I was trying to make was that, once the BoE had given a blanket guarantee, then if you are another financial institution, you lend as much as Northern Rock needs and, as the government has made it quite clear that Northern Rock will not fail, (or the government loses its credibility), then your institutional funds are quite safe. So, you have lots of dodgy paper on your own books, but you cover that by lending to Northern Rock, ..... who cannot fail.

              Just to let you know that I am off air for a few days to finish a book, (not economics), and should be back on site early October.

              Chris.

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              • #22
                Re: Collapsing Global Credit Bubble Churns up Financial "Whales"

                Originally posted by Chris Coles
                The general point I was trying to make was that, once the BoE had given a blanket guarantee, then if you are another financial institution, you lend as much as Northern Rock needs and, as the government has made it quite clear that Northern Rock will not fail, (or the government loses its credibility), then your institutional funds are quite safe. So, you have lots of dodgy paper on your own books, but you cover that by lending to Northern Rock, ..... who cannot fail.
                Chris,

                I understand what you are getting at - but you're missing the basic behavior of bankers: Even with a BoE guarantee - the fact that it is already being modified from 'blanket' means there is risk.

                Banks don't like risk unless they're paid for it - and I very much doubt Northern Rock is in any shape to pay a premium for anything although they will probably have to.

                I think a lot of the bankers are also looking at Countrywide and the BofA lendvestment.

                Unfortunately - Mr. Lewis is head of a traditionally acquisitive institution. BofA is where its at because they've always doubled down and gotten bigger.

                I personally think that the era for that is over - but time will tell!

                Comment


                • #23
                  Re: Collapsing Global Credit Bubble Churns up Financial "Whales"

                  Originally posted by EJ View Post
                  Collapsing Global Credit Bubble Churns up Financial "Whales"

                  As the Whales Hit the Beach, Don't Forget Where they Came From

                  by Eric Janszen


                  ...Not a whale but a collection of whales is what we'll have before the credit bubble Greenspan made is finally unwound.

                  More "sticks of dynamite" going off in interesting places - Australia, Japan, and now China too. The dark side of globalization?

                  Australia, Japan Bond Risk Rises to Record After CDO Downgrades

                  By Laura Cochrane and Oliver Biggadike
                  Nov. 22 (Bloomberg) -- The risk of Australian and Japanese companies defaulting on their debt rose to the highest on record as downgrades on securities tied to mortgage bonds increased concern losses at banks will widen.

                  The iTraxx Australia Series 8 Index rose 2 basis points to 67 basis points at 7:23 p.m. in Sydney, the highest since its start in 2004, according to Citigroup Inc. The iTraxx Japan Series 8 Index of credit-default swaps rose as much as 4.25 basis points to 50 basis points, according to Morgan Stanley.

                  Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc., Japan's two largest banks, in the past month reported profits declined because of investments linked to the U.S. mortgage market. Citic Ka Wah Bank Ltd., a unit of China's biggest state-owned investment company, had its financial strength rating cut yesterday by Moody's Investors Service because of potential losses from structured investment vehicles.

                  ``Subprime is like a steamroller,'' said Peggy Furusaka, sector specialist at BNP Paribas SA in Tokyo. ``I don't think anyone really believes that what's been reported by the major banks is everything.''
                  The turmoil in global credit markets may force banks, brokerages and hedge funds to cut lending by $2 trillion, Goldman Sachs Group Inc. economists said last week.

                  ``Concerns about subprime issues adversely impacting global growth have grown from whispers to a dull roar,'' Commonwealth Bank of Australia analysts in Sydney said in a report today.
                  Fitch Ratings downgraded $29.8 billion of CDOs linked to residential mortgage bonds yesterday. Standard & Poor's cut ratings on $5 billion of securities and said it's reviewing $24 billion more.

                  Citic Ka Wah Downgrade
                  Potential losses from structured investment vehicles at Citic Ka Wah Bank could wipe out a year's profit, Moody's said yesterday.
                  A global slump in corporate debt and equity markets has prompted investors to buy government securities, pushing 10-year yields on Treasuries and Japan's bonds to the lowest since 2005.

                  The Australian iTraxx index, containing credit-defaults swaps on 25 borrowers, including BHP Billiton Ltd., Macquarie Group Ltd. and Australia's five biggest banks, has more than doubled in the past three weeks as banks led by Merrill Lynch & Co. announced at least $20 billion of writedowns on the value of collateralized debt obligations.

                  Each basis point on a contract protecting $10 million of debt from default for five years adds $1,000 to the annual cost.

                  `Definitely Bearish'
                  ``The markets are definitely bearish and a bit nervous,'' said Anita Yadav, head of credit and hybrid research at UBS AG in Sydney.
                  Credit-default swaps tied to the debt of BHP Billiton, the world's largest mining company, increased 3 basis points to 56 basis points, BNP Paribas prices show. The contracts have more than doubled since the Melbourne-based company said Nov. 8 it offered to buy rival Rio Tinto Group.

                  Japan's iTraxx index eclipsed an earlier record of 48 basis points reached by the previous index on July 30. The benchmark contains credit-default swaps tied to 50 Japanese companies including All Nippon Airways Co. and Japan Tobacco Inc. The iTraxx indexes are revised every six months to include the most actively traded contracts.

                  Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.

                  http://www.bloomberg.com/apps/news?p....fw&refer=home

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                  • #24
                    Re: Collapsing Global Credit Bubble Churns up Financial "Whales"

                    Perhaps an alagory will help other to understand

                    You are a "smooth operator" (China and the rest of the world). A young & inexperienced youth in your neighbourhood (the USA) receives a brand new Lambourghini from Papa (the previous, hard working generations of the USA). You resent the neuveau riche. You like those bright red sportscars, but the young fool won't sell it to you. You decide to take it from him.

                    You befriend the young fool. Soon the fool trusts you. You invite him to a friendly card game with a few other friends. After you let him win a few hands, the young fool thinks he is a card shark, and will always wins, no matter how stupid he bets. Suddenly, you turn the tables on the fool. He thinks he has a winning hand, but loses each time. The longer he plays, the more he loses. Soon, he is out of money.

                    You, his new best friend, soothe his feelings, and tell him his luck will soon turn good again. You express trust and belief in the young fool as a true master of life and cards. You agree to loan him a little money to help him win it all back and more, provided the young fool (or Papa) pays you back. Soon there is a pile of IOU's in front of you for the money you have loaned the fool time and again.

                    As soon as you are owed more than the bright red car parked outside is worth, you suddenly become very tired and want to go home in your new car. The young fool protests, asks for time to pay, threatens to tell Papa, cries, yells, etc. You listen but insist on payment immediately; what you came here for in the first place, the red car. The young fool may try to run away, or call the cops, but you have muscle on your side. Soon, you are driving off in your new car.

                    When will the young fool (the USA, and those like him) realize what they have done? How will they tell Papa?

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                    • #25
                      Re: Collapsing Global Credit Bubble Churns up Financial "Whales"

                      Glenn,

                      Welcome to iTulip.

                      Comment


                      • #26
                        Re: Collapsing Global Credit Bubble Churns up Financial "Whales"

                        Originally posted by c1ue View Post
                        Glenn,

                        Welcome to iTulip.
                        As I gather you all say in the US; Roger That!

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