Monday, September 17, 2007

Who F**ks you Xtra? oooh oooh

...taken back in the days when wearing a straw boater was a mandatory requirement for anyone attending a bank run

Now that
Northern Rock is as good as finished and just waiting for someone to have the decency to administer the coup de grâce it's only reasonable to ask 'who's next?'

Fish of the Week

Because they pursued a similar business strategy to
Northern Rock, the two most popular names in the frame seem to be Bradford & Bingley and Alliance & Leicester. Like Northern Rock, they have given out mortgages far in excess of deposits taken and have had to fund their business from money borrowed from other banks. The problem being that other banks have a fair idea of how shite many of those mortgages are and are not lending the funds required.

Or so the story goes

Personally, I haven't looked over
B&B or A&L's books so I don't know how dire their predicament really is

But it doesn't really matter

long as people think those banks are in bad shape they are in bad shape

There are predators out there who have seen how panicky depositors are and how quickly a little negative publicity has crushed a bank's reputation and its share price. The stockmarket is more than ready for a little predatory
shorting of financial stocks

All you have to do is...

  • Sell a lot of Bradford and Bingley shares you don't actually own at the current market price, say £3.60, with a promise to deliver the shares to the buyer in a few days time
  • Hope that other speculators and nervous investors join in the sale-fest and drive the market price down to say something like £2.00 a share
  • At which point you buy the shares you 'sold' a few days before and turn them over to whoever bought them off you.
  • Bingo, you've made £1.60 a share selling stuff you didn't own, off the back of a panic you could very well have started
  • And just to be on the safe side and to make sure the share price doesn't rise instead of fall, there's no harm is spreading a few malicious rumours about the company you are mucking about with - there's nothing like TV coverage of mobs of terrified grannies clawing at a bank's front doors to really enhance its share price

Of course, if the company you're mucking about with is inherently strong and market sentiment is generally positive, playing this sort of game is a risky business.

Though, to be honest, if I were a c*nt in a stripy shirt and access to a trading screen right now I'd be sitting here with an erection, thinking 'dead cert'...

It's also worth pondering upon the fact that the people who ultimately stand to lose out from all of this are ordinary savers and people with pensions. That's the not so funny thing about credit bubbles and their aftermath, everyone loses - savers and spenders alike. At least the spenders got to buy some rubbish and have some nice holidays for a while

Of course, things will start to get really interesting if and when house prices start to fall as the result of lenders like Northern Rock, Alliance & Leicester, Bradford & Bingley, and all the others, pumping less money into the housing market with their shonky, fucked-up mortgages

and then, all that debt which built-up off the back of elevated house prices will become flakier and flakier

and then...

well, fuck knows



There's an intriguing little quote from BBC Business Editor Robert Peston on the BBC News site here...

"Mortgage banks and building societies such as Alliance & Leicester and Bradford & Bingley, as well as the bigger banks, have seen much of the money withdrawn from Northern Rock"

Now why would Mr Peston single out
A&L and B&B, out of all the players on the field, as being destinations for savers fleeing Northern Rock ? = An implied endorsement of those two banks by the State Broadcasting Company

Could someone else be worried that the knives will be out for those two institutions this week?

Total LoonThink
, obviously

And remember, it's only subliminal if you don't notice

edit #2:

At the close of today's working day it seems that Alliance & Leicester was selected as next in line for a well-deserved and potentially lucrative kicking on the stock market, though Bradford & Bingley hardly had a fun day either

And then at the end of all that...

The government announced that it was guaranteeing Northern Rock depositors' money


as outrageous an example of corporate welfare as you're ever likely to see

Apparently, UK taxpayers are now in the 'underwriting shitty loans made by private companies' business

What's our fee for doing that I wonder

Though this might stabilise the share price of banks which have specialised in shitty loans for a little while, it is unlikely that they will be able to continue pumping money into and inflating the housing market with their shitty loans. And it will be interesting to see just how large an appetite our government has for supporting shitty loans on our behalf in the days and weeks ahead. Rumour has it that there are one or two shitty loans out there

It would be nice to think that speculators who have shorted NR, A&L and B&B in the expectation of a share price bloodbath have been reamed by the government announcement and the positive impact it may have on share prices. However, the week is still young and I suspect much tomfoolery lies ahead...



Anonymous said...

I'm getting a bit fed up with all the politicians and the smug self interested 'experts' on the telly telling us how everything is fine and dandy. If they say it enough do you think the £1.3 trillion worth of monopoly money will disappear?

Alexander Fear said...

Good post Stef.

You are right, funnily enough it's the mortgage borrowers who don't have to worry, there'll always be someone ready to buy their debt, it's the savers that do have to worry.

And like everything else, those who join the rush last are going to be the ones left high and dry.

When it comes to finance markets, you could almost bet your granny on them.

Wolfie said...

Well the bit that most people can't get their head around is that the house price boom over the last decade has entirely been caused by profligate lending in the mortgage market. The buy-to-let brigade being the worst offenders. I sneer every time I read about "housing shortages" and "affordable homes", read that as inflation coming your way soon. Deregulation was the start of the problem.

The BBC are up to their usual mischief.

Stef said...

methinks the supply of low cost, though not necessarily affordable, homes in the UK housing market is soon to increase substantially

Anonymous said...

I've never bought the housing shortage bullshit. That's just a convient smokescreen. Have a look at any big city and you'll see hundreds upon hundreds of shiny new and completly empty flats. There's wasteland and boarded up houses all over the place in Leeds where I live. And there's certainly no shortage of land generally across the country, any flight across Britian will tell you that. Houses are so expensive because our money's worth fuck all anymore, due to, as Wolfie says, profligate lending, money creation and trickle down inflation from all the Billionaire criminals/businessmen Brown lets live here tax free buying up even fairly modest houses for the £10 billion loose change they find down the back of their solid gold sofas.

Anonymous said...

"And there's certainly no shortage of land generally across the country, any flight across Britian will tell you that."

The facts are presented in "Who Owns Britain" by Kevin Cahill. Get the book. Something like 5 % of the land has houses on it. Lots of the rest is owned by aristocrats who get a massive increase in land value (tax free) from agricultural land to development land when a tiny tranche of the land that they claim to own gets planning permission. This note can't do a description of the rampant thievery justice; get the book for more details.

Anonymous said...

Thanks for the recomendation. Along the same lines, one thing that has always annoyed me is golf courses. I was staggered recently to be looking at the area I live in in Leeds on Google maps as to the vast amount of surrounding land that was golf courses. The whole place is ringed by the damn things. Many thousands of acres of prime land just so the rich can play a stupid game. That's social injustice right there in the greens and bunkers. If I was in charge the tits in the stupid trousers would be the first against the wall.

Stef said...


If you take a look out of the window of a plane flying into any major UK airport, especially Gatwick, it's easy to convince yourself that the country is run by and for golfers

a fairly reasonable conclusion IMHO

Anonymous said...

"Northern Rock still lending ‘recklessly’
Robert Winnett and Roger Waite

Northern Rock stands accused of “reckless” lending after it emerged this weekend that the beleaguered bank is still offering mortgages of six times salary to potential borrowers."

While the reputation of the local newspaper, The Journal has been shattered by their uncritical support of the finance house.

(There was a time when the article from the Times, top, would've been found in The Journal, above. No longer.)