Great thread guys - what $1M PA OMG. Just back from a quick break.
This from a guy that put rates up in Feb and March 2008 when the yield curve had inverted in UK 15 months earlier and the US bonds and CDS markets had been showing extreme stress for 12 months. Even the equity desks were already unloading LOL.
Duh.. and finally - he only lowered by 0.25 in September 08 and then started to panic AFTER Lehmans. We have the same situation with Spain right now only this time no clean balance sheet for Swan, construction dead, house prices falling & China slowing faster than (they) thought AND stress on banks enormous.
I will list a quickie of this bank stess for you all here now: 1. 40% of banks wholesale funding was from Europe and banks there going home - not renewing offshore loans due to EXTREME distress in EZ. Those of you not across this would not understand the degree of seriousness of this situation. This will take 5 years to play out - but to roughly quantify it does make a hole of roughly 8% of this part of their book. 2. Syndicated loan book same story only much larger loans out there to the banks most important clients - what do they do when maturity arrives?? Banks have limits for participation and need multiple syndicate partners to make up the vast sums of cash in these loans now under serious threat. 3. Mark to market shrinking - prices coming off = extreme distress. Again those that do not understand reserve requirements and risk weightings will not understand the severity of this point. 4. Problem loans contingencies need to be built dramatically. A growing problem. 5. Business facing stress with av payments due being paid after 53 days - slowing payments reducing business deposits. 6. Fewer new loans due to the above = shrinking revenue. 7. Mums and dads withdrawing - soon more and more - due to inflation (CTax) and to help kids etc with loan difficulties = shrinking deposits = reserve distress. 8. Unemployment phase kicking in - more distressed borrowers.
List above not inclusive - distress building this is (vaguely - I doubt they get it fully as no banking background) why GStevens and Swan talking it UP but that will not suffice - no hope of holding this back so this spin is purely bile flavored lies to entrap the unwary.
Why not triple the first home owners grant and stuff a heap more lives? - sorry it makes me a bit angry. This is falling my way so I am fine - I post to warn and write to try to help as many as I can.
There may be demand and yada yada however if buyers can't get loans the prices tumble - unless wages grow significantly in the economic climate :-(
have a great weekend - work out how to profit of protect yourself and you will be fine. Bought 30 years ago and don't need to sell then no problem. No debt no worries.
