Northern Rock, and why this will be the start of the great House Price Crash.

[Lowe]

My mortgage is with NR - if they went bump what would this mean for me? I'm not hugely clued up with these kind of things. I just went with the cheapest mortgage I could afford and pay it each month.

[finlay666]

My mortgage is with NR - if they went bump what would this mean for me? I'm not hugely clued up with these kind of things. I just went with the cheapest mortgage I could afford and pay it each month.

I BELIEVE you are in the clear

Although you might want to check that on MSE or somewhere like that

[Zak33]

Things go up......and they come down again.

It is inevitable....but Rave, my dear dear chap.....you've been saying it for so long that it's BOUND to occur one day, isn't it?

You'll be right on that day....but it's hardly a recipe for a successful investment.
In the time you've been saying this, people have purcahsed houses, made £30,000 clear and sold them again.

the question is: WHEN ....what day will it all start sliding?

IS IT NOW? Money where ya mouth is now Rave me old mucker....are you predicting it all drops FROM NOW?

[Saracen]

I'm actually considering buying NR shares. Their asset base is very strong, and I doubt the government wants to see a bank collapse right now. Most likely, they'll either weather the panic and recover, or get taken over. My problem is exactly when to buy.

Of course, it's a risk, but .....

[Zak33]

I'm actually considering buying NR shares. Their asset base is very strong, and I doubt the government wants to see a bank collapse right now. Most likely, they'll either weather the panic and recover, or get taken over. My problem is exactly when to buy.

Of course, it's a risk, but .....

i thought that too.....

Rave's oldest warning that I can find...
http://forums.hexus.net/showpost.php...78&postcount=8
August 04.

Anyone who purcahsed a house that day, and still has it now, is well well up on the value and it'll need to drop MILES to come back to what they paid back then.

[kalniel]

I'm actually considering buying NR shares. Their asset base is very strong, and I doubt the government wants to see a bank collapse right now. Most likely, they'll either weather the panic and recover, or get taken over. My problem is exactly when to buy.

Of course, it's a risk, but .....

If there weren't such strong signs of a previous take over that had been scuppered by the lending situation I'd agree completely. However the fact that anyone taking over will only be able to do so with limited borrowing means they will be gunning for a low price per share or not at all. Ie, when the shares get low enough they'll immediately buy at little above that price, ending up with little gain for new investors.

Of course, that's a best case scenario.. buy too soon and they'll just drop futher before any take over offer, which could then be well below what you bought.

[Saracen]

If there weren't such strong signs of a previous take over that had been scuppered by the lending situation I'd agree completely. However the fact that anyone taking over will only be able to do so with limited borrowing means they will be gunning for a low price per share or not at all. Ie, when the shares get low enough they'll immediately buy at little above that price, ending up with little gain for new investors. ....

True, but I'm not talking about a statistically significant purchase, just a few thousand.

I don't think NR will collapse. The asset base is too significant, and the BofE is guaranteeing liquidity support. Just to be clear, they are NOT guaranteeing to bail out an insolvency position, but NR isn't insolvent. It's problem is liquidity, not solvency, due to exposure to money markets and the squeeze generated by the US sub-prime farce.

NR itself, it seems to me, is financially solid provided it can weather the liquidity issue, which will probably necessitate a revision of it's business model and certainly a fairly heavy curtailing of it's extremely ambitious market expansion plans. But nonetheless, it isn't itself particularly exposed to the sub-prime risks, and does have a solid asset base.

As for takeovers, well ..... the main problem will be that liquidity issue, and the current panic is just that - panic .... and that appliers to the stock market and share price as much as it applies to people standing in queues outside branches. Would the BofE continue that guarantee if taken over? Maybe, possibly even "probably" not. But .... different banks operate in very different ways. Some (like NR) rely heavily on markets for their cash, while others are based heavily on retail deposits. If a bank with a very strong retail base goes after NR, the combined outfit could well find itself diluting that strong retail deposit base, but still not heavily exposed to wholesale finance. And the asset base is still very strong.

If I buy, I'll be watching very carefully, and prepared to make a snap decision is a quick profit opportunity presents itself, but prepared to ride out into the medium term because as far as I can see, NR is currently seriously undervalued. It'll be a VERY serious bid that takes enough of NR to compel individual shareholders to sell. I don't see that happening, and if it doesn't, then I'd be prepared to ride the coattails of any takeover, if any offer isn't appealing enough.

But, as I said, it's a highly speculative investment. In fact, half investment, half stock market gambling.

[kalniel]

Hehe yep. Personally I wouldn't buy NR, I'd buy in the company taking over - they are the ones that will benefit from the undervalue. If you get shares in NR then all you'll do is be forced to sell them at that below value rate, in my opinion - we differ in our assesment of whether the buy out would be complete or not

[iranu]

The question becomes though, where DO you go to get financial advise without spending a fortune or having someone who'se out to sell you a specific product??

You might want to start at moneysavingexpert.

Saracen is pretty much on the ball with this one. NR will make a profit of £500-£540 million even with this crisis. What we have seen is an unprecedented credit crunch in the most liquid market in the world, the London sterling three month interbank market. The credit facility with the BoE has a ceiling of £31.5 billion but NR estimate they will use about £15 billion at a suspected penalty interest rate of 6.5%.

The question now for the housing market is will the bubble burst or will it deflate. It's not in anyones interest for it to burst so I'd expect government et al to be doing everything to ensure the latter although the panicky coffin dodging sheeple queuing outside NR won't inspire confidence in the population. Remember Gordon Brown is going to have to call an election in the next 3 years and if the bubble bursts he ain't gonna win a cherished second term.

[Saracen]

Hehe yep. Personally I wouldn't buy NR, I'd buy in the company taking over - they are the ones that will benefit from the undervalue. If you get shares in NR then all you'll do is be forced to sell them at that below value rate, in my opinion - we differ in our assesment of whether the buy out would be complete or not

Well, it's all about how we see the situation for NR, the wider situation, the extent and duration of the panic and how a regulator, and/or the BofE, might react to a takeover.

Currently NR is at, what, 290p-ish. I think a lot of that is sheer panic, and I'd expect to see the market pick up in the next few days, to a week or two. I wouldn't be surprised to see the price head back up to 450-550p-ish over that time.

NR is a fairly large player, and with the BofE positioning themselves in support, and the political fallout of such a large bank going under, I don't see it being allowed to happen.

But, in the longer term, the whole banking sector has some underlying structural problems, and in my opinion, there are some uncertain times and at the very least, some restructuring of business models in the offing. Banking is not something I'd be buying into right now, were it not for my belief that NR is both very solid financially and something of a political hot potato (is our new PM going to want to see a MAJOR bank failure weeks after he leaves a 10-year guardianship of our national finances?), and that NR is, in my view, badly under-priced right now.

Time will tell, but I see a good chance of a fairly decent short-term profit in an institution that is (IMHO of course) FAR less risky than the current news stories would suggest. I guess a week or two and the movement in share prices will tell which of us is right. Either not much will happen, or it'll cost me a few grand, or you'll have missed out on some very quick easy (if risky) profits. We'll know over the course of the next few days/weeks.

[M0nkeyb0Y]

Touché - Wondered when we might hear from you regarding this Rave. You're certainly a lot more likely to be correct this time round than you were in March... and this time I agree with most of your points:

House prices are in trouble – they’ll go nowhere for a few years.
The economy is exposed – a recession could be lurking.
Markets are going to take a prolonged correction to strip away the speculation that was fed by freely available credit and the Mergers and Acquisitions bubble it created.

However a few points:
City bonuses aren’t the only thing keeping prices high, huge influxes of foreign cash (esp Russian) have been artificially inflating high end London prices. This won’t cease (it’s a way of securing (often illegal) funds and keeping Putin’s mitts off them).

Savings are protected by FSCS up to the tune of £31,700 in £33,000 (ceiling); Investments up to £48,000 in £50,000 - so you risk losing some money either way.

NSI savings offer a woeful return: I can’t let your recommendation go by without a caveat.

Also, call me crazy, I’m in the process of buying a house at the moment. I won’t lie to you: I’m nervous about it, I think I’ve bought at the top of the market. But on the flip side to that the house I’m selling is at the top of the market. M0nkeyFamilY needs a bigger house, that’s what we’ll have to do. Needs is must.

One last thing Rave, what is a recession proof job?

[Funkstar]

One last thing Rave, what is a recession proof job?

Debt collector

[M0nkeyb0Y]

Debt collector

Fortunately Individual Voluntary Arrangements are lowering the need for a lot of those guys

[JPreston]

...
Currently NR is at, what, 290p-ish. I think a lot of that is sheer panic, and I'd expect to see the market pick up in the next few days, to a week or two. I wouldn't be surprised to see the price head back up to 450-550p-ish over that time......

I guess a week or two and the movement in share prices will tell which of us is right. Either not much will happen, or it'll cost me a few grand, or you'll have missed out on some very quick easy (if risky) profits. We'll know over the course of the next few days/weeks.

I considered buying some shares in NR too, but I don't think I will....I think that the price is still a pretty fair reflection of their value, i.e. NR is not particularly underpriced.

Sheer panic is provoking people who don't have anything better to do to queue for 8 hours in order to transfer their deposit accounts away from the only retail bank underwritten by the bank of England, for no better reason than they vaguely think it's a good thing to do. But, institutional investors are not generally known for being motivated by sheer panic and so the price isn't rock-bottom low. I think a fire-sale takeover will happen and the current price is just indicative of what the takeover offer will be. I think since the sub-prime crisis retail banking sector as a whole is underpriced, but I don't think the rebound will be phenomenal.

[M0nkeyb0Y]

PS - all should read this brilliant article, as it's superbly written and provides great insight into the current problem

[Kumagoro]

Over the past 9 months there seem to be many more places for sale and also places to rent being advertised on boards around where I live. There also seems to be many more repossessions
going on too. Price wise there hasn't been a decrease from what I can tell, all these rental places
want a lot still too.

Also why do letting places/landlords always keep their prices high even when the place remains
empty??? They lose (for a 1 bed unfurnished flat where I am) about £550-600 a month.
If they knocked £50 off a month they would likely get a tenant.

What am I missing here.....