Who'es brave enough to dabble with some NRK.L shares?

[smelly]

OK i know they've had a rough few months but Northern Rock is one if UK's biggest banks and with the current support of the Bank of England i can't see them folding anything soon.

Now the mostly likely outcome is of a foreign takeover (Virgin has kinda gone quiet over it recently). I know the housing market is now plateaued and is starting to dip as well, so the price of housing will fall. This all affects the share value. Yesterday it ended on £1.50p per share, before the current sub-prime issues they were trading at over £10.00 per share. Now i know it's unlikely to see them rise to their former value so soon but i think they may reach back up to £5-6 per share if a suitable take over is arranged.

So I'm highly tempted to invest about £500 to £1000 in these and ride out the storm. Who's with me????
Or am I better off burning my cash and at least heat my home for a little while longer?

[TiG]

Or it could go belly up and eat you £1000.

Shares can go up as well as down, if the sub prime gets worse then northern rock could be completely screwed.

TiG

[M0nkeyb0Y]

Don't even think about it... seriously.

If there is a bid it will likely be around the 1p-£1 mark.

As long as the money market isn’t open to them they essentially can’t operate – things may clear up over the next few weeks, but there is no case for seeking value at these levels.

[TheAnimus]

its unfair to call the northern wreck sub-prime i suppose, but their business model means that the credit crunch is going to seriously effect them as they are reliant on the availability of cheap credit on the international market.

All it would take is for foriegn investors to have a total lack of faith in our housing market, and blam, watch how £1.50 falls to 15p!

But its worth noting that we don't suffer from many of the precursors of the US market fall. I am appalled by people like HSBC (.... can't say what i was going too ....) who have been offering 110% mortgages to graduates, that have a 7 year lock in, which start off at a much lower intrest rate. All seams fine, but they would sell this based on you earning more money. Hardly a prudent way of getting a mortgage. (that said if i'm going skiing next year, i need a pay rise because of my mortgage, so i sail close to that gambling on pay rise for luxuries, just not my roof).

So, the big question is, is the credit market in the UK a big problem? Are we going to see plentiful credit once again?

Personally I don't see intrest rates going too 6% any time soon. So I'd be tempted to have a punt, but then again, my money is still in my garanteed backed up by the FSA savers account

[Rave]

I find this quite interesting actually. Northern Rock got into trouble because they borrowed money on the short term markets (assuming that they'd be able to refinance their loans easily when they became due), and lent it out long term (as mortgages). When it turned out that they couldn't in fact refinance (because of the credit crunch) they got into trouble.

What they have as assets though are a huge book of mortgages, which by definition are secured on the homes they were used to buy. I'm not sure what NR's 'market capitalization' (is that the right term?) is, but it wouldn't surprise me if it was now considerably less than the nominal value of their outstanding assets. If it's less than (say) 60% of the nominal value of their loan portfolio, then even if houses lost 40% of their value in the forthcoming crash, and every one of their borrowers defaulted on their loans, they'd end up owning a massive and still valuable property portfolio once they'd managed to reposess all their borrower's houses.

The really crazy thing is that the BOE have now lent NR something like £700 from every single taxpayer in the country (which includes me, of course). They must think that those loans are (largely) safe, or else they're playing it incredibly fast and loose with our money.....

[SilentDeath]

I have been thinking about this...

On the first few days of northern rocks problems, the shares dropped a huge amount. Then as the BOE stepped in they rose back quite fast. Somewhere, somone made huge amounts of money on that.

[M0nkeyb0Y]

I hope you listened to me!

[Zak33]

I hope you listened to me!

I dont have an account so cant read it....

but I have to say....the three people I know who splashed out on a few NR shares and dumped them after the BOE bailed them out, did ok

[herulach]

The other option here is that all the assets get sold, leaving nothing but a shell. Long term the best hope for NR holders is Luque's bid, but it would still have a way to go to make serious profit.

[Sinizter]

Share prices can never be too low - zero value excepted.

I wouldnt bother with NRK.L unless you want to speculate/gamble. As a good investment - no way. But what do I know ... Im not an IFA.

[smelly]

No i've not brought any - yet. They're around the 150p mark atm and have been for about a week. I would say they were "stable" I think any good news would send them shooting up - there is just too much invested in them. Similarly they could also go down. I'm just waiting to see what happens in the next few weeks.

I'm not expecting them to get to 1000p in the space of a few months or ever, but if they do reach 500p it would be quite a respectable return.