Euro could be under pressure this week

[Gluestick]

Internal trading and self-sufficiency is one of those nice textbook theories I fear, Q!

Same for Comecon: didn't work in fact.

And there is not much oil and gas produced within Eurozone.

In order to balance Current Account (Balance of Trade), usually imports are set off against exports. Global commodities are priced, traditionally in US dollars.

Germany exported much to the USA: that market is now flat.

Same with the UK.

Trouble with the ECB, it is like any committee driven organisation: decisions of significance take forever to agree.

That was a core problem with CAP: by the time an accord was reached, inertial lag had created a mountain of product excess.

And worse, state-by-state reliance on earlier regulations: which is the main problem facing French farmers now. They have invested heavily in CAP Cash crops and don't want to give them up.

And basket case Zone economies (Greece, Spain, Portugal, Cyprus, Malta, Slovenia, Ireland, Slovakia, Italy) don't want to take their corrective medicine!

It is really rather like HSBC being forced to merge with Lloyds TSB HBOS, RBS, et al and expected to carry them.

The resultant would be an even bigger disaster!

 

[NickP]

Well said ErnieY, JMb's attitude sumes up the  mentality of a lot of todays younger British people, I am now retired, and having worked for 52 years I did my share, and may I say earned my money with hard physical work . As you say, lack of "dosh" is not my problem, like you the problem is the frustration of the Gangsters/amatures, (make up your own descriptions), we trusted and were lead to believe were acting in our best interests, people still getting their Bonus payments.

[AnOther]

Nick, 'led to believe is right'

Somebody said something to me when I was but a teenager and didn't even understand what a mortgage or pension plan was. It was these four simple words - THEY WANT YOUR MONEY - and I have never forgotten it. The problem is it's almost impossible for the average Joe to stay outwith the grasp of the parasites, the 40% tax relief on pension contributions for instance and endowments, without which, in the early 80's at least, it would have been virtually impossible to afford to buy a house, I could go on.

I have now lost what little confidence I had in any of them as a result of which, contrary to my original plan which was to pile an increasing amount of my salary into my pension (I already put 50% in and was planning to increase that to 90% in my final year or two of work), I am now going to reduce that to the minimum required to keep me out of 40% tax, take the 20% tax hit on the rest, and stash the rest under the mattress.

At least then it's mine and if things did take a significant upturn I might cautiously dip my toe in the water again [8-|]

 

[NormanH]

But in which currency ErnieY?

I am sure that all the francs coming out from under the mattress because they had to be changed to Euros had an impact on property prices.

[AnOther]

Euro's Norman, it's where I live init and I'm alredy inescapably exposed to the vagries of the £/€ rate. If it does start to go the other way significantly well I can always put some back [:)]

 

[baypond]

Before I start, let me just say that Banks have lost money because of bad lending practises, so whatever comes next isn't a defense of banks, more an attempt to level the playing field and give a slightly different perspective.

I havn't read this since my post last night, and I have to say that there is little to disagree with. As you will know from 'baypond info' I work in a bank, and in fact in the financial markets. I think these blogs quite rightly express the complete frustration that 'things' have gone very wrong, and that highly paid people have been responsible. However, my point has only ever been that to vent all anger at bankers may make you feel better, but it doesn't change the fact that the political/regulatory framework was the cause. Call it capitalism if you prefer. Like it or not, Banks in the developed world are (were) in public hands and responsible to their shareholders to make money. There is intense competition in the banking world, just as there is in say clothing or food. So if the regulators say it is OK to lend on self certification and huge multiples of earnings, the banks are compelled to keep lending at tighter margins and to weaker credit. If you look at clothing, there is always a moral question of where the clothing is made (look at the bad Primark press for example), if you look at food, we have a constant battle on price which beats farmers in to submission etc. So if Tescos stopped selling food as cheaply as possible and Next or M&S put their prices up they would go out of business. The parallel is that banks had to lend to stay in business, but competition dicated that the terms were with increasingly poor credit. If the regulatory bodies had said 80% mortgage maximum and made more stringent controls on self certification 5 years ago, we wouldn't have had the extent of the problems we have now, because banks wouldn't have been pressed in to it. Banks have a lot to answer for, but I really think Government is the cause and banks are the effect. And the problem with letting banks go to the wall, as they did with Lehmans, is that since the day they let that happen, the banking house has come down like a pack of cards.

As regards pensions, I would point the finger at Gordon Brown (and blair) who firstly encouraged every man and his dog to buy pensions, and then taxed dividends for asset managers, which crushed annual returns for investors. Then when Equitable collapsed, they ignored their obligations and to this day still refuse to pay anything meaningful (even to the most needy). I think that if the Government is charging RBS 8% yield on their bailout, they should issue bonds to savers that pay a higher yield than the 1% you get now.

As for the point about pensioners/savers being hard hit, I too think it is outrageous. The comments that 'in the old days' you borrowed what you could repay, is correct and only serves to show that society has some responsibilty for this mess. The best person to tell if you can afford to repay something, is the borrower. If you borrow, you have to repay, but people have been caught in the trap whereby they borrow on the increase in value of a property, and when the value of the property drops, they have no way of maintaining the repayments, because when property prices went up they could always clear their debts by borrowing more. In France I think it is very difficult to re-mortgage for repaying loans, buying cars etc... and that should be the way here in the UK, but it is not. 

Lastly regarding the bandit traders in FX etc. I think the blogs illistrate that to trade these markets is not always straightforward. There are so many factors that dictate an FX rate that traders can not trash markets on a whim. Those that try to take a market on, often end up being a Nick Leeson or Jerome Kerviek for example.

[Gluestick]

Most of the time, Baypond we agree.

However I must take issue with you on suggesting that it was the regulators fault the UK mortgage lenders went ape!

The original Financial Services Act, laid down the system of Self-Regulation. SROs and etc.

In the USA the lenders have some justfication for stating they were driven by government diktat due to ACORN and the freedom allowed to both Freddie and Fannie.

UK lending and its limits was decided because ex-building societies and banks were fighting each other for market share, driven by greed for profit at any cost with no real Risk Management in process. No one compelled them to advance 120% LTVs, 38 year tenors and 8.5 X Income Multiples!

Additionally, their underwriting departments failed to ensure those they trusted (And paid!) as intermediaries were delivering an honest bill of goods!

No one compelled the banks to buy dangerous MBSs either: it was their clear choice.

On pensions, much has been made of Gordon Brown Taxing Pensions Funds.

Hmmmmm. All he actually did was to withdraw ACT: and this didn't just apply to funds managers, it applied to all of us drawing dividends from companies.

Like Brown and Darling's plaintive whining that "It's a global situation" which doesn't wash, since ACT was withdrawn, until the bear market set in, corporate profits (and executive pay!) and the equities markets was never higher. Much of this was due to companies bearing down on costs, savaging levels of service to consumers (Banks in particular!), the roll-out of mass ICT systems which cut middle levels of management and staffing levels.

Yet throught this incredible bull run, companies despite rewarding their senior execs with obscene pay deals and stock options, cried poverty and reduced their contribution to corporate pensions, leaving the rapidly enlarging Black Hole we see today.

If funds managers can't make adequate returns in such a bull run, then all that remains is their incompetence.

 

[baypond]

[quote user="Gluestick"]

 

The original Financial Services Act, laid down the system of Self-Regulation. SROs and etc.

In the USA the lenders have some justfication for stating they were driven by government diktat due to ACORN and the freedom allowed to both Freddie and Fannie.

UK lending and its limits was decided because ex-building societies and banks were fighting each other for market share, driven by greed for profit at any cost with no real Risk Management in process. No one compelled them to advance 120% LTVs, 38 year tenors and 8.5 X Income Multiples!

 

No one compelled the banks to buy dangerous MBSs either: it was their clear choice.

 

[/quote]

I think we basically agree on this as well. Banks were at fault, no question, especially their involvement in non- British mortgage lending.

Self regulation is no regulation in a competetive market place. That is what I mean by Government being the cause. The effect of no regulation is the mess we have now.

On the ACt question, I think/know you understand this better than me, but I think the net effect was to knock 1 or 2% off annual income, which on top of the 1% ish management fees makes placing money in pensions a more challenging question than it was.Which was against the Government's supposed intent at the time which was to get people to put more money in pensions. Dare I suggest that the response from some, was to invest more heavily in bricks and mortar, because people didn't trust pension returns. i know if I look at my pension, it is probably worth less than I have invested over the last 26 years. That is absurd.

 

[Gluestick]

[quote]

On the ACt question, I think/know you understand this better than me, but I think the net effect was to knock 1 or 2% off annual income, which on top of the 1% ish management fees makes placing money in pensions a more challenging question than it was.Which was against the Government's supposed intent at the time which was to get people to put more money in pensions. Dare I suggest that the response from some, was to invest more heavily in bricks and mortar, because people didn't trust pension returns. i know if I look at my pension, it is probably worth less than I have invested over the last 26 years. That is absurd.[/quote]

When base rates are low, institutional investors tend to dump cash and go to equities, as the dividend rates tend to be far higher.

However, as I stated earlier, what excuse for appallingly poor performance do the funds managers have in the bull run?

Your sad comment on your pension pot minds me to recall the fate of the Aberfan Disaster Fund in the 1970s, managed by Barclays Trustees.

They lost 50% of the capital value.

Many other mutuals at the time were the same.

I was then working right in the thick of that Boom-Bust in the City.

I accept that the abolition of ACT did indeed make inroads into any form of trustee investment: however, not enough to justify the appalling state of pensions and other long term investments such as endowments.

 

 

[velcorin]

Thank you Baypond, I work in trade finance in Europe and was going to keep my head well below the parapet, but now at least there's 2 of us to be shot at[:-))]

From my little part of the world I don't absolve anyone from complicity in the meltdown going on across the globe. The German, British, Spanish and Scandanavian housing markets. The French and Italian unsecured lending on multiple open ended store credit cards (I know French acquittances on SMIC who owe in excess of EUR 150K). The German and French corporate sector takeover binges. Etc, etc, etc..... Cheap money, lead to bigger and bigger risks, by individuals and corporations.

I, and all of you, either directly, or indirectly, benefitted from the asset gains, equity gains, capital gains, etc, admittedly less than, but not just, the Masters of Universe in the XVIth, Frankfurt and Mayfair. The party's over. Vive la revolution and the politics of envy[:)]

[just john]

Is'nt it even simpler? no matter how tricky dicky the dealing, surely the banks lost any kind of management of information regarding what they were spending against what they had?
Listening to Theo Paphitis talking about the banks in  bbc.co.uk/panorama on tonight, he said that talking to senior executives in banks they admitted that they were 'making it up on the hoof ' and had no real idea of the situation![:-))]

It might be funny if it wasn't real Silly Money  [8-|]

[woolybanana]

Well, ikt looks as if the ECB is finally on the move:

http://www.telegraph.co.uk/finance/4789171/ECBs-Trichet-sounds-alarm-over-Europes-credit-contraction.html

[baypond]

well   EURUSD started week at 1.2750 and ends the week at 1.2670

GBPEUR started and finished the week at 1.1250.

whats that saying ? something like ' everything changes and everything remains the same'

 

Bon le weekend...

[BIG MAC]

"Knows the price of everything and the value of nothing" maybe?

Or as in the case of the errant canard "One of it's legs are both the same"

[NormanH]

There is an interesting interactive map here  showing lots of economic date for all the European countries.

Useful information with which to make up your mind, although it's a bit out of date.