UK likely to go bankrupt says investment bank.

[Magda Hassan]

They should know.

House prices 'could fall by further 55 per cent'

House prices may fall by a further 55 percent and there is a "very real probability" that Britain will be bankrupted, a leading investment bank has warned in a private note to clients.



By Robert Winnett, Deputy Political Editor
Last Updated: 10:41PM GMT 11 Mar 2009


People who bought buy-to-let flats are expected to “begin panic selling” and the average home value could drop below £100,000.
The predictions in a 298-page report from Numis Securities, a City investment bank, are the bleakest yet on the deteriorating state of the British property market.



House prices have already fallen by about 20 per cent over the past year.
However, in the note written last month, Numis said: “Despite UK house prices already having fallen 21% from the peak, we do not believe that the correction is anywhere near over.
“Our core headline forecast is that UK property prices remain between 17% and 39% overvalued based on fair valuation. Moreover, history has shown us that when property…which has experienced a price bubble corrects, the price tends to fall below fair value for a period of time, as confidence in that market remains low. Prices could fall a further 40-55% if the over-correction was as bad as the early 1990s in our view.”
The report warns that “city centre flats” and “new executive homes” are likely to record the biggest reductions and describes investing in buy-to-let property as a “poor man’s hedge fund”.
“It is the action of these amateur investors over the next few months which we are most concerned about,” the report says. “We expect some to begin panic selling their portfolios, with the peak volume as is almost always the case with private investors, being at the market trough.”
Yesterday, Alistair Darling, the Chancellor, warned that the world is facing the most difficult economic conditions for “generations”.
However, the Numis report is scathing of Government attempts to help the economy.
“The Prime Minister and Chancellor have publicly stated that they want banks this year to lend at 2007 levels,” it said. “We think this is a crazy policy, given that too much debt was one of the prime reasons why the economy has its current problems.”
It also criticises the huge debts being run up by the Government to pump money into the economy. Yesterday, John Lewis, the retailer, said that the £12.5 billion cut in Vat has not made “any long term difference at all”.
The Numis report says: “The bankruptcy of the UK is a very real probability as the UK Government is trying to stimulate a greater debt burden in a grossly indebted economy. We believe the scale of the macro imbalances in the UK means there is no prospect of a recovery in 2009 and we expect the UK to be mired in a deep recession through all of 2010.”
Last night, the Conservatives said that the Numis analysis increased the pressure on the Prime Minister to apologise. Grant Shapps, the shadow Housing minister, said: “This is a devastating critique of the Government’s record and how Gordon Brown’s credit bubble will lead to a mountain of debt, a wave of repossessions and negative equity misery. Labour Ministers must take direct responsibility for fuelling buy-to-let speculation.
“Gordon Brown’s fingerprints are all over this economic wreckage and he should now have the decency to at least apologies for his mistakes.”
Yesterday, it emerged that the number of borrowers falling behind with their mortgage repayments has already doubled in the past year. According to Moody’s Investors Services, borrowers more than 90 days in arrears have increased to 1.5 percent of all home loans compared to 0.6 percent a year ago.





http://www.telegraph.co.uk/finance/econo...-cent.html

[David Guyatt]

To be perfectly honest, I am working on the basis that this could well happen.

But know the enemy I say. Who are Numis? Well, they are the creature of the City's richest billionaire Michael Spencer. More here from Wiki:

Michael Spencer
From Wikipedia, the free encyclopedia

Michael Alan Spencer (born 30 May 1955, Kuala Lumpur, Malaysia) is a billionaire British businessman; the founder and chief executive of ICAP plc, the world's largest interdealer broker. He is also currently the owner of spread betting firm City Index and the chairman of the stock brokerage Numis Securities.

Spencer was educated at the Worth Abbey Benedictine (OSB) School, Sussex and at Corpus Christi College, Oxford, where he read physics. While still a student, he made £300 dealing in shares, and went on to land a job at Drexel Burnham. Fired for trading errors, he resolved to establish his own empire, establishing Icap in 1986. In 2005, Icap earned approximately £200m in pre-tax profits.

He has homes in Holland Park, London, Suffolk and Manhattan. In the Sunday Times Rich List 2008 ranking of the wealthiest people in the UK he was placed 62nd with an estimated fortune of £1,150 million.[1]
He is also a shareholder and an associate director of Ipswich Town Football Club, but has little interest in football.

In March 2007 he was named Entrepreneur of the Year at the European Business Leader Awards. And in November 2007 he was awarded the prestigious Beacon Fellowship Prize for setting up ICAP's Charity Day.
Spencer is an avid art collector with an impressive twentieth century and contemporary collection, including the work of scottish artist, Jack Vettriano.

Having made his bones at Drexel Burnham deserves atention, for it was Drexel's where the Junk Bond king and Mafia financier, Mike Milken, made his bones.

The fact that Spencer also owns the spread betting firm City Index just adds further concerns. Despite my own personal concerns about the future direction of the British economy, I wouldn't trust this outfit not to be setting up a winning market bet.

To add to this concern is the fact that Spencer is deeply involved with various Hedge Funds, has been caught in a dodgy deal and was until very recently the Conservative Party Treasurer until he was replaced by Stanley Find - another hedge fund boss.

Beware dragons I say.

[Jan Klimkowski]

It is very interesting that certain leading British politicians have gone Off Message recently and told us, in the classic words of a civil service mandarin, that "we're fucked".

David is entirely correct to examine precisely whom is saying what.

When the likes of Soros and Buffett speak, not only do they move markets, but their intention is to move markets. My assumption is that they intend to move markets in a direction which is favourable to their "investment" position.

However, fundamentally, we are "fucked".

The relevant questions are:

How will it play out?

and

What do They have in mind for us ordinary folk?

[Peter Lemkin]

I'd say they've engineered a check-mate for the average soul...and most will be 'fucked' no matter WHAT they do, unless they REMOVE themselves from the 'game' enitirely.
Commune in the mountains with barter sounds better and better......in fact it starts to sound like the only way....

[Magda Hassan]

By Ambrose Evans-Pritchard
Published: 4:09PM GMT 30 Nov 2009
Comments 37 | Comment on this article

Morgan Stanley says if Westminster can't restore fiscal credibility it could trigger debt problems.


The US investment bank said there is a danger Britain’s toxic mix of problems will come to a head as soon as next year, triggered by fears that Westminster may prove unable to restore fiscal credibility.
“Growing fears over a hung parliament would likely weigh on both the currency and gilt yields as it would represent something of a leap into the unknown, and would increase the probability that some of the rating agencies remove the UK's AAA status,” said the report, written by the bank’s European investment team of Ronan Carr, Teun Draaisma, and Graham Secker.

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“In an extreme situation a fiscal crisis could lead to some domestic capital flight, severe pound weakness and a sell-off in UK government bonds. The Bank of England may feel forced to hike rates to shore up confidence in monetary policy and stabilize the currency, threatening the fragile economic recovery,” they said.
Morgan Stanley said that such a chain of events could drive up yields on 10-year UK gilts by 150 basis points. This would raise borrowing costs to well over 5pc - the sort of level now confronting Greece, and far higher than costs for Italy, Mexico, or Brazil.
High-grade debt from companies such as BP, GSK, or Tesco might command a lower risk premium than UK sovereign debt, once an unthinkable state of affairs.
A spike in bond yields would greatly complicate the task of funding Britain’s budget deficit, expected to be the worst of the OECD group next year at 13.3pc of GDP.
Investors have been fretting privately for some time that the Bank might have to raise rates before it is ready -- risking a double-dip recession, and an incipient compound-debt spiral – but this the first time a major global investment house has issued such a stark warning.
No G10 country has seen its ability to provide emergency stimulus seriously constrained by outside forces since the credit crisis began. It is unclear how markets would respond if they began to question the efficacy of state power.
Morgan Stanley said sterling may fall a further 10pc in trade-weighted terms. This would complete the steepest slide in the pound since the industrial revolution, exceeding the 30pc drop from peak to trough after Britain was driven off the Gold Standard in cataclysmic circumstances in 1931.
UK equities would perform reasonably well. Some 65pc of earnings from FTSE companies come from overseas, so they would enjoy a currency windfall gain.
While the report – “Tougher Times in 2010” – is not linked to the Dubai debacle, it is a reminder that countries merely bought time during the crisis by resorting to fiscal stimulus and shunting private losses onto public books. The rescues – though necessary (?!)– have not resolved the underlying debt problem. They have storied up a second set of difficulties by degrading sovereign debt across much of the world.
Morgan Stanley said Britain’s travails are one of three “surprises” to expect in 2010. The other two are a dollar rebound, and strong performance by pharmaceutical stocks.
David Buik, from BGC Partners, said Britain is in particularly bad shape because the tax-take is highly leveraged to the global economic cycle: financial services provided 27pc of revenue in the boom, but has since collapsed.
The UK failed to put aside money in the fat years to offset this time-honoured fiscal cycle. It ran a budget deficit of 3pc of GPD at the peak of the boom when prudent countries such as Finland and even Spain were running a surplus of over 2pc.
“We need to raise VAT to 20pc and make seriously dramatic cuts in services that go beyond anything that Alistair Darling or David Cameron are talking about. Nobody seems to have the courage to face up to this,” said Mr Buik.
The report coincided with news that Britain is now officially the only G20 country still to be in recession. Canada reported that its economy grew by 0.1pc in the third quarter. Britain, by contrast, shrank by 0.3pc, the latest estimates show.

http://www.telegraph.co.uk/finance/econo...-2010.html

Ha! Increase the VAT! How original. Why not tax the rich? Now there's a novel idea! Taxes on shares traded, foreign exchange, futures, everything in the elites casino. Tax that. Reduce defense budget. Get out of Afghanistan. Tax non doms.
[url=http://www.telegraph.co.uk/finance/economics/6693162/Morgan-Stanley-fears-UK-sovereign-debt-crisis-in-2010.html][/url]