WILL THE CURRENT MONEY CRISIS AFFECT US?
Discussion
steven f said:
yes it will as 90% of ferrari's/lambo's are on finance ballon payments lease purchase ect so luxurys are the first thing to go and thats what these cars are the housing market is on its way down now
Thats quite positive for you Steve! Can't take it with you mate. if it goes tomorrow i've had a great time 
simonspider said:
steven f said:
yes it will as 90% of ferrari's/lambo's are on finance ballon payments lease purchase ect so luxurys are the first thing to go and thats what these cars are the housing market is on its way down now
Thats quite positive for you Steve! Can't take it with you mate. if it goes tomorrow i've had a great time i fear this financial crisis has got legs and will take a long time to shake out. the recent ease of credit and cheap money supply, fueled by zero rates in japan and 1% rates in the US has led to unprecedented levels of arbitrage (the "carry" trade), and markets awash with liquidity. The latter has led to too much cash chasing any asset with an "attractive" yield which in turn has enabled a whole bunch of people to play the positive yield curve (borrow money on a short term basis, lend longer term). Now banks have always done this. Thats how they make money. But in the simplest sense, they borrow money off you, the deposit account holder and invest long (either bonds or loans or lending via mortgages etc). Part of the problem now is the number of entities also doing this who are arbitraging the excess of short term liquidity versus where they can reinvest this cash longer term. The music suddenly stopped and there arent enough chairs. The final straw was the story involving Paribas's funds and their statement that they couldnt value their assets correctly. Whereas up to this time the problem had been perceived to be a US one, with some spill over to Europe, asia etc, that day that paribas made their announcement, the euro money markets just ground to a halt. Confidence in the whole system and its participants evaporated with nobody wanting to take any credit risk, the fear of the unknown (who else would be next to have a problem), took over. In credit to the ECB they were pretty swift to make comment that they would provide liquidity and then by lunch time that day they had and have continued to do so since. Things still arent back to anything resembling normal yet though.
The bank of england has been reluctant so far to help out much. If the interbank (libor) rates remain as high as they currently are then the profit margin banks make on our mortgages has halved. Most mortgages are fixed on a spread versus UK base rates. Libor rates (where the banks borrow from each other) are usually around 0.2% above base rate. Now they are 0.70% or more above base. So effectively the banks are subsiding mortgage rates (well making less profit anyhow).
So if anyone is still awake, the money markets cant regain their normality until the picture is clear on whos in trouble and by how much.
So 2 senarios:
1) this all blows over in he next couple of months and its back to business as normalish
2) Financial job losses, higher mortgage rates (even without a rate rise, real rates have gone up), a global economic slowdown etc etc.
if scenario 2 comes in to play then prices of luxury assets will fall as certain buyer types will recede (city types, property, maybe industry). heres hoping for scenario 1!
The bank of england has been reluctant so far to help out much. If the interbank (libor) rates remain as high as they currently are then the profit margin banks make on our mortgages has halved. Most mortgages are fixed on a spread versus UK base rates. Libor rates (where the banks borrow from each other) are usually around 0.2% above base rate. Now they are 0.70% or more above base. So effectively the banks are subsiding mortgage rates (well making less profit anyhow).
So if anyone is still awake, the money markets cant regain their normality until the picture is clear on whos in trouble and by how much.
So 2 senarios:
1) this all blows over in he next couple of months and its back to business as normalish
2) Financial job losses, higher mortgage rates (even without a rate rise, real rates have gone up), a global economic slowdown etc etc.
if scenario 2 comes in to play then prices of luxury assets will fall as certain buyer types will recede (city types, property, maybe industry). heres hoping for scenario 1!
Am I missing the point here? Surely no-one with any sense treats these kind of cars as anything other than absolute luxuries which are always fickle things. Consequently most should surely be bought with what I call playtime money and definately with money already guaranteed as opposed to money hoped to be earned at some point. I'd never buy this type of car with anything other than 'spare' finance myself as I like to sleep at night and not worry about putting miles on, depreciation, etc., etc. As a result if the market drops slightly and my car looses a few more grand so what? In short for me the money 'crisis' won't affect my car buying decisions in the slightest.
Edited by Pugsey on Friday 7th September 08:33
simonspider said:
steven f said:
yes it will as 90% of ferrari's/lambo's are on finance ballon payments lease purchase ect so luxurys are the first thing to go and thats what these cars are the housing market is on its way down now
Thats quite positive for you Steve! Can't take it with you mate. if it goes tomorrow i've had a great time Pugsey said:
Am I missing the point here? Surely no-one with any sense treats these kind of cars as anything other than absolute luxuries which are always fickle things. Consequently most should surely be bought with what I call playtime money and definately with money already guaranteed as opposed to money hoped to be earned at some point. I'd never buy this type of car with anything other than 'spare' finance myself as I like to sleep at night and not worry about putting miles on, depreciation, etc., etc. As a result if the market drops slightly and my car looses a few more grand so what? In short for me the money 'crisis' won't affect my car buying decisions in the slightest.
Judging by the number of cars bought on finance, i don't think they are bought with "playtime" money. Secondly, a large proportion are bought with City bonuses, which if this credit squeeze carries on, are going to be a lot smaller next year. Smaller bonuses = less "playtime money"Edited by Pugsey on Friday 7th September 08:33
I have bought my car with the view to upgrading so as mine losses money so will the one i wish to upgrade too. I just wish i had waited a few weeks before i bought this car. Oh well just buying the high again, just in a different market. 
I think it will affect prices but more from dealers being able to use it as an excuse when it comes to buying your car off you when you dont want to buy from them.
I think it will affect prices but more from dealers being able to use it as an excuse when it comes to buying your car off you when you dont want to buy from them.
Edited by Bund on Friday 7th September 11:09
Jules360 said:
Pugsey said:
Am I missing the point here? Surely no-one with any sense treats these kind of cars as anything other than absolute luxuries which are always fickle things. Consequently most should surely be bought with what I call playtime money and definately with money already guaranteed as opposed to money hoped to be earned at some point. I'd never buy this type of car with anything other than 'spare' finance myself as I like to sleep at night and not worry about putting miles on, depreciation, etc., etc. As a result if the market drops slightly and my car looses a few more grand so what? In short for me the money 'crisis' won't affect my car buying decisions in the slightest.
Judging by the number of cars bought on finance, i don't think they are bought with "playtime" money. Secondly, a large proportion are bought with City bonuses, which if this credit squeeze carries on, are going to be a lot smaller next year. Smaller bonuses = less "playtime money"Edited by Pugsey on Friday 7th September 08:33
Edited by Pugsey on Friday 7th September 15:23
andy355 said:
i fear this financial crisis has got legs and will take a long time to shake out. the recent ease of credit and cheap money supply, fueled by zero rates in japan and 1% rates in the US has led to unprecedented levels of arbitrage (the "carry" trade), and markets awash with liquidity. The latter has led to too much cash chasing any asset with an "attractive" yield which in turn has enabled a whole bunch of people to play the positive yield curve (borrow money on a short term basis, lend longer term). Now banks have always done this. Thats how they make money. But in the simplest sense, they borrow money off you, the deposit account holder and invest long (either bonds or loans or lending via mortgages etc). Part of the problem now is the number of entities also doing this who are arbitraging the excess of short term liquidity versus where they can reinvest this cash longer term. The music suddenly stopped and there arent enough chairs. The final straw was the story involving Paribas's funds and their statement that they couldnt value their assets correctly. Whereas up to this time the problem had been perceived to be a US one, with some spill over to Europe, asia etc, that day that paribas made their announcement, the euro money markets just ground to a halt. Confidence in the whole system and its participants evaporated with nobody wanting to take any credit risk, the fear of the unknown (who else would be next to have a problem), took over. In credit to the ECB they were pretty swift to make comment that they would provide liquidity and then by lunch time that day they had and have continued to do so since. Things still arent back to anything resembling normal yet though.
The bank of england has been reluctant so far to help out much. If the interbank (libor) rates remain as high as they currently are then the profit margin banks make on our mortgages has halved. Most mortgages are fixed on a spread versus UK base rates. Libor rates (where the banks borrow from each other) are usually around 0.2% above base rate. Now they are 0.70% or more above base. So effectively the banks are subsiding mortgage rates (well making less profit anyhow).
So if anyone is still awake, the money markets cant regain their normality until the picture is clear on whos in trouble and by how much.
So 2 senarios:
1) this all blows over in he next couple of months and its back to business as normalish
2) Financial job losses, higher mortgage rates (even without a rate rise, real rates have gone up), a global economic slowdown etc etc.
if scenario 2 comes in to play then prices of luxury assets will fall as certain buyer types will recede (city types, property, maybe industry). heres hoping for scenario 1!
Thanks for that Andy.The bank of england has been reluctant so far to help out much. If the interbank (libor) rates remain as high as they currently are then the profit margin banks make on our mortgages has halved. Most mortgages are fixed on a spread versus UK base rates. Libor rates (where the banks borrow from each other) are usually around 0.2% above base rate. Now they are 0.70% or more above base. So effectively the banks are subsiding mortgage rates (well making less profit anyhow).
So if anyone is still awake, the money markets cant regain their normality until the picture is clear on whos in trouble and by how much.
So 2 senarios:
1) this all blows over in he next couple of months and its back to business as normalish
2) Financial job losses, higher mortgage rates (even without a rate rise, real rates have gone up), a global economic slowdown etc etc.
if scenario 2 comes in to play then prices of luxury assets will fall as certain buyer types will recede (city types, property, maybe industry). heres hoping for scenario 1!
I personally do NOT see this resulting in a global economic slowdown. (but what do I know). As I said earlier, hedge fund and private equity activity in recent times has been ridiculously frothy and both industries could do with "rationalisation" - without UNDERplaying the importance of the city, I do NOT think this process would spill over massively into the rest of the UK economy.
To my mind interest rates are of critical importance.
If they go up, make mortgages more expensive and therefore kill off the housing market (and associated equity withdrawal/speculation) then it's all over for the economy. Why? Housing wealth is being translated into real spending - and the banks are funding the whole thing - plenty of people will carry a £3K credit card balance knowing their house has "gone up" by £30k in the last year. (Multiply both of these by 10 in London/South East).
If property prices fall, the country is f***ed. The BoE knows it. So despite inflationary pressures they won't raise rates. There will be a temporary reprieve and hopefully the housing market will cool without dropping.
This credit crunch could be a saviour!
(back to cars: well there's literally loads of people I know running around in sports cars after re-strapping their houses. No house wealth = no Lambo - you can do the maths)
Murcielago_Boy said:
(back to cars: well there's literally loads of people I know running around in sports cars after re-strapping their houses. No house wealth = no Lambo - you can do the maths)
Yep sure can do the maths and - IMHO - anyone who re-straps their house to anywhere near it's equity limit to buy a Lambo or what-have-you is barking in my opinion. Always amazed when I see cars like this parked on driveways of properties worth way below £1m. Maddness. But hey ho each to his own. Personally if I'm going to risk my 'house wealth' it'll sure be on something more important than a car. But then I've always been a 'one step forward, consolidate, then another step forward' kind of guy rather than 'three steps forward, oh dear, three steps back' type.Edited by Pugsey on Friday 7th September 17:32
bear in mind how all this started in the US. Rising interest rates and people coming off fixes and suddenly seeing their mortgages double. (similar to what we had during the early 90s), tho the actual interest rate numbers are less extreme now due to a period of sustained low rates. This coupled to a falling property market, again related to rising rates. This could happen here, ok, more of us are on variable rate mortgages so the pain has been gradual and our rates never went so low to start with. plus the underlying bid that london property prices have from foreign investment.
Also bear in mind that interest rates have gone up in the uk in the last few weeks. Not the official bank of england rate, but real market rates. the official bank of england rate means not a lot really unless you are a bank (and even then you can only borrow money at that rate against pledging uk gilts as collateral against it). the day that the high street banks decide to raise mortgage rates because real rates have risen will be interesting...as they would need to rise by 1% to reflect current rates. me thinks they will have a difficult time explaining that to Joe public though...
sorry to bang on with what is all a bit worrying, but weve not seen anything like this in the market for 10 years, and things are a lot more complex now. this needs the central banks to manage the situation carefully. the US jobs data today were pretty awful which make a US rate cut a near certainty either on sep 18 (next scheduled meeting) or even earlier as an emergency measure
fingers crossed the UK escapes the worst...
Also bear in mind that interest rates have gone up in the uk in the last few weeks. Not the official bank of england rate, but real market rates. the official bank of england rate means not a lot really unless you are a bank (and even then you can only borrow money at that rate against pledging uk gilts as collateral against it). the day that the high street banks decide to raise mortgage rates because real rates have risen will be interesting...as they would need to rise by 1% to reflect current rates. me thinks they will have a difficult time explaining that to Joe public though...
sorry to bang on with what is all a bit worrying, but weve not seen anything like this in the market for 10 years, and things are a lot more complex now. this needs the central banks to manage the situation carefully. the US jobs data today were pretty awful which make a US rate cut a near certainty either on sep 18 (next scheduled meeting) or even earlier as an emergency measure
fingers crossed the UK escapes the worst...
Pugsey said:
Murcielago_Boy said:
(back to cars: well there's literally loads of people I know running around in sports cars after re-strapping their houses. No house wealth = no Lambo - you can do the maths)
Yep sure can do the maths and - IMHO - anyone who re-straps their house to anywhere near it's equity limit to buy a Lambo or what-have-you is barking in my opinion. Always amazed when I see cars like this parked on driveways of properties worth way below £1m. Maddness. But hey ho each to his own. Personally if I'm going to risk my 'house wealth' it'll sure be on something more important than a car. But then I've always been a 'one step forward, consolidate, then another step forward' kind of guy rather than 'three steps forward, oh dear, three steps back' type.Edited by Pugsey on Friday 7th September 17:32
Your property in London worth £500,000 last year, now worth £1m.
Your Murcielago would only cost you resi mortgage rate? (6.0%)
Go on treat yourself - you only live once.
right?????
Murcielago_Boy said:
Pugsey said:
Murcielago_Boy said:
(back to cars: well there's literally loads of people I know running around in sports cars after re-strapping their houses. No house wealth = no Lambo - you can do the maths)
Yep sure can do the maths and - IMHO - anyone who re-straps their house to anywhere near it's equity limit to buy a Lambo or what-have-you is barking in my opinion. Always amazed when I see cars like this parked on driveways of properties worth way below £1m. Maddness. But hey ho each to his own. Personally if I'm going to risk my 'house wealth' it'll sure be on something more important than a car. But then I've always been a 'one step forward, consolidate, then another step forward' kind of guy rather than 'three steps forward, oh dear, three steps back' type.Edited by Pugsey on Friday 7th September 17:32
Your property in London worth £500,000 last year, now worth £1m.
Your Murcielago would only cost you resi mortgage rate? (6.0%)
Go on treat yourself - you only live once.
right?????
steven f said:
yes it will as 90% of ferrari's/lambo's are on finance ballon payments lease purchase ect so luxurys are the first thing to go and thats what these cars are the housing market is on its way down now
Are 90% of these cars bought on finance? Of 3 chaps I know with these cars bought at about 80-100k each, they were all bought with cash. I'd be interested to know otherwise though from people who've spent this on a car, but I presumed this was typical....?My English is not my native language but i shall try my best.
I think the current crisis will affect us.
I only depends which car you have bought. Looks at the prices people paid at the classic car auctions lately. Classic cars went up in price by huge amounts. This is , i think , because people are looking for safer investments. Money always tries to find its way. So what can you do now when stockmarket and bonds do not seem so safe anymore. Invest in classic cars!! Specially the ones that are special. Look at daytona prices and old racing car prices.
The new car market will go down i think because this is more a luxury market then an investment market. People buy those cars also on credit and interest rates will go up.
Housing market went up because of low interest and because of huge consumers confidence in housing market. Actually almost noone bought a house without a big mortgage. This is like going to a casino. Hoping prices will go up forever. Nothing goes up forever , i have been trading on the Amsterdam derivative market for 12 years or so and i was always surprised by the moves in prices. I stood there and saw stock go up for years without sometimes any reason more then that confidence in stock was very high. The same with housing market. But what happened after the stock market crash (2001-2002) people were saying that even a fool could see that prices were to high. The same is happening with housing market now. Even a fool can see that housing prices are insane but because people are afraid to miss the train because their neighbours made huge profits on their houses people are still willing to buy. But wait what will happen when prices go down. All want to sell their houses as soon as possible. And prices can fall with 30 or 40 % easily we have seen this happening before. Difficult situation is that the people keep on buying until they just can not afford it anymore. They do not think in prices anymore, they only think "what do i have to pay everymonth for my mortgage".
Research found that the psychological effect on people when they make making is much less then if they loose money!!! So housing market will make huge down move and will not rise after that for many many years. People start to calculate again and see that perhaps renting is the safer and cheaper alternative. They got afraid and know by that time that they can also loose huge amounts of money with housing market.
Is there a central bank or goverment what can do anything about this??? No i do not think so !!If it goes it goes and very very fast.
Smart people have already sold their houses and that money will seek a way. Stockmarket??? No too dangerous!! Housing market?? Perhaps afterr a huge downfall. Gold? Yes prices went down so safe bet i guess. Classic cars?? Yes there are not much. Lool what prices are doing now. New expensive cars??? No they only cost money.
Fred
I think the current crisis will affect us.
I only depends which car you have bought. Looks at the prices people paid at the classic car auctions lately. Classic cars went up in price by huge amounts. This is , i think , because people are looking for safer investments. Money always tries to find its way. So what can you do now when stockmarket and bonds do not seem so safe anymore. Invest in classic cars!! Specially the ones that are special. Look at daytona prices and old racing car prices.
The new car market will go down i think because this is more a luxury market then an investment market. People buy those cars also on credit and interest rates will go up.
Housing market went up because of low interest and because of huge consumers confidence in housing market. Actually almost noone bought a house without a big mortgage. This is like going to a casino. Hoping prices will go up forever. Nothing goes up forever , i have been trading on the Amsterdam derivative market for 12 years or so and i was always surprised by the moves in prices. I stood there and saw stock go up for years without sometimes any reason more then that confidence in stock was very high. The same with housing market. But what happened after the stock market crash (2001-2002) people were saying that even a fool could see that prices were to high. The same is happening with housing market now. Even a fool can see that housing prices are insane but because people are afraid to miss the train because their neighbours made huge profits on their houses people are still willing to buy. But wait what will happen when prices go down. All want to sell their houses as soon as possible. And prices can fall with 30 or 40 % easily we have seen this happening before. Difficult situation is that the people keep on buying until they just can not afford it anymore. They do not think in prices anymore, they only think "what do i have to pay everymonth for my mortgage".
Research found that the psychological effect on people when they make making is much less then if they loose money!!! So housing market will make huge down move and will not rise after that for many many years. People start to calculate again and see that perhaps renting is the safer and cheaper alternative. They got afraid and know by that time that they can also loose huge amounts of money with housing market.
Is there a central bank or goverment what can do anything about this??? No i do not think so !!If it goes it goes and very very fast.
Smart people have already sold their houses and that money will seek a way. Stockmarket??? No too dangerous!! Housing market?? Perhaps afterr a huge downfall. Gold? Yes prices went down so safe bet i guess. Classic cars?? Yes there are not much. Lool what prices are doing now. New expensive cars??? No they only cost money.
Fred
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