quote:

Originally posted by newnickname:

(I drove a Skoda when I was back in the UK at the end of last year. All cars seem to be the same these days. Do you remember the rear-engined Skodas that everyone laughed at? Now they had a certain style. Anyway - it cost forty pounds to fill the tank, and it would have cost forty dollars to fill it here.)

When Skoda fitted a heated rear window to their basic model it was so your hands didn't get cold when you were pushing it

Those were the days! Since then they've been taken over by Volkswagen (in stages from 1991-2000)and the Czech Republic has become part of the European Union (2004). Buyers are getting the results of VW investment in new plant,VW production values and quality, and excellent Skoda design at a competitive price, and the company has free access to the whole EU market.The marque has won a lot of praise and its reputation has been utterly transformed.

An article in Harper's Magazine points out that after the stock market crash of the twenties, everyone was careful to avoid speculative bubbles for a good while.

However, after the dot.com boom and crash, the US went straight on to the real-estate bubble and crash. The Harper's article predicts that the next bubble will be in the field of alternative energy. Are bubbles what keeps the US economy going? Or are they just froth on the top of a basically sound economy?

The history of the Dow over the last 50 years, despite bubbles. has been higher lows and higher highs. It now sits at over 12300, despite the subprime problems. If there is some volatility now, that is to be expected. My bet is that in 5 years it will be over 20000. Then I can retire.

Is the Dow actually a good indicator of the health of the economy? It's basically a sophisticated casino, isn't it, where players bet on what other players are likely to do?

Canadian dollar surges on solid domestic jobs data

US sees job cuts for second month

Why is there such a difference?

quote:

Is the Dow actually a good indicator of the health of the economy?

Depends on whom you talk to. It only reflects 30 companies, so some would say look at the NASDAQ or the Russell indexes. I think there are a whole basket of indicators that should be looked at together (retail sales, home sales and starts, manufacturing data, etc.)

btw, the C$ is now at 1.01.

If the Canadian dollar surges, it necessarily must surge against something else!

Income from an investment in dollars does not pay well because U.S. interest rates are low. Investors would rather have their money earning more elsewhere.

This creates opportunity, of course. I will meet with the NC Commerce representative for Europe on Wednesday, primarily because the weakened dollar makes investment in American plants and equipment more favorable for European companies.

Returning to Northern Rock for a moment...

'Bear Stearns would now have less value than a corner lemonade stand, if not for the generosity of the Federal Reserve Board. The Fed lent money to Bear Stearns under terms no private lender would have agreed to. The risk it will end up with a substantial loss on its loans to Bear Stearns is quite large, with no prospect for any real return on its investment...

...We know how to keep banks operating even as they go into bankruptcy. England just did this with Northern Rock, a major bank that managed to get itself into huge trouble because of its holding of bad mortgage debt. After it was clear the bank was insolvent, the Bank of England stepped in and essentially took over the bank. It replaced the incompetent managers who had ruined the bank and brought in a new team to straighten out the books. The plan is to resell the bank to the private sector once the books are in order.

In the meantime, the bank keeps operating. The depositors can continue to make deposits and withdrawals just as before. This prevents any chain reaction from bringing down the financial system.

The difference between the Northern Rock route and what happened with Bear Stearns last week is that in the Northern Rock, the highly paid managers that ruined the bank are sent packing. Similarly, the shareholders will get little or nothing. They own a bankrupt company; why should the government give them money?..' Bear Stearns in Bankruptcy: Can You Feel Their Pain?

Is the writer describing the the Northern Rock situation accurately, or is he exaggerating to make a point about Bear Stearns?

The writer is correct in saying that the Bank of England and the government were guaranteeing the security of deposits and preventing total collapse, which would have been to the grave detriment of mortgagors and depositors. The Bank of England did not take over the business but it did put in a competent management team. The management a.k.a the government looked around for offers from people to buy the business. Cue: Sir Richard Branson, friend of the people, to enter as a white knight, with full Virgin publicity (as usual) Unlike the public, who were all for this 'hero', the government/ management could do the sums . These figures showed how it was that Mr R Branson had started in business living on a boat on a canal with an 'office phone' which was, in fact a public telephone box on the canal bank, but had made himself a billionaire Nice try, Richard! The other candidates or their offers were even worse, on various grounds ( one consortium was headed by some of the previous management )

So the government was forced, in these circumstances, to nationalise the business temporarily, pending an improvement in the markets and its affairs being put in better order, before selling it on in some shape or form. The shareholders, naturally, are not happy because they are due what they think a pittance (i.e. what the company is worth )Tough.

Financial turmoil raises worries of deeper recession - worst since Second World War

And the really important news:

'As the United States economy spirals downward, Canada's economy cannot help but follow suit. But British Columbia and its western neighbours will weather the storm much better than their eastern counterparts...' B.C. will weather economic downturn

So that's alright, then. Recess on, dudes.

It's about time for a recession, actually. We haven't had ones in seven years!

This one seems to be linked to the subprime crisis. The spotlight has been focused on what is in effect a very small segment of the $5 trillion market for mortgage-backed securities.

The subprime crisis is, in large measure, one of valuation. The value of the underlying securities has become detached from how they were valued in accounting records. The value of assets on computer models did not perform as well as anticipated under real world stress.

The current strength of the economy is in investor and corporate liquidity. Cash on the books of larger companies is higher than usual and no doubt there will be some "bargain hunting" in the near future. This is an unusual phenomenon for a recession environment.

The brewing economic storm may hit fast, with some lightning strikes like we had with Bear Stearns. But the positives in liquidity give one pause over how long the storm may last. Hopefully investors - and the investment bankers, who are supposed to be smarter than the leadership at Bear Stearns - will again be reminded that model-based valuation is often not a good reflection of the marketplace.

Let's not talk ourselves into a recession. One may happen. We may alredy be in the midst of its start. It may be prudent to act conservatively with your investments, and as always it's a great idea to become indispensible to your employer! But regardless of economists trying to "scoop" one another, let's not say we're in one until the numbers bear that out (two straight quarters of negative GDP growth).

Couldn't help but notice that one of our British self-made billionaires was being headlined here for losing $800 million (or so) on Bear Stearns in about 48 hours. 'Disaster', thought the gloating press. He'd bought just before the first whiff of any problem with any bank was appearing in the press. His 'loss' was when they were to be bought out at $2 a share. He is reported to have said that he felt that that would not be the final price. Yesterday it was reported that the bidders would pay $10 a share. That's how you get to be that rich: reports of your loss are greatly exaggerated And who's betting the price will end higher than $10 and he'll end up with a tidy profit ?

quote:

Originally posted by bedstor:
Looks like we are in For a long rough Ride

I have some Bank shares They were 1100 a few weeks ago (record High)
Today they are trading @ 850 and Still dropping!!

Unknown how low they'll have to go before the Bank starts Suspending them?
On the Plus side the Stat/Graphs for My Bank shares do say the market Had been running too high over the Last year! So 850 to 900 is a Mean average So in that respect It has now corrected itself (Could go to as low as 825-30 to keep in the "safe" area)
Watch the Numbers over the Next week
If the trading is Quiet and there is a small rise of 1% then my theory is Proved

On the other Hand If the Market drops again then it means Trouble

Well, here we are just 5 months on ,those 850 pence shares are History
Todays Close saw them at 473 pence though the other day they touched the 450 Mark!! This was due to some people in the City spreading rumors about HBOS and Somebody(In the City) made a Massive profit when the share price Plummeted from 560 to 470 in just 3 days(14-17 March)
Who's Next?

'...if this is not The Big One, it is likely to be A Big One--and a long one.

We could still get lucky, of course. Republicans facing re-election might persuade Bush to support a big fiscal stimulus and housing rescue. Home prices may miraculously stabilize. Tomorrow, bankers may wake up like Scrooge on Christmas morning and just start lending. The Chinese may start importing American-made cars...

Otto von Bismarck once remarked, "There is a Providence that protects idiots, drunkards, children and the United States of America." Let's hope it's still true.' Is This the Big One?

Harry's Bar in Venice is offering discounts to American tourists whose spending power has been affected by the weak dollar.

The owner of the bar, once a regular resort of Ernest Hemingway, is offering a 20 per cent discount during "the short term of their recovery" [Reuters]

A US dollar is worth 64 euro cents. It was worth 75 cents at its peak over the last twelve months (on June 16th 2007).Back in 2002 it stood at 1 euro 10 cents.

Have to say that anyone who is in Harry's Bar is not likely to notice 20 per cent off. They'll be beyond caring because they are idly rich or because they are already in shock from paying the other prices in Venice

My bet would be that the US$ will continue to fade against the euro for the next several months, which will likely affect countries in Europe that depend on American tourists this summer. I have a hunch, though, that it will recover somewhat during the fall.

quote:

Originally posted by juanruiz:
My bet would be that the US$ will continue to fade against the euro for the next several months, which will likely affect countries in Europe that depend on American tourists this summer.

It will. We are already noticing the effect. The modern American tourist is not the rich individual or a retired person,a SKI ( Spending Kids' Inheritance).

The first family and, in fact, the only family from America I've encountered this season were on the tube, returning from the Chelsea v Fernabahce European Championship game. There was granny, dad, mom,a toddler, and two young sons of whom certainly four had been spectators (at $130 each ticket).They chatted animatedly about the game until alighting at Hyde Park Corner station. That, as it were, gave the game away.The only reason for tourists to alight there at the time could be that they were staying in the most expensive 5* hotel in London, which is the only place of interest there I don't think they were too concerned about mere money

The bulk of American tourism is of the ordinary middle class tourist. These are the people who notice prices most, for whom a few cents difference on the exchange rate makes a big difference in an expensive city like London.

quote:

The bulk of American tourism is of the ordinary middle class tourist. These are the people who notice prices most, for whom a few cents difference on the exchange rate makes a big difference in an expensive city like London.

Exactly right. Plus the cost to get over there due to increased price of tickets. I would have liked to go to Spain and Italy this summer, to visit friends and sightsee. That's out. If I go anywhere, it will be where the currency is pegged to the dollar and doesn't change.

quote:

Originally posted by juanruiz:
If I go anywhere, it will be where the currency is pegged to the dollar and doesn't change.

Try Ecuador where the currency is the USD. Good choice. The country is small, easy to travel and has volcanoes, rain forest, interesting natives and is unspoiled, and owns the Galapagos Islands

Yes. And it helps to speak Spanish.

While we await juanruiz's next report (from Quito ) , the news about the GBP (£) against the euro is almost as depressing for the British as the USD v the euro and GBP is for Americans.

The euro now stands at its historic high against the pound.The pound is down by about 18 per cent against its level at this time last year.Our tourists are heading for Turkey, Hungary and Bulgaria rather than France or Spain.The property prices for secondary homes in Turkey and Bulgaria have rocketed.The secondary home market in Antibes is dead at present.

The pound remains at the same level against the USD.

The reason is that Britain is affected by the American disease concerning credit fears.We have nothing like the same degree of problem, but we have a bit of it.In some parts of Britain the house prices have fallen back by a few per cent, but not everywhere. The net effect is that the market has become very quiet. People are reluctant to sell and reluctant to buy.Lenders are not able, or not willing, to be generous. The position now is that 100 per cent mortgages are not obtainable and those at 90 per cent or less require substantial cash deposits, which makes a big difference for 'first time' buyers.Our fundamental economy is the strongest in Europe. But the French will never suffer repossesions and foreclosures as seen in the US. That's because their law on lending on mortgages is so strict and 'policed'. It must be almost impossible for someone to take a mortgage which they cannot or shall not afford.Every buyer has to submit strict proof of everything about their finances: details of salary, contract of employment, tax returns, outgoings etc.The lender is forbidden to lend more than a certain multiplier of net available income. That does put a brake on. There's no incentive to miss-sell if the lender can't get the mortgage validated !