The Barclays Bears
On Tuesday I was rung up by a couple of mates in the City to congratulate me on a scoop they had heard I was about to broadcast on the Ten O'Clock News.
They informed me that they had been informed I would reveal an enormous financial black hole at
I was simultaneously amused and slightly alarmed - because I wasn't planning to broadcast any such thing.
What the incident shows is how jittery the City has become about the prospects for our biggest banks. And what it may also show is that some unscrupulous speculators are taking advantage of the jitters to spread false rumours - in an attempt to profit from the manipulation of share prices.
Driving down Barclaysβ share price right now would be to go with the flow. The stock has dropped 17 per cent since the beginning of last week, it is down 39 per cent from a high for the past year and has fallen more than 4 per cent so far today.
So I thought I had better find out just what is going on. Now the first thing to point out is that if Barclays' profits and prospects were massively different from its previous public guidance, it would have needed to make an emergency statement, under listing rules. That it hasn't made such a statement should be reassuring.
Point two is that the media and punter obsession with Barclays is to miss something quite big β which is that shares in have actually been falling further and faster (off almost 7 per cent today, down 19 per cent over nine days, and a staggering 44 per cent below a 52-week high).
If you are a bear of the banks, the disproportionate fall in RBS stock is rational β because it has the to digest and because it has far greater exposure than Barclays to the softening consumer economy in the US.
Point three is that although Barclays has a large global investment bank in , whose activities are too opaque for comfort, itβs probably not as deep in the merde as a , a or a
So although Barclays is bound to suffer writedowns on the private-equity leverage and sub-prime securitised rubbish that's stinking away at almost all the banks, its losses may well turn out to be less than its peers and less than the spivs and speculators expect.
What's more my sense is that the rest of Barclays is running well, such that profit growth in other substantial operations will be strong.
So when Barclays updates its shareholders about whatβs really going on, there is a fair chance that its shares will bounce β and that the bears will be squeezed (which doesnβt feel like a tragedy).
But thereβs a βbutβ. Iβm not sure how much of a bounce it will turn out to be. First, the opacity of precisely how Barcap makes its money will continue to unsettle investors, in market conditions where opacity is attracting a massive market discount.
Second, Barcap made a fortune out of the credit bubble and itβs fair to ask whether it can prosper now that the credit-bubble has been pricked.
Finally, all banks will feel capital-constrained in the coming months, as we progress through this second phase of a financial-markets downturn.
First we had the liquidity drought of the summer and early autumn. Now, with growth slowing in the US and infecting the rest of the world, we are moving into a phase of losses on loans, of an inevitable morning-after hangover for almost all banks.
They provided the wrong credit to the wrong people at the wrong time. They mispriced the risk of lending, they banked profits on loans which werenβt real profits, and now they are having to write those profits off.
So for many months to come, all British banks will want to conserve their capital. They will lend less. Their earnings will grow less or even stagnate. And their share prices will languish.
I'm 
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RP - you use the word 'merde' too much... at least vary languages if you can't use the English equivalent...
Again spot on Robert. Your last four paragraphs perceive (as IBAS also perceive) a quite considerable 'tightening' within UK lending. Prudence is a bit late in coming and we can see that many banking consumers will be suffering from the 'fall out' for some time in the future. But, corrections are inevitable and they do not come without a price!
Eddy Weatherill, Chief Executive - Independent Banking Advisory Service (IBAS)
Mr.Preston, I suggest that you should look closer into the underlying activities of the banks you comment on - obviously you are leery about being called on another NR, but try and be a jouralist, investigate what Barclays Captal actually do. They are famously the providers of the excess leverage in the riskiest of the 2 Bear Stearns funds that collapsed without trace and I would be enormously surprised if this is the least of their involvement in the collapsing sub-prime CDO market and, correct me if I am wrong, didn't they also provide leverage to the Granite Master trust series 3 notes? Barclays Capital has recently been viewed as nothing more than an enormous hedge fund, they win few investment banking mandates so they must seek out the higher risk/reward plays in the market. This bank is so far away from its Quaker roots.
"And what it may also show is that some unscrupulous speculators are taking advantage of the jitters to spread false rumours - in an attempt to profit from the manipulation of share prices"
Nothing new there then Robert. The city is rotten to the core and the so-called regulators continue to turn a blind eye to continuing corrupt practices.
It's crash and burn time folks because nobody trusts anybody anymore.
I hope you are going to bang on about this as much as you did regarding Northern Rock.
In the above article you state 'So although Barclays is bound to suffer writedowns on the private-equity leverage and sub-prime securitised rubbish that's stinking away at almost all the banks, its losses may well turn out to be less than its peers and less than the spivs and speculators expect.'
The problems at Northern Rock were not caused by lending in the sub prime mortgage sector. In fact Northern Rock is still expected to make around Β£500 million profit.
So come on, keep going about Barclays and see if you can get them in the s**t too!!
Robert,
Thanks for another illuminating and readable blog. Yours really seems to sum up why giving broadcast journalists a blog allows you to do much more than you could on TV alone.
In addition to Robert's piece above re Barclays and RBS, may I add that there is an amazingly close correlation between their SP performance over the past period - whether viewed over the past 6 months (virtually identical!) or past 5 years (RBS 'just below' Barclays - but really not by much). Also, his very valid point about 'market guidance' (namely the 'lack of' - implying 'no known problem of sufficient magnitude' to be disclosed now, under LSE rules) appears to be getting generally forgotten by virtually all concerned.
Robert it must be sad for you to have to report that many of your colleagues working in the city are now effectively stuck in one place, with their pants down, because they have a severe dose of the jitt's (sorry I couldn't resistit). Normally we would feel sorry for people in this predicament but unfortunately it appears that they brought it upon themselves through over indulgence. So the only advice one can offer is to tell them to moderate their eating habits, at least, until the brown adrenalin stops flowing. It is even sadder to learn that some of their colleagues are trying to take advantage of siuation to make their predicament even worse. Presumably in the hope that some of the unfortunates might never recover. Welcome to the city the center of averice and greed.
Having had my little joke let me say I do hope the money markets return to some form of normality sooner rather than later. Yes I agree the city is important to all us but, not at any cost. I just hope the list of casualities will not be as catastophic as some people would have us believe.
Perhaps now is the time for the people who run and work in these institutions to take proper stock of their actions and to moderate the way they operate. If so then some good might have come out of it.
I would appreciate transparency as a shareholder and reassurance from the management re my investment, especially with the kind of market volatility we have experienced recently. This I believe is part of treating customers/investors fairly and should be a prequisite of any listed company.
Robert, That is a stonking piece of writing. Thank you.
You are a City bsd (if you remember that 1980's book).
The city is so important to this country it is unbelievable. What else does the UK actually produce, come on anyone...The petroleum resources are nearly depleted, (just as you start debating giving Scotland independance), back in 92 the North Sea produced 6.5million bpd. Saudia Arabia does 9.5million bpd now. And of course Scotland never recieved direct benifit because the North Sea was "ex-Regina" so when the clownish English and their red-top papers complain that Scotland recieves more money than England, they don't realise that none of those calculations take into account 30 years of gas and petroleum production.
Barclays Bank has engaged in the riskiest of markets, (no surprise to annyone who remembers the calamaty of BZW), but clearly believe in the "we are too big to fail" argument.
For over ten years this economy and the US economy has boomed. At a ground level 'the people' have used cheaply available credit to boost their consumption and consequently the profits of companies. This along with specious new theories about unlimited growth in the dot.com era has bred a confidence that has become, in many cases, irrational.
I have watched in amazement at the growth of the UK economy, consumer spending, and record profits. My feeling is that many of 'the people' cottoned on to an insight - that if you keep spending then you'll be alright (and this was abetted by the banks and a lust for greater profits). I doubt if there was an understanding of credit and growth, however, it became accepted to spend more than you earn and release equity from rising house prices to wipe-out debt or fund further spending.
When these are actions being performed by millions of people then it seems plausible that any downturn is going to have much harsher effects than it would to a nation of savers and controlled spenders. In this blog there is a lot of fascinating conversation about indicators, funds and capital movement: yet these are only effects of a deeper and much more slow grinding cause - the slow retraction of credit which is inevitable in the capitalist system. The chase for profits always overreaches itself.
Once the key factor of consumer confidence and disposable income have gone then the economy is in recession. The past ten years have shown that the optimism was irrational and hard to get rid of: history shows it is hard to restore.
I see no way that this situation can be reversed once the downward spiral starts (it has started) - re-inflate the economy? Stimulate further house price growth with interest cuts? More government borrowing and spending? Hand-out pills? Even saying it sounds ineffective (well, not the pills bit). I'd be interested to hear if anyone can suggest a realistic way that the economy will grow again in the near future.
It's a shame you weren't and still aren't so analytical when it comes to looking at Northern Rock. As Post 5 Says Northern Rock is still profitable, not Β£500 mil but probably Β£100 once it's paid the BOE interest.
Barclays on the otherhand will have massive losses basically closing it's Barcap business! It wouldn't suprise me if your city mate were telling you it was Barclays that went to the BOE. Didn't fancy the limelight that day peston??
First let me just say - good article. Then let me say to those who (and you could guess they were gonna do it even before you got to the blog's replys section) seem to still want to blame Mr Preston for the whole of the NR crisis - get over it! Stop trying to shoot the messenger! It's dull, repetative and just plain factually wrong.
But what I really want do is reply to #12.
Short answer - can't, not for next 18-24 months because that's how long it's going to take for the problems at the consumer/sub prime level to fully shake out in the US. Add in rising commodity prices, especially oil and the fact these inflationary pressures will constrain what the Fed can do with intrest rates. A US recession not only looks likely but that it will last upto 24 months, maybe an under-estimation. If US consumers decide a frugel Christmas is prudent, then the production scale backs and job losess will start January 2nd. - not just there but here too. Our own housing slow down will become a proper falling market (not a crash, not yet) and consumer confidence here will also start heading south.
To see where confidence is, take a look at gold: up $100 in less than a month with a further $100 gain the month before. Gold is one of the traditional shelters investors seek when a financial storm is approaching.
Toni, in his rant (Comment No 11) should be aware that GB Inc is the four largest exporter in the world.
Tattie bye everybody, tattie bye !
So, I managed to sell Barclays at 610, and make a profit from the recent volatility, feeling only relief, not happiness.
The management transparency, as highlighted above, for me is the issue that needs to be made, well clear. The feeling that someone knows something is only hightened by watching the moving averages move down, it was clear for months that there were big sellers and the price was trending down despite the company buybacks and lack of any public new news.
NRK treated their shareholders with contempt by not disclosing their funding issues, and the suspicion therefore is that others can be doing similar or the same. If i felt certain that Barclays management would act responsibly on their disclosures I would be buying Barclays like there is no tomorrow right now. This might well be a comment on NRK more than BARC, but its how we small investors feel.
Would i put my childrens inheritance on their transparency. I would not.
I agree completely with the need to disclose any information which affects the price of the shares in a public company, but when a high up person actually suggested that it would have been better to lend NR taxpayers money secretly, to avoid a run on the bank, it makes people wonder if there are bank bosses who also feel that they can be justified for the same reason in not coming clean with the shareholders. It is clearly too long to wait until end of Feb to get some clarification because the lack of information from the horses mouth is causing far too much very expensive speculation.
11: what else does the uk produce?...er how about 200 bn pounds of exports.
12: is there a reason why you post the same piece, verbatim, on this messageboard and the ambrose evans-pritchard's messageboard at the telegraph?
or are you just a troll?
as a futher note... since my original reply The EU finance minister has this morning, downgraded european growth forcasts for next year. Quel surprise!
The over valued stock market (which has for the most part been acting as though everyone there has collectively got their eyes closed, with there fingers in their ears going "nur nur nur nur nur nur" so as to avoid the realities of what has occurred since August)is currently swallowing that pill with all the easy of a rich man trying to pass through the eye of a needle.
Good luck to them.
As business customer, private customer and shareholder in Barclays I am dismayed at the turn of events within the Banking sector.
The fact is that these events show that we cannot trust those who ply their trade within the finance sector. It is full of unscrupulous fly by nights and may I also say fraudulent individuals who line their pockets at the expense of the rest of the population who are left holding the can in the form of higher mortgages, loan charges, bank charges and investment losses.
I want heads to roll not just at Barclays but elsewhere and if we had a financial system that didn't operate above the law I believe criminal prosecutions should also be appropriate. Wishful thinking though!
The whole situation is a disgrace and a scandal.
Barclays has fallen in line with lots of other banks - HBOS, RBS, several other European banks, particularily the Irish ones.
Have they more rotten holdings than the rest ? Its like the old story of the grizzly bear chasing into a crowd - it only wants one kill. The market is exactly like that. Northern Rock was only an appetiser. The market is biting chunks out of lots of banks, Citi, Merrill, etc... I believe that this will not stop until there is one large player taken down. I dont think its Barclays.
So Robert, neat summary of the exact sloppiness indulged in by the investment bank wannabes. Or should I say opacity? So, it's a few weeks liquidity crisis, a few months slowing growth and only another seven or eight months capital-contraint, then out of the woods (ne m**da). Hunky dory then, as long as no more skeletons start dancing out of the closets.
Robert - much has been made on this and several other blogs, about the fact the sub prime situation and consequent write downs are essentially imported bad practice catching up with those wicked people that dabbled in more and more exotic securitisation devices. Therefore far removed from UK retail banking. Your blog indeed draws a distinction between Barclays Capital and the rest of the Group. I wonder if you are right to do so. What if the level of risk incompetence is the same throughout the UK banking sector? I would welcome your comments on the following (true) tale.
This is not a Barclays story, but it does relate to one of the other big UK operations. I have been doing some pro bono debt assistance work with young men with a range of drug related mental heath issues. Sub prime is understating the case more than a little. One lad (under 21) had opened an account a month ago, been granted a Β£1500 overdraft and a cash card. He managed to extract Β£1900 in 5 days. The Bank is now charging 20 X Β£20 daily facility charges per month, plus a monthly Β£25 fee and interest at 18% pa. I'm sure you have readers that can calculate the annual interest rate equivalent better than I can. The point is this. The customer had not been in employment for a year, had no current abode - just out of a psychiatric hospital - (and wasn't on the electoral register at the address he gave) and offered no references. He opened the account with Β£100 cash.
I bet that this hugely profitable account is being reflected in that Bank's current profits - when will the write off become unavoidable? This tale is commonplace (ask the CAB) among the young. Last thing... with Β£300 of the overdraft he opened another 3 accounts.....
Any thoughts?
AJ
Following on from previous comments
I have to say that the silence around the sub prime situation is absolutely deafening!
Senior management have seen their share price drop substantially and have done nothing to reassure the market.
I wonder why
If the poster at number 5 really believes that Northern Rock is on course to report Β£500 million profit for the full year, he has been at the Christmas drinks a trifle early.
NR has patently failed to update the market re the costs it is incurring with regard to its Β£20 billion plus of borrowing at a punitive rate-plus the costs it is incurring as regards employing three sets of advisors.
It has not been mentioned any where how much Barclays has lent to financial institutions which might incur loses.
I find the evidence contradictory.
On the Regulatory News Service (RNS), I see that Barclays has bought over 26 million of its own shares in the last 10 days. Is that symptomatic of a Bank in trouble?
& it's singularly short-but-sweet statement to the media yesterday said that it would be providing a trading update at the end of the month, and anticipated no need to make any statement earlier than this. Which basically means it is trading within the consensus forecats of analysts and investors.
These seem to me to be hard facts, whereas all the rest is founded on speculation, rumour, and secret phone calls.
Mind you, having sold Barclays at Β£6.40, I'm happy to see the share price sink some more before buying back into them again! So I'd better start start a rumour of my own.....
HOLD THE FRONT PAGE....... VARLEY RESIGNS!!!!
To 18: the reason why I posted to both blogs is that both are fascinating reading and the level of debate (yours and the 'hang Peston' brigade aside) is extremely high. The other blog has nowhere near as high a contribution rate so I thought I would see what further informative responses I could elicit.
To 23: I believe you've hit the nail on the head. This is why I think the situation is far more serious than the figures connected to sub-prime would lead us to believe. For example, there are young people in their hundreds of thousands doing low paid, insecure work, who have improved, highly decorated cars which they have bought on credit. Minimum repayments mean that they are not defaulting but the debt is growing and, at some stage, for many, default is inevitable. In a easy hire, easy fire economy downturns are sharper and faster and deeper once they get going. Expand the point beyond young people: how many people are doing the same across the economy? How many people will their undoing affect? What has created growth over the past ten years? What, in a downturn, can sustain it? How many banks are funding (as yet unknown) sub-prime loans in general and to what extent? I'm not wishing to be gloomy but the situation appears VERY difficult when I think about it this way.
Re: #23 -
The real world debt issues are appearing in Citizen's Advice Bureaux more often these days. All connected with over-lending by banks to people with extremely poor credit histories. If you want to know how bad the losses from bad debt in the UK are going to be, talk to the CAB.
i wonder how much stock of barclays and rbs is borrowed to short sell at the moment.
if, as i suspect, the answer is a lot i think even a free marketeer like me has to question the wisdom of the apparently free market in stock lending/borrowing. this surely needs to be looked at.
also the hedge funds that are almost certainly behind these attacks on the uk banks must subject themselves to greater scrutiny and transparency or have their right to trade withdrawn.
pb
All serious banks have made very good profits over the past 5 years. So they have big reserves. Losses racked up as the sub prime unwinds can be handed in a variety of ways without serious jeopardy to survival of the banks. Besides no governemnt will allow a serious player to go under for many compelling reasons. This has already been demonstrated in relation to the relatively small NR.
These are times when company valuations in the stock market become seriously mis priced none more so than in the finance sector.
The balance sheets of most financial institutions contain financial instruments that are difficult or impossible to value in today's illiquid market. It does not mean that they are worthless, it is just that they far more difficult to value them. Thus the market has more of a tendency to respond to gossip. It is more of a gamblers market than it was before.
The 'kiddies' who populate the dealing rooms, and their bosses, do not yet understand this and long for the 'certainty' of the past. History tells us that 'new' kiddies will arrive with new certainties. They will talk well and we will be taken in again. This is the economic cycle to wish it otherwise is the be a simpleton. This is the present reality - do not complain, live with it - you have no other choice.
The World's workshop is now in China. We pay them. They accumulate piles of cash. They lend this to us to finance out trade deficits. In short the USA still thinks it makes things - it doesn't- it imports its goods from China. Whilst the Yuan is so dramatically undervalued this situation will continue and so will the 'crisis' in the banking system.
Mr Preston, why not campaign for the revaluation of the Yuan by say 10 times (1.5 Yuan = Β£1, rather than 15 or so Yuan = Β£1) then we will be able to make things and compete. An hour of a skilled worker here is just as productive as an hour of a similarly skilled worker in China - It is just the price that is out of balance!
This is why i would never put my savings in stocks when one of britains biggest banks can drop 30% just on speculation and have to have it shares suspended even though they made a statement in october with no hint of a bleak outlook, and when they are buying back 4 million shares everyday.
Im sure a lot of the big hedge funds will make alot of money out of this.
If you're going to make a point on this page have the courtesy to get the name right - it just makes you look stupid.
PEston, not PReston!
We need to get things in perpective here!
I think we all know that banks have to borrow money in order to lend? OK.
Therefore all banks are in debt? So what difference does it make whether the debt is to another financial operator, the BOE or the ECB?
I am sick of reading comments which are full of rumour and speculation!
Northern Rock is the tip of the iceberg - all of the worlds banks are suffering. Not just in the US or Europe I might add.
And if the rumours are true then the losses of the biggest UK banks (RBSG, Barclays, etc) will make Northern Rock look like chicken feed!
At the risk of throwing more "merde" on the growing pile, I suspect we are getting close to the point where it starts to become apparent that many many savers and pensioners who thought their conservative investments were just that will start realising that perhaps they were not. At least not so conservative anyway.A common feature of many pension funds and conservative savings bonds has been the inclusion of these toxic "AAA+" rated ABP of yore.They have provided nice income boosts from mortgage financing threads embedded in the instruments. No longer.This may become a more profound charge for the big banks to answer, seeing as it was their own alchemy that gave birth to these hazmat paper bombs, abetted of course by their incestuous relations with the ratings agencies.
The city along with the private investors show a lack of trust in Barclays management statements with the falling collapse in their share price.
I do hope that the banks statements are correct and restore back some confidence & integrity into the stock market along with share dealing in general.
If not Barclays have have only themselves to blame on the future of investors and shareholders actions.
As I see it, one problem is how do the banks value their exposure to these financial instruments when there is little or no mark to market.
REF 32 - Your point about the Yuan and in particular the labour content of standard industrial products is a good one. Our experience is that it's nearer 250% than 100% and the CO2 cost is also around the 300% mark. The good news is that with a 8 to 10% annual labour cost increase (multiplied by 250%)it's possible to see significant inflationary pressures not too far around the corner (which as a UK manufacturer doesn't break my heart!). The bad news is that this will force a move into higher value manufacturing. The question is how much irreversable damage will the Chinese manage to inflict on Western manufacturing capacity, before the inevitable corrections kick in in 10 to 15 years? As the Americans appear equally inept at managing their trade affairs as they are their foreign affairs the prognosis isn't good.
Toni in comment 11
Sadly the credibility of the comments is hapered by the all too obvious lack of education - ie 'independAnce' 'benIfit' and the classic misspelling 'recIEves'
It would be better to concentrate on Independence, benefits and receiving - and then we could address the real issues - such as acknowledging that if the invisible earnings are of such importance then proper governance is VITAL
#31.
None of what you write actually follows. Yes, banks have [i]rep[orted[/i] big profits in recent years. However, this does not mean they have large reserves. It means they have large [i]accounting[/i] reserves - an entirely different matter. If they had large amounts of spare cash, why did the interbank market freeze? Answer - they didn't, and don't. They have large balance sheets, made of previously liquid assets, but which are now pretty illiquid without losing a chunk on them.
But then that's the point. The whole sub-prime issue doesn't surround whether the interest can be paid. Its the whole capital value of the loan. And if the mess gets big enough, there won't be a thing that Govt can do about it, other than print more money to bail out the banks. Do you think a few avoided bank failures is worth the rampant inflation?
Also, has anyone stopped to think who the biggest profiteer from this whole sub-prime inflationary debacle is? Any chance its Government? I'll leave you to think about it.
No 27 Chris Nowell says that because Barclays have been buying some of their own shares it is a sign of strength. Maybe he forgot that they sold a whole load of (new?) shares to far eastern banks to put some cash into the ABN offer. As they no longer need it for that purpose, it seems perfectly natural to buy back the shares with the cash they raised, otherwise the earnings would have to be divided amongst the increased number of shares , reducing the EPS. I don't necessarily believe that it indicates anything very much apart from the fact that they would rather undo the mistake that they previously made.
Banks are at the verge of collapse and it is really difficult to say, if it is they (i.e. bank) , who got carried away with consumers ambitious aspiration or the consumer , who are more ready to indulge themselves in the rat race of which we all are part of
or above all this unregulated free competition , which had compelled both consumer and supplier to become utmost selfish...
Mike in comment 40
Too much haste and too little substance methinks. So what if a few typos have crept in? The points being made are clear.
Talking about typos it's "haMpered" I believe... now I'm at it......
Things are getting serious.
Teddy is on the brink of closing his Barclays savings account.
He is getting fed up with having to join a long queue, particularly on a Saturday when a lot of the branches are now closing. Maybe they do not feel they can afford to recruit anybody to ease the queues ?
The problem with all these credit-backed securities is the pricing mechanism. Pricing such an instrument depends on a concept known as correlation (specifically, will the circumstances causing A to default make it more likely that B will default, and if so what numerical value can be placed upon that)
The problem comes with products that have a huge range of underlying debts. Firstly measurement of correlation is nigh on impossible, and even if it could be accurately measured it would take forever to price accurately. So a single figure is used, which is largely based on an estimate.
When the "merde" hits the fan, correlation rises because vast numbers of people are defaulting. It doesn't take a genius to figure out that lending money to those unable to pay it would result in mass defaults sooner or later, but sometimes genius is in short supply in the City.
When correlation rises, the value of products based upon baskets of credits falls. The trouble is nobody knows how far, and when all the instruments that have been "marked to model" meet the market for real the gap between what the model says they are worth and what the market says they are worth can be significant. Hence billions of dollars disappear, overnight.
Good luck to anyone left holding them when the music stops, you'll need it.
The beauty of the sub prime mortgage pyramid scheme in the US is that it is probably perfectly legal. What crime is it to lend money to people whom you know can't pay it back? The beauty is that other people are stupid enough to buy those mortgages from the original lenders without knowing what a risk they are taking. The loans were massive, the thing rippled outwards like water gushing away from a meteorite falling in a lake. It's beautiful to watch. The thing about pyramid schemes is that those at the apex always make money. There's an old saying on Wall Street that there are only two emotions greed and fear. This one like most pyramid schemes played on greed but there also has to be a strong element of stupidity thrown in for it to work. And that is what the so called financial experts bring to the table. Those MBAs who have the world convinced they know exactly what they are doing. Where was their "due diligence" and their "fiduciary responsibility" to exercise it? Are you kidding, they were too busy kicking up more deals to read the fine print or kick the tires to see what they were buying. They trusted but did not verify. There's a certain satisfaction seeing banks and insurance companies getting screwed. And it's also satisfying seeing it ripple not just across America but throughout the whole world. Now for every loser in this there's a potential winner and those are the people who will buy the best values in those forclosures. There will be superb real estate at fire sale prices if you know where to look for it. Do you think this is the first time this has happened? It actually happens about ever 7 or 8 years. Anyone remember the Real Estate Trust Corporation set up by the US government to settle the last one in the real estate market. But in other markets there were other schemes. Anyone remember what a derivitive or a structured note is? Lots of big corporations went belly up on that and many huge pension funds and insurance companies got badly burned. But until they broke down, the people who bought these things looked like geniuses. Leverege, that's what it's all about, put down a little on a bet, make or lose a lot more. That's the surest way to turn millions into thousands. A fool and his money are soon parted.
Mike Finn in comment 40 should consider learning how to use punctuation before he condemns those whom cannot type or spell!
A number of posts seem to focus on aspects of retail banking. In my opinion, this should not be connected with the global credit crunch. UK high street banks are fundamentally sound!
The banks had their fingers burnt two to three years ago on personal lending and started raising their credit cut-offs at this time. The publicly available information now shows that personal credit arrears and insolvencies have turned the corner in the UK. If you combine this with a recent rise in margins (particularly mortgages) then I would expect underlying performance in non-wholesale banking divisions to be stronger this year than for a number of years.
Toni,
What have Quaker roots got to do with anything? And exactly why do you believe BarCap is a giant hedge fund? ? You have clearly not been analysing the performance of Barclays generally and BarCap specifically over the past 3 years.
Providing leverage and liquidity to clients (including issuers structured notes) is something all banks do - it's called banking.
Re post 42 - no, I hadn't forgotten the funding Barclays put in place for the ABN purchase.
My point is that if Barclays is genuinely suffering a liquidity issue, such that its own trading is in difficulties let alone the credit conditions it is imposing upon propsoective borrowers, then the very last thing it would be doing is using its scarce liquiduity to purchase its own shares.
Continuing to execute a share buy-back programme - and it has continued with further purchases since I wrote my original post - is not consistent with the doom-&-gloom merchants' portrayal of the current state of trading in Barclays.
As I originally said, there are facts (such as share re-purchases) and there are rumours (such as those quoted in Robert's original blog). I know where my money lies!
Well Barclays are offering alot of guaranteed emerging countries accounts held for 5 years.Should one trust to invest in these accounts with Barclays or not?