At the start of this month I looked into buying shares in one or more of the companies dealing with personal insolvency and IVAs - Debt Free Direct and the like.
I'm glad I dithered. Their shares have taken a hammering recently:
Accuma, ACG, up 21% in the last year, down 12% in the last 2 days.
Cleardebt, CLEA, down 10% in the last year, down 17% in the last 2 days.
Debt Free Direct, DFD, up 182% in the last year, down 13% in the last 2 days.
Debt Matters, DEBT, up 172% in the last year, down 12% in the last 2 days.
Debts.co.uk, DETS, down 4% in the last year, down 11% in the last 2 days.
No real accounting for it. An article in the Indie says there's a two track market developing where corporate debt management stocks are outperforming personal debt.
It goes on to point out that Debt Matters was forced into issuing a statement saying it didn't know of any reason for the share price falls.
Could it be the market thinks the Great British Consumer might not get so badly burnt by debt after all, or is this just an example of how a bubble that formed in the share prices of these companies is bursting?
17 October 2006
16 October 2006
M4 Corridor an IVA Hotspot
So according to an article in the FT today, the credit rating agency Experian, the M4 corridor is a "major hotspot" for IVAs (Individual Voluntary Arrangements).
The thing is, it seems, the really poor have nothing to lose by going bankrupt so it's those to whom going bankrupt represents a significant social stigma who opt for the IVA route.
I live in the M4 corridor and I can't say it surprises me. I really can't see how a lot of people are managing to make ends meet while at the same time keeping up appearances.
I can think of a few reasons why the M4 corridor should be a hot spot. For a start, the area has plenty of decent jobs (especially in areas like IT and telecoms) and therefore attracts people both from other parts of the country and from overseas. People moving into an area from outside won't have local family support networks and therefore their cost of living is going to be higher. Of course, this area has high house prices, which adds to the burden. Finally, the IT and telecoms industries tend to be boom/bust so I can forsee a situation whereby the major bread winner loses their job.
Seems to me there's a credit crunch on its way.
The thing is, it seems, the really poor have nothing to lose by going bankrupt so it's those to whom going bankrupt represents a significant social stigma who opt for the IVA route.
I live in the M4 corridor and I can't say it surprises me. I really can't see how a lot of people are managing to make ends meet while at the same time keeping up appearances.
I can think of a few reasons why the M4 corridor should be a hot spot. For a start, the area has plenty of decent jobs (especially in areas like IT and telecoms) and therefore attracts people both from other parts of the country and from overseas. People moving into an area from outside won't have local family support networks and therefore their cost of living is going to be higher. Of course, this area has high house prices, which adds to the burden. Finally, the IT and telecoms industries tend to be boom/bust so I can forsee a situation whereby the major bread winner loses their job.
Seems to me there's a credit crunch on its way.
13 October 2006
What a difference 9 months makes
Back in January, I posted on how well Tony Blair had performed in the Commons. What a difference 9 months makes! This week he was well and truly trounced by David Cameron at Prime Minister's Questions. Still, Blair has dug a hole for himself by refusing to endorse Brown now after having done just that earlier in the year. Quite how he could hope to get away with this U-turn is beyond me.
As someone mentioned on the radio the other day though, it must be deeply galling to have pumped so much into the NHS over the last 9 years, only to have the Tories come out ahead of Labour in recent polls which seek to measure which party is trusted more with the health service.
As for Cameron, I don't have much time for the guy. As I heard that entertaining political duo Abbot and Portillo say on This Week last week, the shadow cabinet has something like 13 old Etonians in it, including Cameron himself. Furthermore, apparently, there are even more Etonians and their ilk working for Cameron as political advisors etc. Diane and Michael pointed out that an affable, self-deprecating manner was what distinguished the old Etonians from their peers and how, in meeting an old Etonian for the first time, it was easy to get sucked in by all this charm. This is what seems to be happening to the British public right now.
I had much more time for Cameron's predecessor, Michael Howard. He was a superb parliamentary performer and I think it's fair to say you knew where you were with him. As an ex-grammar school boy from less than affluent roots, I'm sure he doesn't have much time for the crowd who now dominate the Tory front bench.
Of course, Howard like the much derided Ming Campbell, had the great disadvantage of being an intellectual and the great British public has always hated intellectuals.
As someone mentioned on the radio the other day though, it must be deeply galling to have pumped so much into the NHS over the last 9 years, only to have the Tories come out ahead of Labour in recent polls which seek to measure which party is trusted more with the health service.
As for Cameron, I don't have much time for the guy. As I heard that entertaining political duo Abbot and Portillo say on This Week last week, the shadow cabinet has something like 13 old Etonians in it, including Cameron himself. Furthermore, apparently, there are even more Etonians and their ilk working for Cameron as political advisors etc. Diane and Michael pointed out that an affable, self-deprecating manner was what distinguished the old Etonians from their peers and how, in meeting an old Etonian for the first time, it was easy to get sucked in by all this charm. This is what seems to be happening to the British public right now.
I had much more time for Cameron's predecessor, Michael Howard. He was a superb parliamentary performer and I think it's fair to say you knew where you were with him. As an ex-grammar school boy from less than affluent roots, I'm sure he doesn't have much time for the crowd who now dominate the Tory front bench.
Of course, Howard like the much derided Ming Campbell, had the great disadvantage of being an intellectual and the great British public has always hated intellectuals.
Why Felix Randal?
You know, I forgot to mention why this site is called Felix Randal. It's named after a poem written by one of my favourite poets, Gerard Manley Hopkins. Here it is:
FELIX RANDAL the farrier, O he is dead then? my duty all ended,
Who have watched his mould of man, big-boned and hardy-handsome
Pining, pining, till time when reason rambled in it and some
Fatal four disorders, fleshed there, all contended?
Sickness broke him. Impatient he cursed at first, but mended
Being anointed and all; though a heavenlier heart began some
Months earlier, since I had our sweet reprieve and ransom
Tendered to him. Ah well, God rest him all road ever he offended!
This seeing the sick endears them to us, us too it endears.
My tongue had taught thee comfort, touch had quenched thy tears,
Thy tears that touched my heart, child, Felix, poor Felix Randal;
How far from then forethought of, all thy more boisterous years,
When thou at the random grim forge, powerful amidst peers,
Didst fettle for the great grey drayhorse his bright and battering sandal!
I love that last line. It encapsulates Hopkins' style; all that alliteration and the sheer exhuberance shown in using "fettle" as a verb which must have been a pretty rare use of it even then.
Binsey Poplars is probably my favourite poem by Gerard Manley Hopkins. This is just superb. The line After-comers cannot guess the beauty been is one of those which pops into my head quite often. I suppose it's one of those oft thought but ne'er so well expressed type of phrases. Anyhow, here's the poem:
MY aspens dear, whose airy cages quelled,
Quelled or quenched in leaves the leaping sun,
All felled, felled, are all felled;
Of a fresh and following folded rank
Not spared, not one
That dandled a sandalled
Shadow that swam or sank
On meadow and river and wind-wandering weed-winding bank.
O if we but knew what we do
When we delve or hew—
Hack and rack the growing green!
Since country is so tender
To touch, her being só slender,
That, like this sleek and seeing ball
But a prick will make no eye at all,
Where we, even where we mean
To mend her we end her,
When we hew or delve:
After-comers cannot guess the beauty been.
Ten or twelve, only ten or twelve
Strokes of havoc únselve
The sweet especial scene,
Rural scene, a rural scene,
Sweet especial rural scene.
FELIX RANDAL the farrier, O he is dead then? my duty all ended,
Who have watched his mould of man, big-boned and hardy-handsome
Pining, pining, till time when reason rambled in it and some
Fatal four disorders, fleshed there, all contended?
Sickness broke him. Impatient he cursed at first, but mended
Being anointed and all; though a heavenlier heart began some
Months earlier, since I had our sweet reprieve and ransom
Tendered to him. Ah well, God rest him all road ever he offended!
This seeing the sick endears them to us, us too it endears.
My tongue had taught thee comfort, touch had quenched thy tears,
Thy tears that touched my heart, child, Felix, poor Felix Randal;
How far from then forethought of, all thy more boisterous years,
When thou at the random grim forge, powerful amidst peers,
Didst fettle for the great grey drayhorse his bright and battering sandal!
I love that last line. It encapsulates Hopkins' style; all that alliteration and the sheer exhuberance shown in using "fettle" as a verb which must have been a pretty rare use of it even then.
Binsey Poplars is probably my favourite poem by Gerard Manley Hopkins. This is just superb. The line After-comers cannot guess the beauty been is one of those which pops into my head quite often. I suppose it's one of those oft thought but ne'er so well expressed type of phrases. Anyhow, here's the poem:
MY aspens dear, whose airy cages quelled,
Quelled or quenched in leaves the leaping sun,
All felled, felled, are all felled;
Of a fresh and following folded rank
Not spared, not one
That dandled a sandalled
Shadow that swam or sank
On meadow and river and wind-wandering weed-winding bank.
O if we but knew what we do
When we delve or hew—
Hack and rack the growing green!
Since country is so tender
To touch, her being só slender,
That, like this sleek and seeing ball
But a prick will make no eye at all,
Where we, even where we mean
To mend her we end her,
When we hew or delve:
After-comers cannot guess the beauty been.
Ten or twelve, only ten or twelve
Strokes of havoc únselve
The sweet especial scene,
Rural scene, a rural scene,
Sweet especial rural scene.
11 October 2006
Why I think house prices will crash
I'm a bear when it comes to house prices. I was convinced back in 2003 that they were ripe for a correction, having risen enormously since around 1996, which happened to be when I bought.
So, my wife and I made a very brave (follhardy?) decision. In May 03 we sold our house, shoved the equity into a savings account and have been renting ever since. I'll come clean and say that I regret that decision now because house prices have continued their upward trajectory, all be it at a slower pace.
If I'd invested in a stock market tracker instead of opting for the savings account, I would have doubled my money. I certainly would have no regrets if I'd had the bottle to do that! The other plus side is that we have a bigger house in a better area on which the landlord makes all of 3.5% gross yield and we've been able to save the interest on our savings.
Now, of course, we've reached the stage where we want to buy back into the market but I for one am nervous about buying in at the top of one of the biggest asset price bubbles in history.
So why do I think that it still might all end in tears?
I don't think that interest rates are going to shoot up to 8% or 10% anytime soon. I believe the historical average is about 5% and that's where we're almost certainly going to be in a month's time. I believe that what will precipitate the fall will be the ever-increasing indebtedness that many people have got into and an end to the easy lending that has got us into this position.
A recent blog in the Grauniad blog by Ann Pettifor put some flesh on the bones of this. She quotes research done by Elizabeth Warren of Harvard University that shows that fully 75% of middle class America's family income is earmarked for recurrent monthly expenses; today's family has no margin for error....Their basic situation is far riskier than that of their parents a generation earlier. That phrase about the lack of margin for error echoed many articles I've read recently about the finances of many families.
A few days ago, some research by KDB really caught my eye. It shows that household disposable wealth in the UK has fallen significantly (outside of London) during the first half of the year. In the South-East, for example, it fell 14% and in Scotland it collapsed by 26%.
The Torygraph used this research as the basis for an article which points out that While house prices rose by 5pc from mid 2005 to mid 2006, this was dwarfed by a 15pc rise in mortgage advances ... Home equity extraction is now running at a staggering rate of £50bn a year... equivalent to 4pc of GDP, and all has to be repaid. The KDB findings are ominous, suggesting that household finances are even more stretched than previously thought.
This research confirms that here in the UK we're having to MEW ever deeper into what equity remains in our houses. I'm sure that many families' income is largely eaten up by essentials, just like in the USA.
Meanwhile, more and more people are defaulting on their unsecured loans which has led to the banks tightening their criteria for unsecured lending and having to continually raise their provision for bad debt. The debt spiral has also led to a whole bunch of companies like Debt Free Direct springing up in order to help those who are up to their eyeballs in debt "manage" it by the use of IVRs (Individual Voluntary Arrangements) and bankruptcy. The response has been an outcry from the banks and threats that they will tighten criteria further so as not to get caught out again. Whether these are just idle threats remains to be seen.
This is why I've come to the conclusion that it won't take an interest rate hike to say 8% to precipitate the credit crunch and a consequent house price crash. The fall in disposable wealth shows that many people must be accumulating debt even at current interest rates, ie, they are either carrying on spending or simply can't eat into their debt mountain. Compounding interest even at the current level could well be forcing equity withdrawal and unsecured borrowing.
This ever-increasing indebtedness must surely be what triggers the eventual correction.
So, my wife and I made a very brave (follhardy?) decision. In May 03 we sold our house, shoved the equity into a savings account and have been renting ever since. I'll come clean and say that I regret that decision now because house prices have continued their upward trajectory, all be it at a slower pace.
If I'd invested in a stock market tracker instead of opting for the savings account, I would have doubled my money. I certainly would have no regrets if I'd had the bottle to do that! The other plus side is that we have a bigger house in a better area on which the landlord makes all of 3.5% gross yield and we've been able to save the interest on our savings.
Now, of course, we've reached the stage where we want to buy back into the market but I for one am nervous about buying in at the top of one of the biggest asset price bubbles in history.
So why do I think that it still might all end in tears?
I don't think that interest rates are going to shoot up to 8% or 10% anytime soon. I believe the historical average is about 5% and that's where we're almost certainly going to be in a month's time. I believe that what will precipitate the fall will be the ever-increasing indebtedness that many people have got into and an end to the easy lending that has got us into this position.
A recent blog in the Grauniad blog by Ann Pettifor put some flesh on the bones of this. She quotes research done by Elizabeth Warren of Harvard University that shows that fully 75% of middle class America's family income is earmarked for recurrent monthly expenses; today's family has no margin for error....Their basic situation is far riskier than that of their parents a generation earlier. That phrase about the lack of margin for error echoed many articles I've read recently about the finances of many families.
A few days ago, some research by KDB really caught my eye. It shows that household disposable wealth in the UK has fallen significantly (outside of London) during the first half of the year. In the South-East, for example, it fell 14% and in Scotland it collapsed by 26%.
The Torygraph used this research as the basis for an article which points out that While house prices rose by 5pc from mid 2005 to mid 2006, this was dwarfed by a 15pc rise in mortgage advances ... Home equity extraction is now running at a staggering rate of £50bn a year... equivalent to 4pc of GDP, and all has to be repaid. The KDB findings are ominous, suggesting that household finances are even more stretched than previously thought.
This research confirms that here in the UK we're having to MEW ever deeper into what equity remains in our houses. I'm sure that many families' income is largely eaten up by essentials, just like in the USA.
Meanwhile, more and more people are defaulting on their unsecured loans which has led to the banks tightening their criteria for unsecured lending and having to continually raise their provision for bad debt. The debt spiral has also led to a whole bunch of companies like Debt Free Direct springing up in order to help those who are up to their eyeballs in debt "manage" it by the use of IVRs (Individual Voluntary Arrangements) and bankruptcy. The response has been an outcry from the banks and threats that they will tighten criteria further so as not to get caught out again. Whether these are just idle threats remains to be seen.
This is why I've come to the conclusion that it won't take an interest rate hike to say 8% to precipitate the credit crunch and a consequent house price crash. The fall in disposable wealth shows that many people must be accumulating debt even at current interest rates, ie, they are either carrying on spending or simply can't eat into their debt mountain. Compounding interest even at the current level could well be forcing equity withdrawal and unsecured borrowing.
This ever-increasing indebtedness must surely be what triggers the eventual correction.
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