BBC Radio 4 In Business Podcast - Economic “Bubbles”

This week, In Business goes behind the headlines to consider the Bubble economy. The Crash of 2007 comes just seven years after the dot com bubble burst with a bang, just ten years after the Asian economic crisis, and it’s 20 years since the great stock market crash of October 1987. Peter Day will be asking financial wizards, plus a psychiatrist, why we have these “shock” bubbles and busts with such monotonous regularity. Producer: Sandra Kanthal. Editor: Stephen Chilcott

Download Podcast - MP3

InBiz: Bubbles 20 Sep 2007

Duration: 29mins | File Size: 14Mb

It Will Be Lonely This Christmas For Retailers Says M&S Boss

The boss of the popular store Marks and Spencer has said he believes retailers will be facing a touch Christmas this year. Stuart Rose says shoppers are pinching the pennies and spending less on the High Street. It is believed that consumers are less well off thanks to increased taxes, high fuel bills and increased mortgages, causing their spending to dwindle.

Lucy, www.product-reviews.netww. - 26 September 2007

In an interview, Mr Rose revealed,

“We have definitely entered a period of uncertainty. If you look at disposable income over the last five years it has really contracted. There are definitely indications that things have slowed up a bit.”

He went on to say that the period between now and Christmas is crucial and he will be able to tell by the middle of October how Marks and Spencer will fare this Yule tide.

It’s not only the Christmas season that has Mr Rose worried, he admitted that it had been not such a good summer for M&S due to the floods. Despite this, Mr Rose is defending the fall in share price from 750p down to around 580p in just six months, erasing around £2 billion of the companies value.

He concluded his interview by saying, “Retailers have all been hammered. But we’ve outperformed by about 64% over the last three years. The stock market is up by 45%. We’re confident about our plan, about giving customers strong products, great looking stores and good service.”

Builder Barratt warns of a ‘tighter market’

HOUSEBUILDER Barratt Developments today warned of a tighter UK housing market as it posted a 9.3 per cent rise in annual pre-tax profit.

JIM STANTON, BUSINESS EDITOR, The Scotsman - 26 September 2007

Barratt, which has a number of developments across Edinburgh and the Lothians, said the series of five interest rate rises since August 2006, along with the current financial squeeze in lending markets, would affect the housing sector. But it said it had no idea how long markets might take to recover.

And it said that house sales plunged by as much as ten per cent last week as the global lending crisis escalated in the wake of the Northern Rock situation - full article

Low gearing shelters landlords

Residential landlords have sheltered themselves from rising interest rates and higher borrowing costs by reducing the gearing on their portfolios, research from specialist buy-to-let lender Paragon has revealed.

AWD MoneyExtra

The average landlords’ portfolio gearing - the proportion of borrowing to the level of equity in the portfolio - has fallen from 48% in 2002, to 38% in 2007. And the level of gearing for landlords with 3 or fewer properties is even lower at just 25%, quashing suggestions that these operators will bail out of the buy-to-let market if rental yields contract - full article

The story of Flat 904 and what it means

If a major property auction held in London this week is anything to go by, a dreadful story is about to unfold that could engulf the bonanza that was Britain’s new-build buy-to-let sector.

CityWire, Richard Lander - Friday 21 September 2007

The auction, organised by Barnard Marcus and held in the plush Café Royal on Regent Street, featured 255 lots ranging from a parking space in Hackney (reserve price £6,000) to a terrace of five buildings in south east London which failed to sell despite attracting bids of £2.1 million.

Among the lots were several entries to which the dreaded words ‘by order of the mortgagees in possession’ were appended – repossessions in other words, where the owner had figuratively tossed in the keys to the bank or building society which was now trying to get some of its money back - full article

Subprime fallout - Global Markets Face Protracted Adjustment

Markets face difficult period ahead, Credit difficulties likely to have broader economic effects, Market framework needs strengthening.

IMF Survey Magazine - September 24, 2007

Markets are likely to go through a protracted adjustment period following recent financial turbulence triggered by the collapse of the U.S. subprime mortgage market, according to the IMF’s latest Global Financial Stability Report (GFSR).

The report, released on September 24, said the turbulence represents the first significant test of innovative financial instruments and markets used to distribute credit risks through the global financial system, with markets recognizing the extent that credit discipline has deteriorated in recent years. This has caused a repricing of credit risk and a retrenchment from risky assets that, combined with increased complexity and illiquidity, has led to disruptions in core funding markets and increased market turbulence in August.

Central banks in several countries have stepped in to help stabilize markets and mitigate the impact on the broader economy. But the GFSR said the period ahead may still be difficult as bouts of turbulence are likely to recur and the adjustment process will take time. “Credit conditions may not normalize soon, and some of the practices that have developed in the structured credit markets will have to change,” it stated - full article

IMF warns Britain on sub-prime market

The International Monetary Fund has warned that Britain’s sub-prime mortgage system is comparable to the United States, sparking fears about the stability of the housing market, according to a report in the Daily Telegraph which cited the IMF.

Interactive Investor - (AFX UK Focus) 2007-09-25 06:56 GMT:

The report said the Washington-based institution singled out the UK’s low-income mortgage market as a key area of risk for the financial system. It came alongside a warning that the credit crunch and its aftermath will last longer, and be more painful, than many people expect - full article

Can the UK avoid a house price crash?

It’s been a rollercoaster week for investors, but the property market should survive the credit crunch. The Northern Rock crisis has dented confidence in the housing market but most analysts still predict a soft landing rather than a crash.

Graham Norwood, Daily Mail - 21 September 2007

HOUSE PRICE CRASH? UK property should avoid a major slump claim industry experts

Signs of a slowdown have been on the horizon since early summer, long before ‘credit crunch’ and ’subprime mortgages’ became part of the standard dinner party lexicon.
In the four weeks to early September - just ahead of the Northern Rock turmoil - asking prices of homes on sale in England and Wales were already dipping - full article

My buy-to-let dream cost me everything

Mortgage bank Abbey has been accused of fuelling the debt crisis by offering a home loan worth up to 125% of a property’s sale price - and many rivals seem willing to lend whatever the risks.

Richard Dyson, Mail on Sunday - 23 September 2007

Richard Dyson reports how one buy-to-let investor has been ruined by an ill-fated property speculation - funded by some of our biggest banks.

A life of financial freedom, travel, and a luxurious holiday home in a sunny country from which to manage a property portfolio worth millions.
These are the dreams conjured up by the countless property investment clubs, developers and other middlemen that have profited in recent years from the boom in buy-to-let. But for a growing number, the dream is now a nightmare of repossession and ruin - full article

The Fed’s bold cut

IS THE Federal Reserve running scared of the financial markets—or the housing market? On Tuesday September 18th America’s central bank cut its target for the federal funds rate by half a point, to 4.75%, the first reduction for more than four years. Financial markets had thought a quarter-point cut a shade more likely, but prayed fervently for a half. Rejoicing, the S&P 500 jumped by nearly 3% after the Fed’s announcement and the Dow Jones index closed more than 300 points up.

Economist.com - Sep 18th 2007

Once the cheering stops, it may be worth reflecting on what the Fed’s action—and words—say about the state of the economy, especially the housing market. The “tightening of credit conditions”, said the Fed, “has the potential to intensify the housing correction and to restrain economic growth.” The Fed seems to be trying to act before things get worse: the cut, it said, “is intended to help forestall some of the adverse effects on the broader economy” - full article