Whats been your biggest financial blunder

IronWolf

Glen_Clark wrote: »

But we have already had to bail out Retail depositors, plus everyone else.
At the risk of stating the obvious, bailing out domestic Retail depositors without everyone else would have cost less.
Iceland did, and is recovering well.

How do you think we are going to cope with bailing them out?
Practically every day we discover more black holes, more calls on the taxpayer.

Iceland got away with it because there were bigger countries like us prepared to bailout the depositors they screwed over. For us there wasn't that luxury. You have huge ramifications if the UK and US banks suddenly start defaulting on obligations. If some banks bonds default, you suddenly have pension funds that need bailing out as they cant cover their liabilities. The interbank lending would dry up completely as noone would know who was next, and they would cease to function properly. Without interbank lending you'd have ATMS all over the country run out of money with no easy access to cash to refill them. You start to get runs on the banks as people withdraw cash while they can.

The only thing that could have restored confidence was a government guarantee.

IronWolf

sabretoothtigger wrote: »

Reverse logic that is, how long have we bankrupted failed business. Must be thousands of years
This time its different pretty much sums up the fit of every mistake made . A company buying too much isnt the cause of an economic problem.
Look for details which genuinely are new and it should highlight causes much more, a private bank isnt it


Only if it was the MG or some limited edition. I remember a mate had one, it was like Knight Rider because the computer spoke

Im not saying bankrupt businesses should be bailed out, but this was such an extreme case, literally the entire financial system would have collapsed had you allowed the biggest banks to fail. There was simply no option even though it goes against the ideology of the free market, which I in general agree with.

Not saying I completely agree with how it was done, the government could have nationalised banks that needed helped with total loss to shareholders, and then stripped them of their assets over many years to wind down their operations, possibly sell it off in small bits to create new competition in the market. But then you are destroying some of the biggest tax sources and the UK is no longer a financial centre.

sabretoothtigger

There was simply no option even

Hysteria is scary, it goes to the opposite of 'we have nothing to fear but fear itself'
I cant agree with those conclusions, I know some clever guys might say them but they dont stand up as working solutions and governments cant make private business work profitably by force. We can only act honestly & declare failure and losses as they occur and then avoid it
I say that as a beneficiary of these bailouts and low rates and so on.

Finance represents working interests, that demand will not disappear absolutely because one firm or even many and its bond holders are wiped out. It'll sting a fair bit but there is alot of fallacy used in politics that doesnt work for private business
Lehmans stills exists, even in name its still there operating trying to repay. Its assets definitely still are operated, its staff also, bad losses but it has to level against those who backed it first.
Private bankruptcy still has a use, people will avoid that loss again which is the most important thing we gain from it all

the government could have nationalised banks

They couldnt, not so far as I know. RBS had 1tn owed on its books. The total debt of the UK was 1tn, it wasnt really feasible to absorb that into public debt as if it was all working fine

grey_gym_sock

IronWolf wrote: »

Not saying I completely agree with how it was done, the government could have nationalised banks that needed helped with total loss to shareholders, and then stripped them of their assets over many years to wind down their operations, possibly sell it off in small bits to create new competition in the market. But then you are destroying some of the biggest tax sources and the UK is no longer a financial centre.

the last point i disagree with, because the costs of the bailout + of the depression caused by the financial crisis are far greater than the previous high tax take.

i agree that the state had no choice to step in and either prop up the banks or oversee their dismantling.

i don't see why it was necessary effectively to protect all the banks' creditors. the state could have protected depositors and the other sane parts of the business, without making such an open-ended commitment to bail out whatever losses might come to light later in any part of the banks. 1 way to achieve that would be to let them go bust, and then offer buy out certain parts of the business from the liquidator. though it would probably have been possible to negotiate something similar without letting it go quite that far.

the other problem is that the banks haven't been reformed.

grey_gym_sock

sabretoothtigger wrote: »

They couldnt, not so far as I know. RBS had 1tn owed on its books. The total debt of the UK was 1tn, it wasnt really feasible to absorb that into public debt as if it was all working fine

the point is that, in effect, they have.

you may be right that it wasn't feasible, but that's where we are now.

(RBS may have owed 1tn, but it also had a large fraction of 1tn owed to it, so it's not like taking on 1tn debt with nothing in exchange for it.)

talexuser

IronWolf wrote: »

The only thing that could have restored confidence was a government guarantee.

And that is the damning guilt of the politicians and regulators who deregulated to the extent that it was the only thing left!

garybarlowsbeard

Ah, I'm glad this thread came along. About 3 and a half years years ago my fixed mortgage expired. The prevailing advice pretty much everywhere was to fix. Interest rates were sure to shoot up soon. A 5 year fix was definitely the best bet. So I paid a grand, got my fix at the historically lowish rate of 4.59 and waited for the fixes to edge up before, in a few years interest rates shot up to 8% and more. Boy would I be glad I didn't stick with my reversiopn rate (obviously with no fees) of 1.75% above base, min 2.5%).

REckon it's cost me about £15k. I still sometimes lose sleep over it!

AdamKels

Reading all the mistakes on here is a great incentive to use passive investments. Paying into a fund ran by a professional seems to me to be a lot more beneficial than attempting to beat them myself on a part-time basis, only to misread the market and buy shares in something that's on its way out.

Nobody can predict what's happened to some of you on here, I know, but a team of people that spend all day researching investment opportunities probably have more chance than I do.

Diversifying your portfolio and different funds, stocks, bonds + Real estate, buying and holding these investments for a number of years and reinvesting dividends is the standard advice. Not buying 10k of Woolworth shares and hoping the price increases in x amount of months or years, and selling.

mark55man

so passive investment isn't about buying professionals who can do well out of the market through research -its about buying professionals who are able to track the chosen index (or indices) you have decided to passively follow

but I certainly don't disagree with the general sentiment which I mainly follow - although my diversification includes a small percentage I allow myself some more speculative investments

AdamKels

By research, I meant tracking, I apologise.

But yes, speculative investments keep the blood pumping!