MPC may raise Interest Rates to 6% in August!

Generali

64-1 against at the next meeting.

It won't happen though.

Melissa177

Guy_Montag wrote: »

Sorry to bring this back OT, but do how will the increase in the price of money (due to the looming credit crunch) manifest itself to
a) those with mortgages
b) those wishing to get mortgages
c) those with savings

It's a self-perpetuating cycle to those with mortgages - those outfits like Kensington, Northern Rock, even Abbey who have people defaulting on loans, then default on their CDOs (collateralised debt obligations) which have been sold to someone, somewhere in the world. This only serves to increase the credit crunch, debt becomes more expensive as fewer institutions are willing to take on the risk etc, until the MPC/Fed drop rates (as Generali points out, traders have started betting on a Fed drop again - 41-1 has to be worth a shot)

We're going to see a lot less PE firms taking over businesses, presumably.

For anyone who thinks this is all gobbledy-gook (and I'm not a City person, I just read the FT a lot), here is a fun article from Mark Gilbert (Bloomberg) which sums up the jargon in terms of, er, cows.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aBDouX0a6h6o

Leveraged Buyouts
You have two cows. You come home from the fields one day to find Henry Kravis chatting to your spouse at the dining-room table. Two days later, you have no spouse, no farm, and no table. Two guys the size of sumo wrestlers have saddled up the cows and are riding them around the farmyard.

Currency Market
You have two cows. China has 1 trillion cows. Guess who sets the price of milk?

Bond Market
You have two cows. One is Brazilian, one is Australian. They yield 25 quarts of milk per day. That's half as much as three years ago, when you traded your less-lactiferous German and U.S. cows for them. You are thinking of swapping for a pair of Namibian cows. They only have three legs but, hey, they produce 26 quarts per day.

Derivatives
You have two cows. You repackage five of them into a Collateralized Lactating Obligation, pay for a AAA credit rating, slice the CLO into 10 pieces and sell it to investors, skimming the cream from the milk for yourself. Three of the cows fall ill, and the credit rating plummets. You get to keep the cream.

Hedge Funds
You have two cows. A guy in an open-necked shirt drives up in his Bentley and offers to take care of them for you in return for a year's supply of steak and 50 percent of their milk. They won't be allowed to leave his compound for two years.
Six months later, you have half a cow, producing sour milk. ``You have to be willing to lose rump today to get rib-eye tomorrow,'' the hedge-fund guy mumbles through a mouthful of sirloin and champagne.

Economics
Assume two cows.

Carbon-Emissions Trading
You have two cows. They produce 1.2 tons of methane gas per day. After a hefty donation to the re-election campaign of your local representative, the government gives you enough emission permits for six cows. You sell three permits, buy another cow, and apply for a European Commission grant to build a methane-gas power station.

Microsoft Corp.
You have one old, tired cow. A recent heart transplant may have come too late to save the beast.

Google Inc.
You have no cows. You slap advertisements on everyone else's cows. The milk floods in. You use the proceeds to reinvent the cow.

Apple Inc.
Nobody wants your cows. You design the cutest little milk bottle. Now, everybody wants your cows.

Goldman Sachs Group Inc.
You have 26,467 cows. They are strapped into the milking machines 24/7. Some of them have more hay than they could ever hope to eat. Others aspire to one day having more hay than they could ever hope to eat. The cows with the most hay end up with big government jobs.

Pension-Fund Management
You have two cows. How boring is that? You pay a month's supply of milk to a consultant, who advises you to sell one cow and buy two aardvarks instead. The aardvarks die. The consultant charges you four months of your (now reduced) milk supply and advises you to sell half of your remaining cow and buy a wombat. The wombat dies. The consultant charges eight months of milk for a copy of his new report, ``Two-Cow Strategies for Alleviating the Impending Pensions Crisis.''

Russian Energy
You have two cows. Comrade, those cows are an environmental hazard. We suggest you hand one of them over to us.

Credit-Default Swaps
You have two cows. You buy insurance against them dying, and tuck the contracts into the middle of that tottering pile of documentation on your desk. One dark night, Henry Kravis sneaks off with your cows. By the time you track down the paperwork, your now worthless contracts have expired.

Interest-Rate Swaps
You have two cows. You pledge one of them to me as collateral in a swap for some of my pigs. I pledge the cow to my neighbor as collateral in a swap for some of his sheep. He pledges the cow to his cousin as collateral in a swap for some of his cousin's goats. Better pray the livestock market doesn't crash and we have to try and round up that cow.

Commodities
You have lots of stocks and bonds, but no cows. Are you crazy? Cows are the hot new market. Here, buy this exchange- traded cow futures contract. It can't lose. It gained 40 percent in the past six months.

Gold
You have two cows. You wear a cap you made out of tin foil so that the tiny black helicopters can't read your thoughts. You spend your days blogging about how the government's decision to abandon the cattle standard in 1933 was part of a global conspiracy by the world's central banks to destroy the value of your herd.

Melissa177

free4440273 wrote: »

despite the odds, i think a final .50 increase is on the cards. they have until the october meeting to do it.

I doubt it.

There was an 8-1 vote against a hike this time. The inflation report out on the 8th Aug (MPC have already seen it) must have shown signs that inflation is cooling.

Generali

I've had another 2 quid on a BoE cut. I've got £4 against about £500. Wish me luck. A tenner on the Fed cutting against £300 too.

Abbey are trying to raise £5,800,000,000 in an MBS (Mortgage Backed Security) issue. They need more luck than me! Perhaps I could use my £800 of winnings to short UK builders' shares.

Melissa177

I think I might join you on that bet, Generali.

Plenty of comment on CDOs and the credit crunch here:

http://www.bloomberg.com/news/commentary/gilbert.html

I do like Mark Gilbert's stuff.

According to Mark, this week's Honey I Shrunk the Company award should go to American Home Mortgage Investment Corp, whose value was $1.8 billion only six weeks ago. It's now as low as $56 mil. Ouch. They specialise in non-prime, but not sub-prime mortgages ("Alternative A").

Generali

Yeah, he's good. I liked the Credit Brothel Raided, Even Piano Player Not Safe headline.

You can buy me a pint at Deacons when your bet comes in.

Melissa177

Great headline I agree.

Where is Deacon's? We'll have to have a drink in the City one night, I'll drag my boyfriend along now that he's based at Cannon St.

ManAtHome

So dollar and pound both tank... short pause... inflation leaps (or maybe during the short pause we stop buying shiny stuff and start making shiny stuff..?).

Generali

Melissa177 wrote: »

Great headline I agree.

Where is Deacon's? We'll have to have a drink in the City one night, I'll drag my boyfriend along now that he's based at Cannon St.

Deacons is an ok pub on Wallbrook opposite Cannon St station.

I'm up for a drink after work one evening. Corney & Barrow at Monument or in Paternoster Sq. spring to mind.

Snow_Dog

Guy_Montag wrote: »

I make it five meetings, four in 2007 & one in 2008. The problems are, Mel, a) I don't know if we'll get a pre-Christmas kick, or a post-Christmas kick & b) I hate giving bookies money, I never get any back off them :rolleyes:

I made it 4 meetings as the phrase "by January 2008" implied before the new year.

Anything to squirm out of a 50p bet eh.;)