northern rock on the news begging for cash

silverbullit

Northern Rock shares have gone down by about 25%! Given what the experts are saying about NR being fundamentally sound, is this a good time to buy some NR shares?

WTF?_2

Generali wrote: »

Take a very simple model of a bank - one that takes money from depositors and lends it to people:

That's sooooo 20th Century

The way forward is to borrow money from the market where it's cheap and plentiful then recklessly lend it out to anyone who can sign their name on a piece of paper. Then package up the debt into a mortgage backed security, get a AAA rating from S&P and sell it on the investment markets.

Then do it all again. Massive growth, massive profits and easy money. And the house market shoots up because of all the easy credit you've been giving out, thus creating more demand for your credit because prices are sky high and everyone is worried they'll miss the boat if they don't buy into it right away! Happy days, everyone's a winner baby!


Now, what could go wrong with a rock solid business plan like that? :rolleyes:

nelly_2

Generali wrote: »

Take a very simple model of a bank - one that takes money from depositors and lends it to people:

It has assets and liabilities.

It's assets are it's loans.

It's liabilities are the money held on deposit by savers.

If the bank goes bust, for example because too many borrowers default, the assets will be sold to repay the liabilities.

As a bank is seen as a special sort of business, the government guarantees that savers get the first £2k back in full and then 90% of the next £33,000. If the bank's assets wont cover that amount, the government will.

Right when you say government you mean me and you yeah?

Cos governments do actually have money they [strike]steal[/strike] sorry

[strike]extort[/strike] sorry TAX us, and its our money they propose to use to bail the banks out?

Alan_M_2

!!!!!!? wrote: »

Now, what could go wrong with a (Northern) rock solid business plan like that? :rolleyes:

Pun intended?;)

Generali

I wouldn't buy them for more than the break-up value of the group.

NRK are not fundamentally sound. That's not the same thing as saying they'll go bust, they won't IMO.

jonewer

silverbullit wrote: »

Northern Rock shares have gone down by about 25%! Given what the experts are saying about NR being fundamentally sound, is this a good time to buy some NR shares?

I'm not a financial advisor or anything but it seems to me that NR's business model is now obsolete. I would hesitate to buy, but maybe if another banks want to do a take-over they will make a good offer for your shares? I dunno!

Generali

nelly wrote: »

Right when you say government you mean me and you yeah?

I do. The government has no money of it's own. It can either print some (lowering the value of the money everyone holds) or it can take it from you and I with the threat of imprisonment if we do not comply (or tax as it's otherwise known).

Usually they chose a little of each.

nelly wrote: »

they propose...to bail the banks out?

Strictly speaking it's the savers that get bailed out, not the bank. The owners of the bank (the shareholders) won't get a penny of Government money in the event of NRK going bust. At the moment, our money has been loaned to NRK, not given. We've taken on risk. That risk has a value but it hasn't actually cost us anything yet.

nelly_2

Will they goverment bail out my ebay buisness of large size frilly bras and thongs for men?

Generali

nelly wrote: »

Will they goverment bail out my ebay buisness of large size frilly bras and thongs for men?

I can think of nothing better for my taxes to be spent on than high quality, outsized lingerie.

chriss1979

nelly wrote: »

Will they goverment bail out my ebay buisness of large size frilly bras and thongs for men?

LOL I wasnt aware there was a crunch in the thong market? :rotfl: