Friday 17 October 2008

End of week: Predictions Results

Last Sunday I posted my thoughts on what I though would be a pretty chaotic week in the world economy; got that bit right. below are last week's predictions and in highlights the actual results:

- RBS. Barclays & Lloyds/HBOS will announce taking of the Governments' shilling before the markets open tomorrow. Despite the huge knock to dividends, this will temporarily support their share prices. The CEO of RBS will resign.

RBS has held up, LLoyds HBOS not so well, they may come back a bit if the Government allows Dividend payments within 5 years. Fred the Shred did resign. Prediction Accuracy - 50%

2- The markets will continue their downward trend as more bad news seeps out into reality. Perhaps not with the vigour of this past week and with a bear rally for a day or two, but downwards nonetheless. Lehmans fall-out will be main bad news to financials sector.

It was a nice Bear Rally, but unless the markets are up over 5% (currently 3%) by the end of Friday then my prediction was spot on. Lehmans fall out will be next week, post 21/10. Prediction accuracy - 90%

3- After the failure of the Sarkozy talks today (prediction), the Euro will weaken further against the dollar and pound. Serious questions will begin to be asked about its viability.

The talks succeeded by the standards of European agreements, but the Euro has fallen heavily. Prediction accuracy: 50%

4- Commodity sell off will continue, as will gold and silver to some extent as margin calls for big traders continue to force liquidation of assets. Maybe some respite by Friday, Oil will end the week under $70 unless OPEC cut production.

Commodities wrecked, oil at $66 a barrel. Gold ans Silver routed too. Prediction Accuracy: 100%

5- Questions will being to be asked of the strength of some UK Insurers as they are battered by huge markdowns to their assets; similar with large pension fund companies like BA and BT.

Insurers are down a lot this week indeed, RSA and Aviva more than the market average, L&G too. This was the front page story on the Telegraph today. BA and BT held up not so badly after last weeks decimation, but are still nearly off hugely. BA is 50% down on a MONTH ago and is heavily shorted.
Prediction Accuracy 100%

Overall Success - 78%. Do you agree?


Mark Wadsworth said...

Good stuff. But seeing as this appears to be your job, did you make a killing by snapping up bank bonds in the weeks leading up to the bail-out and then flogging them off again?

The realisation has dawned on me that the main purpose of gummint intervention in free markets is to provide opportunities for speculators.

Unsworth said...

Yep, not a bad score at all.

The Euro nonsense will rumble for a while. Agreement at such 'talks' means sod all - as we all know - simply because the whole thing is much more complicated than that. I'm not conviced the Euro will die, but it may well weaken further. This is all long-haul stuff.

Insurers (IMO) are going to be in trouble for a few months and I think there'll be a shake out. I'm interested in the state of Norwich Union, which is currently a mess.

Unknown said...

Pretty good, you should try making a living out of some these predictions

CityUnslicker said...

sadly I have no excess capital due to a lifetime bond issue that is in a irrecoverable position: married with kids.

CityUnslicker said...

BTW MW - my job has nothing to do with the markets, just an innocent bystander.

Old BE said...

Oil tells the amazing story of the last month or two. Will we see $20 oil next year?

Anonymous said...


Gordon Brown has caused the second great depression. Currently, unemployment is rising by 50,000 a month. This would mean that by the time of the next election, about 1million people would be added to the jobless list, on top of the 1.79million people already out of work and the 2.7million people labelled as "disabled". But this is not the full story. During the summer months there were still a lot of alternative jobs available, which were filled by the recently unemployed. Polish workers on short-term contracts were the first to return home. The real credit crunch had not started.

The real pain of unemployment is about to begin. It will ramp up rapidly as the US continues to sink into recession along with the European economies. I would predict that by the time of the next election private sector unemployment will reach 4million.

But this is just the private sector. The public spending funds 10million jobs. But the government has been spending at a staggering 20% more than its own income. We can expect this to continue under Gordon Brown. Indeed, it will probably accelerate as tax revenues decrease as the recession bites. After the next election, David Cameron will be facing 4million unemployed, 2.7million listed as "disabled" but forced to make cuts of 40% to public spending to bring public expenditure under control and pay back government debt. This would cause a further 4million to be put out of work.

Within the next five years we could be looking at an unemployment rate of 30% with over 10million people out of work. This would be a higher rate of unemployment than at any time in the last 100 years. Higher than in the last Great Depression.

There will be nothing that David Cameron or anyone else can do to avoid this. The damage was done over the last ten years under Gordon Brown. I would strongly suggest that readers of these comments take whatever measures are necessary to protect the interests of themselves and their loved ones, because the next five years will be brutal.

Tom Powdrill said...

Actually I think you are bit ahead of the game in terms of the impact of market falls on company pension funds. I don't think anyone has taken a serious look at this yet, and when they do I can only see further pain.

I was talking to a couple of pension fund folks earliet this week and their funding position has worsened by 10% to 15% over recent months. Unless the regulator eases up on the period trustees can spread recovery plans over that is going to mean some steep increases in contributions.

Mark Wadsworth said...

Tom P, pension fund trustees and their sponsoring companies are complete morons, they could fix these deficits in a day and have a handsome tax rebate to boot!

CU, I've got one of those bonds, plus one left over from a previous marriage. So I freed up capital by selling to rent last year.

Bill Quango MP said...

CU: I am 2 weeks away from the next installment of my lifetime bond issue. I took this position back in February when the situation was different.
Is it too late to cancel?

Steven_L said...

Next week?

1) Brown will continue to try and take the credit for falling fuel prices.

2) Brown will continue to position himself for a new job as global financial regulator, promising to end 'global financial crisis's' with his new reforms.

3) Brown will continue to deflect any criticism of his role in the crisis by making cheap remarks about the Tories and talking about 'problems that started in the US housing market ...'

Anonymous said...

Re. 'problems which started in US'

I have a cousin who lives in California and was a (I'm assuming 'was' and not 'is') sub-prime mortgage broker... haven't spoken to him for about a year and half... haven't dared to make contact...

To be fair, if anyone's interested, I know that these people have a terrible reputation now but, he really was trying to help people out in the way he - and I think some of his peers, though certainly not all or many - played the system. His customers will now be totally f*cked but at the time, his way of doing it made sense to me when we visited last March and he explained his system. Basically, each time he would sell a sub-prime loan he would get $6k commission. The loans would start off at a low rate of about 6% and then hike to about 13% after a year. What he would do is that after a year, he would sell them a new loan, using part of his commission to pay the early-exit fees of a couple of $k and giving them $2k cashback towards their mortgage as an incentive to deal with him. They ended up - he was doing this successfully for several years - on a fairly constant 6% or so and he was better off - the way he looked at it, rather than make a lot of one-off $6k fees, he had a pool of 30 people he was 'helping' who would each generate $2k a year in steady income for him without ever needing to look for new customers.

This post is a bit long, sorry but I guessed that some people here are interested in such things and I know that many people at many stages of the system were doing things which were f*cked up - my cousin is naive not to have realised things might change, and I'm assuming his customers couldn't refinance this year and will lose their homes (which they would not have been able to hold on to otherwise anyway, but still...) - but the assumption in the UK seems to be that everybody involved in the US subprime system was playing the game in an exploitative (as opposed to merely opportunistic) manner.

He really believed he was helping some people (single mothers, divorcees, etc.) to keep homes when the banks wouldn't help them.

Anonymous said...


Brown has caused Great Depression? A bit harsh, considering a Great Depression would be a global issue if indeed there will be one.

Man in a Shed said...

Looks good. oil will continue to tank as reserves get sold of - unless, unless the Israelis see Mr Obama as a sure thing and decide to go for Iran whilst they still can.

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