Hi,There is allot of uncertainty in the markets currently, and it seems very hard to get into FS at the moment.Does anyone know what are the current issues facing Banks? , when will confidence return?

1. Lack of liquidity2. Banks employed 'toffs' from eaton and cambridge as did IB houses, only to find out that the toffs understanding of the real world was somewhat limited (They sim[ply did not know how the real world worked)3. hedge funds sprang up to relieve the stupid of their cash, and banks invested4. Everyone moved actual work out to other countries thinking that 'banking' could be the cornerstone of an economy.5. Now as nobody wants to buy anything (An example id a Toyota, its 0% and 0 down over 4 years, if only you had the money to buy it, or the confidence that you actually had a sustainable 'trade'.6. The 'new' economy is investing in UK PLC and the doors are closing fast.7. Confidence will return when we actually start doing 'real' work and people want to pay for it.8. Head of advertising strategy is not a job, as an example, people are not fooled anymore, its made in China and should be cheap, a 40" flat screen TV is just that the insideas are all the same and made to the same standards by some low paid worker in china, if you pay more than £400 your mad. Margins will be cut, and pointless jobs along with them.9. Project Management is NOT a career, its simply organising people, these people are in India and China, and thats where the next big savings are, moving Project Management to BRIC (Remember when the IT staff went you said nothing, well its your turn now :) .10. The value of curency will fluctuate and eventually the BRIC and the G8 will align and actiual 'free' trade will return, not based on arbitrage (See Ponzi)11. Once we understand 'value' we can build and invest, until then you would be mad to spend or invest in anything.

"moving Project Management to BRIC (Remember when the IT staff went you said nothing, well its your turn now :)"hear hear.

"moving Project Management to BRIC (Remember when the IT staff went you said nothing, well its your turn now :)"hear hear.

Taxman, that really is one of the worst analyses (if not the worst) of the current economic climate / situation / causes / consequences that I have seen in the past year.

Last year I predicted a lowering of interest rates to 2% together with a devaluation of the £ leading to greater losses or artificial value placed in property assets.I made a significant amount of money off that (you can check the forum, its true).In fact just ask Andrew Lahde, he has much the same opinion, or at least had till he retired.http://ftalphaville.ft.com/blog/2008/10/17/17194/andrew-lahde-bows-out-in-style/Now most will be bailing really fast as its not much use asking your bankrupt customers for your cash, irrespective as to how much you have made on paper. (Liquididy , I wont invest in anything as the market has much farther to fall, there are still some killings to be made)Now those who did invest are simply the type who are led by others based on their 'wonderful analysis) Would you have given Madhoff money? Or asked the bank for money to 'lend to some bloke', probably not, but our bankers did :) (Toffs, Hedge funds and the stupid)We in the UK thought ourselves to be the 'Cornerstone' of the banking industry (Ask anyone in the USA, London thinks its the next (or better) NYSE, therefore it stands toi take the largest hit. (London is the worst hit in the recession in case you had not noticed)The number of sales is eye opening, look at your television for christ sake, those expensive £2000 leather suites are now £299 or less, with the £ devalued against other currencies ask yourself why you paid so much prior to the recession (If the cobwebs are not starting to lift yet, then they never will)Shops are closing daily, are you ruhing out to buy up liquidated stock? Oh thats right your not, in fact I can guarantee if Aston Martin had a 50% off sale you would still not borrow to buy one :) as you would expect it to get lower. The same is true for Houses, why buy now and get tied into 5 years or 3 years at 5%, when you know that we are about to reduce rates to 0% and embark on quantitative easing.Now look at business in the UK, we are a nation of 'do-nothings' in fact this forum shouts it from the rafters, most consultants dont even 'have' a skill apart from 'thinking', but in comparison to someone whos only skill is managing x people on a project of y and being educated in the principles of managing 'people' may as well be a bloody sheep dog, they have no real skill. We are activeley off-shoring these types now to manage the off-shored workers, as I am a 'thinker', and this is how I will increase GP on what are now narrow margins.This means that 'value' as we see it will not return quickly, but will eventually return by 'reducing' the margins of goods between countries (This includes services) and will encourage the UK to once again start exporting something other than 'managers'. In fact if your a UK exporter you have never seen it so good, just a pity most business is based on re-sale of other countries goods and large mark ups.Therefore perhaps a little more illustrated, My view is perhaps the worst you have seen, but then again you probably move in circles where you 'manage' and indeed for you it is the worst. Time to move up the tree as the monkeys on the lower branches are about to get wet :)I would however be interested in your view, if its the same as Robert Pestons then you are probably as blind as those who are fed news, the news these days reports what is happening and is leading reaction, from it you can set precedent.I could perhaps echo Robert Peston who simply states what is happening, as opposed to the latest sloppy format whereby News Stations rely on their viewers to tell them what is happening in the world.Therefore I thank you for your comment and hope that indeed I am wrong, but im not.

So Taxman - tell us how best to plan our survival (and/or profit) from the end of the world as we know it ?

Simple dear boy, wait until June 2009 when property and rates are at their lowest, dont spend a penny until then (food and non designer clothes excepted).At this point you will be able to get the 'sellers' to drop prices to afford you leverage (or a false deposit) and the rate will be very attractive.Avoid flats and aim for semi detached and detached properties in an area where you would live, think ameneties.Stocks should be pretty low by June, and as we are about to have an age crisis in 2011 you shoyuld look towards drugs and helthcare, you should avoid IT stocks and manufacturing until at least 2010.I can name them if that helps :)

And for those who have a couple of flats to spare ?

Taxman, explain this 'false deposit'. I'm planning on buying some distressed property (was planning on auction) around May/June 2009.I'm not sure I understand correctly but are you saying you can agree a price, get say a 90% mortgage on this basis, then insisit on a price drop from the buyer. Retaining the same mortgage it becomes in effect 100% and you do not require a deposit?If this is what you mean, is this allowed? Will the banks not withdraw the mortgage when this is disclosed?

Lets say the property has a 'PRICE' of £200'000, and you are offering the seller £180'000 as that is the VALUE you percieve in the property and is what you will pay for it in the current market. And your not going anywhere near that 5% stamp duty (More on chattels later)You then get a surveyor to value the property at £230'000.You are now obtaining a LTV (Loan to Value) of 80% which means you do not pay the inflated 'guarantees' or the 'silly' rates of interest.Its not illegal, banks are still run by computers :) and computer says yes!In the late 2003-2007's 'property speculators' used this method to amass portfolio's of property without as much as a penny down, they used to go in at a 70% LTV and did not require proof on income.This is how you made money out of property in the noughties, and if it all went titsup your 'rent' is in bank of somewhere else, you spend £500 on going bankrupt and are ready to start again with the next big thing.Good luck on the property by the way.Yours.TaxMan

So Taxman's answer is to the financial crisis is to increase leverage. That's about as smart as I'd expect for someone who couldn't even make it as a proper accountant.

Property is overrated as although you can leverage gearing you have tax to pay.Also the waiting game means you will be a grey millionaire.But I do agree with shorting on a few tech stocks. Should be tax free and tech stocks should sink like a stone in the first half of next year.

Ridic, the answer was one in respose to a framed question, the wider answer is in the thread. And an accountant would not promote leverage and most certainly would not assist in tax avoidance as they have a 'duty of disclosure' you would know this if you had done basic law or even corporate accounting :)I left Uni many years ago, I assume that Law and accounting are still hand in glove, or is it law and dentistry oir accountancy and equestrian studies now.Off to town now to get a meal in the cinnamon club, see you in there :)

Taxman, your words of wisdom have not fallen on deaf ears (or blind eyes).

Bored at work taxman?You appeared to have added your garbage opinion to almost every thread over the past couple of days.You should concentrate on getting you 31 Dec filings in line rather than ruining this forum.Even Z comes out with better comments than you!

Ding ding. Round 1 to Vatman

Was just here for fun over the last few days, thought I may get some serious debate. Alas it comes down to 'ah thats the worst argument for X i ever seen' (depending on your alignment) but no actual effort to defend or prove otherwise.You bunch of project managers :)Not one thought amonst the bunch of you .Baaaaa!!!All the best when it comes

The most useless and pointless thing anyone can do is criticise someone else's arguments without providing their own alternative explanation. At the very least Taxman has the strength of character to give his honest opinion, stand by it and risk the backlash. If only the people that criticise his responses had the cojones to provide their own....Vatman so did not win round 1....Note: I am not supporting Taxman's opinions but only his approach to these forums.

Cheers for the info Taxman, don't listen to these bullys! Happy NYE. Champagne is on hold till my first lucrative property deal completes but after that it's out in your honour!Casio & Candy

Interesting arguments from TaxMan, although somewhat extreme. Economies are almost by their nature cycical and as we approach the top its common that the excesses associated with a bubble start to become more apparent. However, to dismiss the whole UK economy as being fluff and not based on 'real work' is a nonsense and shows a misunderstanding of the basics of economics and comparative advantage. Its important to retain some sense of perspective....

'Lucrative' and 'property deal' are two terms I would hestitate to use together - few people reailse that the last time house prices fell they did so for 4-5 years in real terms. Post the decline, I suspect it would only be prudent to plan for marginal growth... Put that in a spreadsheet and see if the returns justify the risks.

'Lucrative' and 'property deal' are two terms I would hestitate to use together - few people reailse that the last time house prices fell they did so for 4-5 years in real terms. Post the decline, I suspect it would only be prudent to plan for marginal growth... Put that in a spreadsheet and see if the returns justify the risks.

I agree FBAs pointed out in the Wealth of Nations ' if a product shortage were to occur, that product's price in the market would rise, creating incentive for its production and a reduction in its consumption, eventually curing the shortage. The increased competition among manufacturers and increased supply would also lower the price of the product to its production cost plus a small profit, the "natural price." We never had a housing shortage, this was driven by BTL and 'pension' investors, programmes sucha s 'location location' and others made the populace think that having a brace of houses was the correct method to acquire wealth.At the same time this led to a non required consumption in cars (3 per household), lawyers, and half of poland :)As you point out we are at the apex of that cycle, and we must therefore concentrate on what people require (Green energy is not one, 90% of CEOs could not care unless its cheaper, and it wont be for a long time)What held the 'cost' of the product was that the consumers seen house prices rising at double digit growth, people spent money as 12% of 300'000 is probably the national average salary, so a £1000 Tv was seen as an ok 'purchase' and an incease in consumption.This also increased the value of companies that 'laid the golden eggs' and everyone seen 'shareholder value' increase, as a direct result as per the 'dot-com' boom funds migrated to those percieved as successful.This also had the side issue of driving up the value of the £, which led to cheap imports and with it the UK moved to an importer (Cheaper to import). We then had a German company which outsourced much of its manufacturing to china selling to UK retailers and prices were marked up.The downside of all of this is that with the now weak £ the UK should be leading exports, the decision by Gordon is a good one, however many are complaining some examples:1. Our projects were priced in £ (overseas company) we cant raise UK workers wages now as the value we recieve is lower.2. We buy our raw materials and part finished materials from the euro zone for assemble and re-sale, we need to raise not lower prices3. We bill in $ and have recently raised our prices by 10% (usually we overprice UK goods by 40%) but with the fall off in the £ we are now selling at a lower price than we used to (even with the 40%) mark up.What should be happening is:We have a cheaper £ lets build and sell from the UK undercutting the euro zone and the US, we held the £ for a reason and this is it. Now we need to find out what the worl requires, hold most of the labour here until it reaches saturation point and then sell the company before it becomes an expensive liability (Jaguar/Ladrover and Foxtons being prime examples).

As usual some very compelling stuff from Taxman. What are your thoughts on the wider economy? Is now a good time to make that move to mainland Europe? or even the USA or Oz? With the £ declining is this an opportune time?

Any decision on whether to relocate to another country will be driven by a range of factors, but one of these should be the specific sector you work in / are exposed too. Analysis of GDP at a sector level in previous slow downs will show that some sectors are significantly less impacted than others - even thriving and growing.

Any decision on whether to relocate to another country will be driven by a range of factors, but one of these should be the specific sector you work in / are exposed too. Analysis of GDP at a sector level in previous slow downs will show that some sectors are significantly less impacted than others - even thriving and growing.

@TaxmanI see no recovery. The next big thing is when Fitch and co. re-rate government bondsand figure out that the US or British debt is just not repayable.What will then happen? I imagine the rating agencies will avoid such rating at any cost but hey, we all know that this debt mountain cant be repayedand it has to blow at some point right?

My thoughts exactly... too many people living beyond their means. Once the baby boomers have spent all the money they 'earnt' via inter-generational wealth transfer (whether inheritance or by selling their houses for way more than they paid for them to generations X and Y) and eventually die leaving a net debt behind them, something is gonna give BIGTIME. A very significant proportion of the old folk are living the lives of millionaires whilst fundamentally having been more or less unproductive members of society all their lives (think a generation of civil servants etc)... this is unsustainable, however much things get 'smoothed out' by enron-style book cooking in the meantime.

A path of thought currently (mainly due to banks asking for more money and still not lending) is a level of debt forgiveness for the UK consumer.Essentially the consumer is not buying anything, the Times has stated this as even with 70% off and a 2.5% vat reduction, the British public (Who incedentally DO NOT scrimp on Christmas, sorry Germany Christmas IS British family time) are not spending with seasonal favorited John Lewis (Presents) and Next (sales) M&S (Yummy food and dinner suits) reporting an alarming downturn (yes 10% down on last year with 72.5% off is BAD) indicates that consumer confidence is shot.Now this can lead to deflation, which will be ruinous.Therefore thought is that those percieved as 'Helped' are now to be forced, essentially every UK mortgage holder could be offered a 'Mortgage Holiday' to sort out their finances of 6 months.The alternative to this is the reduction in TAX, which is at the moment a re-introduction of MIRAS (Mortgage Interest Relief at Source) for a period to boost spending.What is causing hesitation is that the average UK consumer is now so debt averse that they would pay off ALL Debt first before spending a penny.The other side of the coin is that by 'encouraging' lending and not heping the consumer the current 'crisis' is extended into deflation and the UK 'flattens' which will in some respects hurt major blue chips who benefited form outsourcing and offshoring as the entire BRIC theory now becomes a 'HUGE' cost.Essentially what we have is those 100 cheap 'heads' which we used to replace 25 'UK' heads now costing as much as 50 'UK' heads and indeed on a 40-60 month contract with a cancellation clause this will wipe out balance sheets.We should hear something in the next 10 days, your thoughts on a postcard. I would go for a rate reduction of 0.5% to begin with, which will not benefit anyone. (You cant borrow and your existing rate wont get any lower, so this only benefits the Banks again).Your thoughts, whats the mumblings over pimms and curry...

I expect Gordon will just give the pensioners another £250 "bonus" for doing nothing, coupled with some other measure to keep house prices disjointed from long-term affordability for as long as possible, so that the baby boomers can continue living like millionaires for the next 20 years or so. After that, it's someone else's problem isn't it. I imagine he'll reward the reckless - "As of today, this Labour government will pay the interest on mortgages for hard working families and individuals who have fallen behind on their repayments on mortgages taken out on a multiple of 10x salary and greater". Cue the sob stories from Mr and Mrs Shelfstacker and video footage of them "unfairly" being evicted from their 5 bedroom detached house along with their 7 kids and a Mercedes SUV in the driveway.

@Taxman and Cynic,Of course the consumer is not buying anything. Lots of people donot trust the system any more. Private debt (through mortgages or whatever) is justnot repayable when the job is gone (and banks know that).Public debt (UK governments expenditure) is not repayable either. -and anytax reduction or mortgage buyout will just cause more debt.What about the British State declaring bankruptcy? Thiswould cancel the huge interest rate payments and the state wouldhave real money to spend again. - the few peoplethat have saved arm and leg to by government bonds can be re-paid.

@johnsmithYep you are spot on, and this will cause deflation, effectiveley prices will come down but we will all be paying off debt and not taking any more out, its generally the folly of thrift.This will in turn reduce interest rates and cause more redundancies.However as many have pointed out the money has been 'pretend' money as jobs and skills have migrated across the pond never to come back we like the Americans have 'sold' houses to each other as have the Banks.When the retail banking market sees the public as consumers and a loan is a sale, and you can have a 'loan sale x% off' it tells you the world has went barking mad.We now need a little protectionism if we ever want to see jobs returning to the UK, if we dont then the balance of power will shift away from the UK and US to the Middle East and BRIC countries.Many people forget that its events such as these that led rise to some rather nasty wars, once certain members of the public had their fill of their governments failing them.Mind you in saying that a good war is very good for the economy, but only if we can 'own' the spoils and not the current pussy footing that we do at the moment trying to install puppet governments.

Wow... that is incorrect by 180-degrees (Taxman's on his usual form). Protectionism directly led to the conditions under which Adolf Hitler was able to rise to power, as any fule kno.

@taxman,thanks a lot for your thoughts.

@nailer, we need a 'little' not a lot, and no its the lack of protectionism that leead to the nazis, as they 'introduced' it to bring worlk back to the german people. Remember in those days as today Germany was heavy industry and the UK was Finance.If we dont show some backbone, and the great unwashed become unemployed in droves then its any port in a storm, rhetoric does not put food on the table.

@nailer, check protectionism on wikipedia and then tell me America is not now activeley engaged in a little more than basic protectionism.Heard a great quote on radio4 today, minister was asked in the Government should help the UK Auto industry after the Nissan announcement.The reply was that this would help the 'Auto Industry' but not necessarily the UK, as the Uk does not have an Auto Industry.

@taxmanOnce could argue that western nations pursue protectionism sincemany decades through dubious WTO agreements, trade quotas and tariffs.The only solution I see in state bankruptcy (hence debts to zero) and reshuffling for the financeindustry.I think that If the bank of england decides to print money then it has unofficially decidedto default on its debts.

@johnsmithI cant disagree with that, and we are about 4 months away from leverage, so it would appear to be imminent.

In answer to some previous messages:To Taxman: Thank you for the many replies and some of your answers were very useful and insightful. However, I do not agree with all of the points you made. Here are my responses to some of those. 1) 'Toffs' from Eaton and Cambridge do not necessarily run IB houses. At the end of the day the partners run the strat houses and only do so if they have shown they can produce results. I think their understanding of the real world as you put it is quite good. Nobody could have adequately predicted events would have transpired as they did. Also, if you are at the partner level and you know how the game is played and your main objective is to make as much money as you can because simply that is the name of the game. It is up to the government to hire smart enough people to raise red flags that the system is flawed rather than just let things run their course. Maybe some people did predict what was going to happen and it is sad they were not listened to. You must also note that the ones that did are very rare and even exceptional people.2) I am not sure why you are attacking hedge funds. A lot of them have invested wisely, turned companies around, caused a positive movement of cash in the economy.3) In order to get to a Manager level in a strat house you need to have done the ground work first and understand the processes. Also, it is not only to do with managing people but being able to grasp the concepts and use many years of experience to come up with innovative and effective solutions. As you join a consulting firm you must also understand that you do develop an array of useful skills such as undertaking effective research, data analysis, client interaction and business principles to name a few.To Johnsmith: Again some valid points and some I disagree with:I do not agree with your comment that UK dept is not repayable. As a % of GDP the UK is still 20% better than Germany or France and 60% better than Italy. Yes the debt will rise and yes it will be an nuisance to pay off but it is definitely payable, even if it means that in 2012 we will all feel the sting of an increase in taxation. People on tracker loans are finding it much easier to pay their mortgage than they did before so this is not always the case.In general, I do believe things will get a lot worse before they get better but I still think that it is overly premature to predict a state bankruptcy. I have not read enough ‘proof’ in your comments to support this argument.

@BAIN.You provide a wonderful argument and very strong points difficult to argue with, especially as the point/focus of the senior partners is weath aquisition.However as john Smith hinted.In a secret meeting with Myners before Christmas, senior partners from KPMG, Deloitte, Price Waterhouse Coopers and Ernst & Young warned they might not be able to sign off the accounts of Britain’s biggest banks. The auditors were not certain they could state that banks and building societies were “going concerns” under the terms of international accounting rules.The Cinnamon club was nice :)Im off now, will be back post April.Ill be in touch soon ;)

I am not an accountant by any means but a "going concern" is a broad enough term that it does not adequately describe the level of ‘difficulty’ faced by the banks. I do however understand the importance of their making that comment. I believe that a large part of the reason for the claim is that the Big Four need to protect themselves. As we have seen on numerous occasions nobody really knows the full extent to which banks have invested and the risk levels of those investments. As such, I think it is a prudent move for the Big Four. In conclusion, I admit that a risk does exist but I cannot quantify with any certainty what the level of this risk is. I am sure the Big Four have a much better idea but in broad terms still a vague one.