Every so often this share makes me sit back and shake my head in wonder. Given its diabolical propensity to tank at the drop of an off comment, I am just amazed that it appears to be holding its value despite everything else falling. Perhaps this is evidence of market sentiment that in fact, the share is undervalued and that reassurance about not being broken up is all that is needed to sustain it.
You need to get some sleep! Much of what you say is perfectly right, it is just the main reasoning that is in dispute. For fear of repeating myself yet again, what happened was:- 1. Two incomes were accepted. 2. More people bought houses, including the sell-off of council houses. 3. Many people sought higher mortgages to buy bigger houses. 4. The Banks found ways to allow even bigger mortgages, up to 125%. 5. The Estate Agents and Builders said "we'll have some of that", house prices went up by approx. 20%. Therein is the point we are arguing about, that was what put up the price of houses, ie: way beyond their value. There was/is nothing wrong with people being able to borrow high mortgages as long as the Banks provides terms that allow trouble-free repayment. What was wrong is the greed element of the trade that we have agreed in so many of our other discussions. That is what needs controls and the return of 'fair value' in house prices. That will come if people are more astute when seeking to buy. Thanks for your good wishes but let's enjoy Thursday first, as I opened, 'you must get more sleep!' GL
1970 System based on mainly ....1 main earners wages..... resticted the amount of mortgage allowed.
When the system of allowing 2 or more wages to be considered then by default larger mortgages were permitted.
So by default if 1 system of 1 earner kept house prices stable with small house price increases... then doubling the amount of earners allowed double the amount of the potental mortgage loan offered .
People you say just bought bigger houses..if that was just the case why has every property increased damaticailly to the present day.
If the one earner system to qualify for a mortgage was still in place today.... how much lower would house prices be.....today ..than what the are...?
If the 1 earner system was reintroduced tomorrow..... 95% of houses would never by bought or sold at their current prices..... thus if the 1970 i earner system was still in place today house prices would be possibly half the prices they are now... to be affordable.
Thus the change in the system to 2 earners has a direct bearing on the house price rises over the past 40 years...house prices would never increased as they have if people had not means to get bigger loans via 2 or more earners...
basic logic......if people are not given the means to buy at a higher price any price increase will be more limited... not the other way round.....thus house prices have increased 2000% because the system has been changed and manipulated to encourage more debt and bigger debt loans the past 30 years..... remember in1970 their was not even a credit card available..... and HP- Hire Purchase loans... was the norm to buy unaffordable cash items.....debt was not encouraged anywhere near the degree as today.... or todays 4 - 6 times 2 earners joint incomes...a far cry for 1 earner on 3 times earnings.....
Mortgage loans maybe tighter now, but the damage has been done and house inflation is now where it is...and not where more affodable prices could well have been now... under the 1970 system.... if it was not changed......and probably we would not have bankers etc on £10 million a year....but thats another issue...
if people do not have extra petrol to throw on a fire then the fire will not be encouraged to get bigger...
Thanks again for our mini debate.... we may diagree on a few points ...but its been nice ...chatting...
£12.00 will be a long time coming but I agree that this Bank employs a posse of very clever people and they are eminently capable of taking the Bank through all the growth stages to restore it to its previous levels.
Wednesday, Aug 14 8:02 AM Fitch: RBS "bad bank split" not a great idea The costs of the so-called "bad bank split" for RBS would likely exceed the benefits, according to Fitch, citing the complications in actually doing the split, and the bank's H1 profits and increasingly robust balance sheet.The most likely outcome, says Fitch, is for the bank to continue with planned capital actions - deleverage further, sell some U.S. operations, reduce its markets business. The greatest risk facing RBS is litigation relating to its legacy business and this would be difficult to remove with a bad bank split. http://seekingalpha.com/currents/post/1220702
LONDON (ShareCast) - Royal Bank of Scotland Group topped the risers on the FTSE 100 on Wednesday after ratings agency Fitch said that a break-up of the state-backed UK lender into a ‘good’ and ‘bad’ bank is increasing unlikely as the costs would outweigh the benefits. Part-nationalised counterpart Lloyds was also making gains today.
Goldman insisted RBS could create a "better bad bank" by separating assets rather than splitting them off, claimed that "retaining the bad bank assets on the RBS balance sheet" would be preferable to transferring them into an "off-balance sheet bad bank". Investors will ascribe a "fuller value to the core RBS", which would make it look as good as Lloyds.
Nomura analysts however, said the bulls' point that RBS is the next Lloyds is wrong because the "main difference is the profitability of the core". They warned that it remained "challenged" and will "take time to restore". Investors inclined to Goldman's view and RBS edged up 3.5p to 333p. It has been on the rise since the start of this month, according to the Independent.
I'd say that there was a nod to the psychological impact of the sp after consolidation. But the sp only got to 50p+ once, in about April- May 2010. Prior to consolidation, there was chat on here about 'when this hits £1' and so forth, which for much of the time represented about a 400% increase in the sp. Given that kind of optimism, we would be looking at 1200p a share at the moment. I would argue that in the long term, after this crisis has been a long time gone (like 1970's house prices), we could see £12 a share again. A healthy, functioning bank in any normal, healthy, functioning national equities market has that capacity. I think that our own psychology is affected at the moment by the sheer number of times that this share has risen then collapsed, to the point where no- one can realistically see the sort of level I have mentioned. But I think it is possible in the longer term.
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