howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
1 November 2010
19:0477892ask at check in if you can borrow a parachute vic, the icelandics will then fly you back to blighty.
Guest 696- Registered: 31 Mar 2010
- Posts: 8,115
1 November 2010
19:1877895Barry, Kent is the Garden of England, and to invest in the Garden is possible and sensible!
Guest 651- Registered: 12 Mar 2008
- Posts: 5,673
1 November 2010
20:4577918Alexander, every council at times in the year will have an excess of cash such as when a grant comes in or large bills paid. Rather than this sit in a bank gaining little interest, it can be loaned to other institutions all over the country at a borrowing rate better than the other party can get from the bank.... Treasury Management....
Been nice knowing you :)
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
1 November 2010
22:0877951Alexander to put it as kindly and as mildly as possible - you do not understand what you are talking about.
Guest 649- Registered: 12 Mar 2008
- Posts: 14,118
1 November 2010
22:1177955Not like you to put it mildly Barry ,you do not do that with me.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
1 November 2010
22:1677958Vic - of course I do.......
Guest 696- Registered: 31 Mar 2010
- Posts: 8,115
2 November 2010
11:2678045Post 24
Guest 698- Registered: 28 May 2010
- Posts: 8,664
2 November 2010
11:3378047The basics of Treasury risk management is to spread your risk across as many different risks as possible, taking into consideration, amongst other things: asset class, credit ratings, and country exposure. It is country exposure which was the nemesis of UK local authorities. Total UK local authority exposure to 3 Icelandic banks was more than double the entire country's GDP. That should have been spotted much earlier.
I'm an optimist. But I'm an optimist who takes my raincoat - Harold Wilson
Guest 696- Registered: 31 Mar 2010
- Posts: 8,115
2 November 2010
11:3378048Barry, if the Council invested money in a bank in Iceland and lost most of it, are you telling me now that I don't understand that an investment in a Norwegian bank would have been more secure, considering Norway's revenues? I don't know what the Icelandic bank was offering, but considering Iceland's economy, it must have had to do with easy and unrealistic profits.
May-be you should read how pyramid invesrtments function, Barry, which was at the basis of the whole bank-system collapse in 2008 that hit Britain, America, western Europe and Japan.
The Americam mortgage system was put up for sale in packages, which passed from one investor to another and then to the banks, each getting their despicable profit. At the end, the American house-buyers were paying unrealistic and inflated mortgages, and many went bust.
I possibly understand more than you would think.
Keith Sansum1
- Location: london
- Registered: 25 Aug 2010
- Posts: 23,942
2 November 2010
14:5278083Agan our barryw decides only he's right
shame will stifle debate
ALL POSTS ARE MY OWN PERSONAL VIEWS
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
2 November 2010
16:3078102Keith - I do deal with investment on a professional basis so I do know about this kind of thing and it is not a matter of a political viewpoint.
Alexander - again I inform you that you do not know what you are talking about. I could give you a lecture on the matters that you refer to and on which you demonstrate, at best, a partial understanding, but I do not have the motivation and time to do so.
Peter Garstin is quite right about spreading investments, though local authorities do not have quite the free-hand in this as private sector investors. The body that overseas local authorities in this, the Audit Commission (soon to be defunct) themselves invested money with Icelandic Banks.
Peter, you are of course correct about total local authority exposure but there lays an assumption that there was some over-riding perspective on the totality of funds being invested into each provider/asset class, there is not.
Each local authority/government body made their own investment decisions with reference to only their own portfolio requirements. What was important here is the proportions of the overall portfolios that was in these banks. I have not heard that this was excessive and I remember when figures were announced for DDC and KCC that was not a problem, the exact details I do not remember.
2 November 2010
16:5378107post #27
Guest 696- Registered: 31 Mar 2010
- Posts: 8,115
2 November 2010
18:4678126So in other words, Barry, there was no bank-system collapse in 2008, and there were no causes that sent the banks into bankruptcy. It's all humbug, and I don't know what I'm talking about!
Brian Dixon
- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
2 November 2010
18:4778127no one does alex.
Keith Sansum1- Location: london
- Registered: 25 Aug 2010
- Posts: 23,942
2 November 2010
18:5278130There are a number of issues that posters are expert on or have a lot of knowledge on.
But no many say they are the only ones to know it all, or to say to others your wrong.
ALL POSTS ARE MY OWN PERSONAL VIEWS
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
2 November 2010
20:1378142Alexander - there you go demonstrating my point. The reason that you diversify investments is to maximise gain while minimising risk. In this case institutional risk. I forget the exact figure but about 4% of the portfolio was invested in Icelandic Bank accounts, not an unreasonable level. Now if British banks like RBS/HBOS can also nearly go belly up, you can hardly point the finger at the Councils. You must remember that was a once in a century crisis.
Guest 696- Registered: 31 Mar 2010
- Posts: 8,115
2 November 2010
20:1978144Even more than that: ''you don't understand anything!''. It so happens that I learned that information about the U.S. mortgage market listening to financial news from various countries in 2008! It wasn't the only reason, but one of the causes that led to the financial collapse in that year.
Barry, if you have no motivation to express your point, then your point is unknown to us and we are not obliged to believe that you know everything about this subject.
The original topic of this thread: should Mw. Watkins resign? could be answered by trying to undestand what happened, and may-be come to the conclusion that the bankruptcy of the Icelandic banks was due to causes of easy profit-making by many different financial institutions and not Mr. Watkin's fault.
But we might like to make sure that it doesn't happen again.
Hence my view was: choose a stable bank that is backed by a strong economy. That was all, Barry!
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
2 November 2010
20:2278145alex
what i know about high finance could be written on the back of a postage stamp, however when barry speaks of diversifying investments" he maybe saying that it is not wise to put all one's eggs into one basket.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
2 November 2010
20:4078148A stable bank backed by a strong economy, like RBS eh.
Alexander you must understand a few points:
1/ All investment must be diversified to spread and reduce risk. There is no such thing as no risk in investment, only different risks. The question was did DDC diversify - they did, so only a small amount was exposed to the institutional risk of Icelandic Banks about 4%. It would have been far more risky to have placed all this investment in RBS, or Lloyds, or HSBC or Barclays - or indeed 25% into each of them, this still would not be enough diversification to spread institutional risk. If limited only to AAA institutions you would reduce diversification and reduce returns. By using A, AA and AAA institutions you would have a much greater diversity of institutions and a higher return from those with a lower risk rating. OK I am over simplifying this but the principal is correct.
2/The buying and selling of packages of debt is a normal and legitimate practise. It works well and there are funds that trade this debt to generate returns and a level of income for their investors. These form the backbone of many investment portfolios, particularly those generating an income. These are of lower volatility than equities. There were problems in the USA that arose due to reforms brought in by Clinton. This resulted in a situation in which some 'toxic debt' was mixed in with higher grade debt and was misrepresented in the markets. This was criminal activity. Again that is a simplified explanation.
None of this reflects badly on what DDC did - they acted correctly and diversified their holdings so they were not exposed to excessive risk.
If you cannot understand that then, frankly I just do not have the patience to spell it out again and find even easier language that you might understand. For one thing I doubt that you even want to understand and I have better things to do.
Guest 696- Registered: 31 Mar 2010
- Posts: 8,115
2 November 2010
20:5878151Well I will say thank you for that explanation!
However, I wasn't commenting negatively about DDC's investments in Iceland, but was trying to defuse the calls for Mr. Watkin's resignation by highlighting a world-wide bank crisis that took many by surprise. I mean, the thread was brought up under that heading, so I took it seriously.
I think we can agree that I understood some detail of what happened in 2008, as you yourself acknowledged that something did happen on the US mortgage market. But I wasn't picking holes in DDC's lost pennies triviality, I'm not one to do that, the Icelandic bankruptcy wasn't pre-meditated on DDC's part.