Northern Rock - Example of Panic Selling?

[JTrader]

This is incorrect, NR shares have fallen from around £6.50 to £4.38 which is a 32% fall and not 67% as would be the case if they had fallen from £12 to £4.


Paul

Thanks. I haven't looked into the prices myself, i just heard some know it all member of the public say £12 - £4 on the news today.

 

[Splitlink]

This is incorrect, NR shares have fallen from around £6.50 to £4.38 which is a 32% fall and not 67% as would be the case if they had fallen from £12 to £4.


Paul

Yesterday. But they were £12.58 in Feb. I pity anyone who went on a six months holiday and had them in his portfolio.

There's a moral in that, somewhere....

Split

 

[Atilla]

Yesterday. But they were £12.58 in Feb. I pity anyone who went on a six months holiday and had them in his portfolio.

There's a moral in that, somewhere....

Split

Yes that's called dastardly trading.

Somebody somewhere always has information ahead of everybody else what nobody knows.

 

[shortorlong]

Someone said on the news NR shares have fallen from £12 to £4. Is £4 a good price to buy at on monday morning. Whats the upside potential, based on the current fundamentals?

Perhaps the share price will plummet further if people continue panic withdrawals?

Cheers.

Depends on your time frame .. NRK was just over £12 in January this year . that's not too long ago. The panic withdrawals might continue Monday, who knows where it will end. Sure it could be a great buying opportunity ... but only risk money you don't mind losing 100% .. pure punt. Shorting them now is equally risky IMO. We are not going to be clear of this global banking fiasco any time soon.

I once went bottom fishing - I had noticed how the biggest fallers on the day usually bounced a little next day .. Well .. a company called AB airlines plunged 30% one day . I bought them .. next day they did indeed rise above my price .. but I got greedy . and held the position . next day they were below my buy price .. a few days later .. they went bust ..I did not see any of that money again .. £500 .. I did not pursue this as a strategy after that ..

 

[Lightning McQueen]

I've put nrk on my watch list, its not often that I look at individual shares but this one could get interesting if it carries on selling off in the panic. The message boards are full of people filling their boots friday, Im a lot more conservative and will wait and see what it all looks like on a chart in the coming weeks, if it gaps up large on bid speculation at some point, then fair enough I will have missed the boat, better that than getting fried in a runaway sell-off.

Lightning

 

[Jack o'Clubs]

I can't see NR going under.

Agreed. But at the same time I don't think the BoE is terribly interested in the holders of NR equity, and I can continue to see downside from here if the queues outside the branches continue. All the BoE will want is to hold it up long enough for a buyer to be found. £1bn withdrawn yesterday apparently : should be easy to calculate the spread between the BoE rate and the average savings rate on that, and apply it to earnings...

I've not looked at it closely enough to put money on it, but if I had to choose it would be a short rather than long from here, with the occasional bounce as kitty hits the bricks.

 

[Atilla]

Agreed. But at the same time I don't think the BoE is terribly interested in the holders of NR equity, and I can continue to see downside from here if the queues outside the branches continue. All the BoE will want is to hold it up long enough for a buyer to be found. £1bn withdrawn yesterday apparently : should be easy to calculate the spread between the BoE rate and the average savings rate on that, and apply it to earnings...

I've not looked at it closely enough to put money on it, but if I had to choose it would be a short rather than long from here, with the occasional bounce as kitty hits the bricks.

I would agree also with that view. I am more concerned with sentiment and run on banks rather than NR share holders.

Bank runs can even take down healthy banks. Right now markets need leadership and quick remedies. Wrong time for Mervyn to think and sit smugly about his system.

 

[timsk]

Crumbling Rock

According to a lunchtime news bulletin today, the £1 billion withdrawn by investors yesterday amounted to 4% of NRK assets. However, there are equally long queues of investors today, eager to withdraw their money. That 4% figure could easily rise to 10% or more by early next week. Stock investors aren't going to like what they see on their TV screens and read in the weekend papers and are likely to continue to sell their holdings next week, IMO. Clearly, NRK is haemorrhaging money hand over fist and will have to do something pretty spectacular to stem the flow. A new account offering the best interest rate on the market for depositors and the mother of all dividends for stock investors perhaps? What if they fail to halt the stampede for the exits, will the BoE do whatever is necessary to support them? As for the company employees, I think I'd spend the weekend polishing up my CV if I was one of them.
Tim.

 

[de123]

well i think when major blue chips ...banks, in uk and europe will start to climb back, ofcourse if, the sentiment should be good for all financial stocks, ... but that was indeed the biggest decline in a day...maybe even in a year...scary, and cable did react to this news,...when i saw the news on my chat it broke dailly support and it went down to 50 fibo...ok. it was profit taking, but still the market needs the reason to pull the trigger....and that was a hell of a reason for panic...

 

[Atilla]

well i think when major blue chips ...banks, in uk and europe will start to climb back, ofcourse if, the sentiment should be good for all financial stocks, ... but that was indeed the biggest decline in a day...maybe even in a year...scary, and cable did react to this news,...when i saw the news on my chat it broke dailly support and it went down to 50 fibo...ok. it was profit taking, but still the market needs the reason to pull the trigger....and that was a hell of a reason for panic...

News is already talking about a take over bid for NR. I think this would be a good step in overcoming puplic perception of bad management and vulnerability. Plus assurances all liabilities will be met.

Look at Ratners and Signet? Worked a treat.

Take over has my vote.

 

[TheBramble]

I pity anyone who went on a six months holiday and had them in his portfolio.

There's a moral in that, somewhere....

Yeah. The moral is never pity anyone who goes on a 6 months holiday - just enjoy their portfolio for them...

 

[Nut]

I wonder if other institutions in a similar situation will borrow money from the BOE if required, if they do will it become common knowledge that they have? I doubt it following the reaction of savers with NR.

Whats happened to the FSA? They seem to be very quite in all of this, keeping their heads down if you ask me. Probably their next course of action will be to stop NR operating as a business to protect the savers with NR. Thus insuring that the savers lose everything. After this the government bail out scheme will default.

Or am I being cynical?

Cheers

Nut

 

[jacinto]

I wonder if other institutions in a similar situation will borrow money from the BOE if required, if they do will it become common knowledge that they have? I doubt it following the reaction of savers with NR.

Whats happened to the FSA? They seem to be very quite in all of this, keeping their heads down if you ask me. Probably their next course of action will be to stop NR operating as a business to protect the savers with NR. Thus insuring that the savers lose everything. After this the government bail out scheme will default.

Or am I being cynical?

Cheers

Nut

good point

question is: are NR assets adequately valued and capitilised, and have no significant risk of deterioration?

a) if yes, then solvent, and wait and see how they manage this liquidity run until calm returns (taken over or business model revamped by looking for better sources of cash, or start selling assets, whichever). In this case, the real question is to the FSA. How on earth did they allow a supervised insitution continue operating with such liquidity exposure and P&L risk?

b) if no, then hold on tight, cause this aint over and will have to sit back and see who's next .......and again, question goes to the FSA.

so all in all, im still waiting to see how BOE and FSA manage this one.

IMHO, now its a game of signals. If others are bleedin in the same way as NR, they wont raise their hands after seeing what happened to NR....and they will only make the problem worse later on.....risk of insolvency. so, again, want to see what FSA does next. that is the key signal IMHO

EDIT: oh, forgot to add: watch out for the accounting of the BOE loans. the second they start moving down in the balance sheet, the more they look like a capitalisation.....and you know what that means :cheesy:

 

[Splitlink]

I think I'll go offshore. Somewhere I am not protected by a British institution.

You guys don't make happy Sunday morning reading.

 

[chump]

Both the BOE and the FSA have not been shy about warning institutions about their exposure to revaluations and reserves. All they have not done is step in and make the business decisions for the institutions which appears reasonable to me...let the shti land where it should. Once again we have bad financial practice dressing up and prancing about pretending to be financial innovation...for f...ks sake lending money is simple, it doesn't need innovating...innovating in any of it's many guises is nothing more than a rational for financial services donkeys loading up their own bonuses from chumps who are of a mind to believe it...whether it's the guy who needs a mortgage ,but shouldn't have one, to a pension fund manager who's so scared shtiless for his job/career that he daren't stand up and say no this isn't right or prudent.
I've got cash and they can have it for the meagre rate of 50%pa...that's what it would cost them for the privilege of holding it and reflects my opinion of their skill set.
Anyway what's this got to do with the more serious business of Rugby

Rock will get propped just long enough for a buyout ,but the cost of the prop will be written down against those so called assets...so could end up being pennies in the pound..recent highs 65% above current are totally irrelevant now as they indeed were even when they were current prices....also why they got shorted to a fair thee well

 

[jacinto]

Both the BOE and the FSA have not been shy about warning institutions about their exposure to revaluations and reserves. All they have not done is step in and make the business decisions for the institutions which appears reasonable to me...let the shti land where it should.

fair enough regarding the business decisions, however, i remember that when i was a bank regulator we used to look up to the FSA for being proactive on risk management......and looks like they extra reactive. this one was "treasury management 101" IMHO

Anyway what's this got to do with the more serious business of Rugby

not much, just an example of how bad can it get if they are reactive

Rock will get propped just long enough for a buyout ,but the cost of the prop will be written down against those so called assets...so could end up being pennies in the pound..recent highs 65% above current are totally irrelevant now as they indeed were even when they were current prices....also why they got shorted to a fair thee well

hopefully, this is the only institution in this situation, otherwise, it will get messy.

again, IMHO now its a game of signals. just wait and see

 

[chump]

the problem is I would guess most of those thousands queuing for their money are covered in the 95 to 100% range ,but don't even know it...egg and spoon depositors holding a few grand in savings ...some big depositors clueless about risk like the hotellier with a million in there...how did he get a million to begin with with such a gormless approach...LOL...BUT those few are probably peanuts to the multitude of small holders...information on FSA guarantees should be on the headlines of each daily newspaper for those little guys to read then perhaps the panic will be more manageable..doesn't help having 'tulips' in the media crying 'get your money out now'..not only clueless ,but irresponsible to boot.

 

[jacinto]

information on FSA guarantees should be on the headlines of each daily newspaper for those little guys to read then perhaps the panic will be more manageable..doesn't help having 'tulips' in the media crying 'get your money out now'..not only clueless ,but irresponsible to boot.

you just hit the nail on "liquidity crisis management 101"


see the point on being reactive and not proactive

 

[Atilla]

good point

question is: are NR assets adequately valued and capitilised, and have no significant risk of deterioration?

a) if yes, then solvent, and wait and see how they manage this liquidity run until calm returns (taken over or business model revamped by looking for better sources of cash, or start selling assets, whichever). In this case, the real question is to the FSA. How on earth did they allow a supervised insitution continue operating with such liquidity exposure and P&L risk?

b) if no, then hold on tight, cause this aint over and will have to sit back and see who's next .......and again, question goes to the FSA.

so all in all, im still waiting to see how BOE and FSA manage this one.

IMHO, now its a game of signals. If others are bleedin in the same way as NR, they wont raise their hands after seeing what happened to NR....and they will only make the problem worse later on.....risk of insolvency. so, again, want to see what FSA does next. that is the key signal IMHO

EDIT: oh, forgot to add: watch out for the accounting of the BOE loans. the second they start moving down in the balance sheet, the more they look like a capitalisation.....and you know what that means :cheesy:

My undertanding from the news is that the reason NR went to BoE is because under normal circumstances it would be able to borrow the money from other banks.

The fact that Banks have stopped lending to each other is very significant imo.

Why have banks stopped lending to each other and why has LIBOR gone up? I know the reasons which tells me banks don't want to lend because they too have major MAJOR issues.

Transparency and accountability! Who has issues and how much? One needs to kill uncertainty to stop the bank runs. FAST!

Apparently NR deposits are £12bn and twice that it's liabilities. Oh dear my... Little ol lady has to lift her mattress up and lose some cushion...

That'll show the markets who is the boss eh? :cheesy:

 

[jacinto]

My undertanding from the news is that the reason NR went to BoE is because under normal circumstances it would be able to borrow the money from other banks.

The fact that Banks have stopped lending to each other is very significant imo.

Why have banks stopped lending to each other and why has LIBOR gone up? I know the reasons which tells me banks don't want to lend because they too have major MAJOR issues.

Transparency and accountability! Who has issues and how much? One needs to kill uncertainty to stop the bank runs. FAST!

Apparently NR deposits are £12bn and twice that it's liabilities. Oh dear my... Little ol lady has to lift her mattress up and loose some cushion...

That'll show the markets who is the boss eh? :cheesy:

translation: a reactive supervisor: FSA