Lehman Brothers & Merrill Lynch...why the fuss? Important in Swindon?

An extra-ordinary weekend has seen US Investment Bank Lehamn Brothers file for bankruptcy.

Secondly Merrill Lynch has ben bought bu the Bank of America.

Both companies were badly hit by having bought bad mortgage related debt.

There will be repercussions this week. The Bank of England & European Central Bank have provided more money today to help credit markets and it is predicted that the US Federal reserve will lower interest rates.

How does it affect the consumer in Swindon & beyond?

Lehaman Brothers & MerrillLynch have been at the heart of the credit crunch. The cleansing/purging of the 2 companies is part of the clear up process.

AS the process goes on then credit will slowly begin to be made available to banks....which will eventually mean customers will be able to get cheaper mortages (theoretically).

Cheshire & Derbyshire “saved” by Nationwide

It looks like the Cheshire and Derbyshire Building Societies are about to be taken over by the Nationwide Building Society. The Derbyshire is the 9th and the Derbyshire the 11th biggest societies with about 1 million customers between them.

The Derbyshire has been hit because it could not raise money on the money markets...the credit crunch again. Whilst the Cheshire had encountered some problems with its commercial property lending.

The Financial Services Authority has had a hand in recommending the deals to the 2 societies and the speedy negotiations which have taken place

Will there be any windfall payments?

Borrowers & savers with the Derbyshire or Cheshire should not expect any windfall payments owing to the problems they have encountered.

Can you trust the financial pages of National Newspapers?

Since the dawn of mankind there have been get rich schemes. The financial pages of the national pages abound with rich succesful people, the implication being that you are the only one not making any money.

Many a time the city editors encourage you to invest in a fund or company or asset that is high risk, has peaked in value and is on the way down.

Some examples from the last few years.

1 Invest in gold...it hit a high in April 2008 and the price has retreated
2 Buy to Let Property. Too many unwanted flats, falling house prices.
3 Bubbles in India & China in 2007

Possibly the worst re-occurring offence is to give tips on company shares as though they were horse racing tips (Thanks to Lawrence Gosling of Investment Week for that analogy)

The solution
Have a broad based portfolio of assets not linked to the rise of fall of risky asets

Stamp Duty "Holiday"

Alistair Darling announced a Stamp Duty Payment Holiday.

The threshold for Stamp Duty has been temporarily raised to £175 000. The idea is to get the housing market going again.

Will it work?

In the early 1990s, thne Chancellor Norman Lamont tried it. He was asked his opinions this time round. He mentioned that it had not worked then & he did not expect it to work now.

It will have no effect in London & the South East where the average property for a first time buyer costs £241,985.