Tuesday 16 September 2008

HBoS and RBS

Shares in HBoS and the Royal have been severely hit in the last two days. Along with Standard Life and Scottish Widows, these companies comprise the cream of Scotland's financial sector and are two of the largest employers here in Edinburgh.

I have no idea what the real underlying strengths and weaknesses of these banks may be, but I am certainly worried. I have an ISA with HBoS although I withdrew 40% of it a year ago when the last panic took place. That money was subsequently invested in a Euro deposit account that's done quite well since then.

I don't really expect that either HBos or the Royal would be allowed to go under: such an outcome would lead to a collapse in the British economy from which recovery would be extraordinarily difficult. But what if either company were to be taken over? Perhaps by HSBC who seem to be the soundest bank in the UK at present? Surely the Edinburgh economy would suffer. Loss of top jobs is always a problem and just how much back office work would remain? Some, but perhaps not all. The knock-on effect would be huge.

Then there's the political question. Would the loss of one or both of Scotland's banks benefit Labour or the SNP? Surely Labour would argue that such an event showed that the Union was all the more necessary. A Scotland that was unable to keep its major financial institutions would need to look to London for its security. Or would Scots blame Labour for what had happened and be even more likely to want to go it alone? I don't know but the situation sure is interesting.


David Farrer said...

Comments made on previous template:

For what it's worth, HSBC always wanted to buy a Scottish bank, considering themselves to be Scottish at heart - many of the high-ups were indeed Scottish; they were most put out when Midland disposed of Clydesdale before they got their hands on it. I think they would be kindly purchasers, but I don't suppose it would play well in Scotland, all the same.

23 September 2008, 15:43:40 GMT+01:00
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David Farrer
By the way: Where to store gold? Is there a culture of hire a lockbox in Scotland? 
I imagine that some Scottish banks will have deposit boxes but don't know for sure. My gold investment is in shares.

20 September 2008, 19:46:53 GMT+01:00
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Better not go under - I'm rejoining.

18 September 2008, 20:03:14 GMT+01:00
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In the US the obsession with government-promoted multiculturalism, or to put it more honestly, cultural Marxist racial egalitarianism, lies at the root of the sub-prime mortgage debacle. 
Of course, the mainstream media whose scribblers are politically ensconced in the Kosher Kindergarten make no mention of American liberalism's culpability.

18 September 2008, 04:03:26 GMT+01:00
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It's always the 'capitalism' beeing blamed if state controlled planing, state controlled central banking is running into losses. 
By the way: Where to store gold? Is there a culture of hire a lockbox in Scotland?

17 September 2008, 22:13:27 GMT+01:00
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Simon Jester
"Would the loss of one or both of Scotland's banks benefit Labour or the SNP?" 
I suspect that the socialists would blame the free market and the nationalists would blame London.

17 September 2008, 14:03:56 GMT+01:00
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john b
Meanwhile, I'm pissed off that my current employer places restrictions on personal account share trading, because it means I couldn't spend £10k on HBOS shares yesterday. 
Looks like it'll be Lloyds which gets an awesome deal out of others' gibbering paranoia instead - which is probably good news for Edinburgh, as Lloyds is also Anglo-Scottish and more likely than HSBC to keep ops in Scotland. 
[and investing in gold right now is roughly equivalent to buying a house last June, or AOL shares in summer 2000...]

17 September 2008, 11:31:33 GMT+01:00
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much prefer bullionvault to the 'certificates' is what I meant to sat above...

17 September 2008, 10:36:12 GMT+01:00
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David Farrer said...

ok, so maybe not PHYSICAL gold in my possession, but Bullionvault looks a good bet. They buy physical gold on your behalf and keep it in safes in either London, New York or Switzerland. This is how I have owned gold previously, and much prefer it to the as it's more easily liquidable, the bullionvault market works much like 'Betfair', don't know if you've used that before? 
Thanks for the advice!

17 September 2008, 10:35:20 GMT+01:00
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David Farrer
Well Robert, I've put some money into index-linked gilts and also into index-linked NS certificates. Premium bonds are another option. I've got some of the Merrill Lynch (!) Gold and General shares (now they're under the name of Blackrock of whom I'd never heard until a year or so ago.) I've now got five separate deposit accounts and am thinking of opening one with HSBC to spread things even more. 
With your business skills you could always buy Killie! 
Gold under the bed? With a machine gun alongside I trust!

17 September 2008, 06:20:06 GMT+01:00
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Where to even start?  
I'm a long-time reader of your blog David and agree with you on almost every issue. 
The inevitable financial downturn is scary, even as someone who has been expecting it now for the past few years since I started reading economic blogs and books and saw the sense in what people were saying. 
This despite people thinking I was crazy, selling my first house at a tidy profit 3 years ago, at 22 years old.  
Between that and various business dealings, I'm lucky enough to have savings now of £150K with no debt and a university education.  
I feel no satisfaction in the coming financial shitstorm, now I'm just trying to prepare for it. 
I've tried to safeguard things by spreading this £150k around via various savings accounts under the £35k government-backed limit, but even that doesn't look so safe now, unless it's with the NS&A or bloody Northern Rock. 
I'm thinking of putting £20-25k into physical gold as it looks like the smart money will be fleeing there over the next couple of years, but apart from that, what do you suggest apart from withdrawing the lot and putting it under my bed?! 
I know you couldn't possibly act as a financial adviser, but I'd trust your judgement given your previous writings, and as a fellow Killie fan! 

17 September 2008, 00:47:57 GMT+01:00