How to get the cash out of your Pension
Moderator: Peak Moderation
Something in Money Week today - more about bonds
Professional fund managers might also be hoping for an extended pause in Mervyn King's fight against inflation, too. But you wouldn't know it from their love of fixed-income bonds ? most especially securitised debt, backed by loans made on residential property.
The City of London now leads Europe in selling debt as an investment product ? most especially these mortgage-backed bonds, known as MBS for short.
Sold to pension companies, hedge funds and investment managers, MBS give investors a chunk of the interest repayments made by home-owners each month. They barely existed a decade ago.
During the first three months of this year, however, sales of residential and commercial MBS by UK mortgage lenders totalled ?36 billion ? well over half of all debt sold onto the investment markets in Europe. The value of new MBS issued in the UK rose 81% from the first quarter of 2006.
With UK bankruptcy rates already at record highs ? and the damage now leaching into home loan defaults ? you might expect demand for MBS bonds to be waning. But Abbey National, the UK's second-largest mortgage lender, plans to raise ?5.6 billion this week by selling bonds backed by outstanding mortgage loans.
Abbey's had no problems so far finding MBS buyers in 2007. But any hedge funds or pension managers looking to take up its new offer might do well to note the currency market's opinion of where base rates are headed.
Repeating a pattern seen in each of the last four months, Sterling was bid higher yesterday in anticipation of a hike on Threadneedle Street this week. The Pound in your pocket reached a one-week high versus the Euro and broke a one-month high versus the Dollar above $1.99.
Last month's 0.25% baby-step disappointed the Sterling bulls, of course ? and this week's decision could cost short-term speculators dear if Mervyn King and his team delay taking base rates to a fresh six-year high of 5.75%.
But it's not only on Threadneedle Street that professional investors now expect interest rates to increase. All 52 professional number-crunchers surveyed by Bloomberg News see the European Central Bank raising Eurozone lending rates to 4.0% tomorrow.
In Chicago, the options market now puts the chance of a hike in US interest rates at the end of this month at 41%. Only a month ago, those same options traders priced the chance that US rates would actually fall as a 4/5 shot.
Whatever is driving this quick turnaround in interest-rate forecasts ? be it oil prices above $70 per barrel, or the creeping rise of official inflation data ? government bond prices have begun to tick lower. Last Friday saw UK gilts complete their third losing week on the run. Prices fell, pushing yields upwards and reflecting the City's consensus that interest rates are about to go higher.
Yet no one seems to have told the institutional or hedge-fund investors buying MBS debt.
New sales of MBS bonds in the US totalled $552 billion between January and March, reports Sifma, the securities association. And despite the collapse of the subprime US mortgage market ? where 78 major lenders have gone kaput since the end of last year ? private equity firms, hedge fund managers and investment banks can't get enough subprime MBS bonds right now, reports the New York Times.
High-risk MBS and other complex debt instruments are starting to attract "dumb money" along with the "hot money", however. According to Bloomberg, Bear Stearns ? a leading Wall Street investment bank ? recently sold high-risk MBS to some fifty public-sector US pension funds at a meeting in a Las Vegas ballroom.
"There is a lot of money pent up," says one mortgage-bond salesman. "A lot of people are betting that the US housing market will snap back quickly."
Bear Stearns is also seeking permission to sell high-risk debt to retail investors via the stock market, reports Bloomberg. It wants to list CDOs ? the collateralised debt obligations that made up $503 billion of the alphabet soup of global debt issuance last year, a fivefold increase since 2003 ? in the same way as the London stock market listed Queen?s Walk Investment earlier this year.
Run by hedge fund Cheyne Capital, shares in Queen's Walk lost 25% on one day in March after it said that poor-quality US mortgage loans would hurt dividend payments.
Yet many professional investors, however, keep betting that interest rates will soon fall ? and that mortgage-backed bonds will continue to pay. Tomorrow's decision in Frankfurt ? and Thursday's vote at the Bank of England ? could well be the start of much more than just belt-tightening by one million UK homeowners.
Turning to the wider markets...
Professional fund managers might also be hoping for an extended pause in Mervyn King's fight against inflation, too. But you wouldn't know it from their love of fixed-income bonds ? most especially securitised debt, backed by loans made on residential property.
The City of London now leads Europe in selling debt as an investment product ? most especially these mortgage-backed bonds, known as MBS for short.
Sold to pension companies, hedge funds and investment managers, MBS give investors a chunk of the interest repayments made by home-owners each month. They barely existed a decade ago.
During the first three months of this year, however, sales of residential and commercial MBS by UK mortgage lenders totalled ?36 billion ? well over half of all debt sold onto the investment markets in Europe. The value of new MBS issued in the UK rose 81% from the first quarter of 2006.
With UK bankruptcy rates already at record highs ? and the damage now leaching into home loan defaults ? you might expect demand for MBS bonds to be waning. But Abbey National, the UK's second-largest mortgage lender, plans to raise ?5.6 billion this week by selling bonds backed by outstanding mortgage loans.
Abbey's had no problems so far finding MBS buyers in 2007. But any hedge funds or pension managers looking to take up its new offer might do well to note the currency market's opinion of where base rates are headed.
Repeating a pattern seen in each of the last four months, Sterling was bid higher yesterday in anticipation of a hike on Threadneedle Street this week. The Pound in your pocket reached a one-week high versus the Euro and broke a one-month high versus the Dollar above $1.99.
Last month's 0.25% baby-step disappointed the Sterling bulls, of course ? and this week's decision could cost short-term speculators dear if Mervyn King and his team delay taking base rates to a fresh six-year high of 5.75%.
But it's not only on Threadneedle Street that professional investors now expect interest rates to increase. All 52 professional number-crunchers surveyed by Bloomberg News see the European Central Bank raising Eurozone lending rates to 4.0% tomorrow.
In Chicago, the options market now puts the chance of a hike in US interest rates at the end of this month at 41%. Only a month ago, those same options traders priced the chance that US rates would actually fall as a 4/5 shot.
Whatever is driving this quick turnaround in interest-rate forecasts ? be it oil prices above $70 per barrel, or the creeping rise of official inflation data ? government bond prices have begun to tick lower. Last Friday saw UK gilts complete their third losing week on the run. Prices fell, pushing yields upwards and reflecting the City's consensus that interest rates are about to go higher.
Yet no one seems to have told the institutional or hedge-fund investors buying MBS debt.
New sales of MBS bonds in the US totalled $552 billion between January and March, reports Sifma, the securities association. And despite the collapse of the subprime US mortgage market ? where 78 major lenders have gone kaput since the end of last year ? private equity firms, hedge fund managers and investment banks can't get enough subprime MBS bonds right now, reports the New York Times.
High-risk MBS and other complex debt instruments are starting to attract "dumb money" along with the "hot money", however. According to Bloomberg, Bear Stearns ? a leading Wall Street investment bank ? recently sold high-risk MBS to some fifty public-sector US pension funds at a meeting in a Las Vegas ballroom.
"There is a lot of money pent up," says one mortgage-bond salesman. "A lot of people are betting that the US housing market will snap back quickly."
Bear Stearns is also seeking permission to sell high-risk debt to retail investors via the stock market, reports Bloomberg. It wants to list CDOs ? the collateralised debt obligations that made up $503 billion of the alphabet soup of global debt issuance last year, a fivefold increase since 2003 ? in the same way as the London stock market listed Queen?s Walk Investment earlier this year.
Run by hedge fund Cheyne Capital, shares in Queen's Walk lost 25% on one day in March after it said that poor-quality US mortgage loans would hurt dividend payments.
Yet many professional investors, however, keep betting that interest rates will soon fall ? and that mortgage-backed bonds will continue to pay. Tomorrow's decision in Frankfurt ? and Thursday's vote at the Bank of England ? could well be the start of much more than just belt-tightening by one million UK homeowners.
Turning to the wider markets...
More information about how, in a closed system, everything is related. Pensioners buying bad mortage debts to live on, what ever next?
http://www.landlordexpert.co.uk/index.p ... atrick.net
http://www.landlordexpert.co.uk/index.p ... atrick.net
Just sent the letter confirming I want to cash in my Endowment Policy - never though I would see this day. 
Oh well, now that I know the economy is going to go up the swanny (very soon imo), after considerable thought I believe it is best to get something out of the policy. Afterall I have more than a decade of contributions and I would hate to lose it all when it becomes a worthless piece of paper, which is what it will be when the markets crash.
I advise anybody in a similar position to take action now. When the markets start to drop it will be too late........
Oh well, now that I know the economy is going to go up the swanny (very soon imo), after considerable thought I believe it is best to get something out of the policy. Afterall I have more than a decade of contributions and I would hate to lose it all when it becomes a worthless piece of paper, which is what it will be when the markets crash.
I advise anybody in a similar position to take action now. When the markets start to drop it will be too late........
Real money is gold and silver
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Totally_Baffled
- Posts: 2824
- Joined: 24 Nov 2005, 11:09
- Location: Hampshire
If it makes you feel better - I did the same three years ago with my policy which had 5 years of payments on.snow hope wrote:Just sent the letter confirming I want to cash in my Endowment Policy - never though I would see this day.
Oh well, now that I know the economy is going to go up the swanny (very soon imo), after considerable thought I believe it is best to get something out of the policy. Afterall I have more than a decade of contributions and I would hate to lose it all when it becomes a worthless piece of paper, which is what it will be when the markets crash.
I advise anybody in a similar position to take action now. When the markets start to drop it will be too late........
Good move IMO - it wasnt to mature until 2024, lol no chance!
TB
Peak oil? ahhh smeg.....
Peak oil? ahhh smeg.....
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Totally_Baffled
- Posts: 2824
- Joined: 24 Nov 2005, 11:09
- Location: Hampshire
One question to you all though - and be honest please?
Who is still paying into their company pension scheme?...
I am - dont know why - 180 quid a month potentially down the pan.
Why can I not bring myself to cancel it?
I suppose its cheap insurance against this all being a very bad dream....
Who is still paying into their company pension scheme?...
I am - dont know why - 180 quid a month potentially down the pan.
Why can I not bring myself to cancel it?
I suppose its cheap insurance against this all being a very bad dream....
TB
Peak oil? ahhh smeg.....
Peak oil? ahhh smeg.....
I am... but it's not being invested in equities. We could eaisly see a 50% fall any day now.
...on Black Monday, 19 October 1987, both the London and New York markets plummeted. The FTSE 100 index fell from 2322 to just 1801 by 20 October, and continued to fall for another few weeks until reaching a low of 1565 [-33%] on 9 November 1987.
On 21 December 1999 the index traded to its highest ever level of 6939. Just over three months later, at the beginning of March 2000, the FTSE Techmark, the index of smaller technology companies, achieved a high of 5743. Then, of course, dot.com boom turned to dot.bomb bust.
Its highest point was on Millennium Eve when it reached 6950.
After 9/11 and the Dot Com crash it finally bottomed at 3287 [-51%, nominal] in March 2003 during the run up to the war in Iraq.
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Totally_Baffled
- Posts: 2824
- Joined: 24 Nov 2005, 11:09
- Location: Hampshire
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biffvernon
- Posts: 18538
- Joined: 24 Nov 2005, 11:09
- Location: Lincolnshire
- Contact:
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biffvernon
- Posts: 18538
- Joined: 24 Nov 2005, 11:09
- Location: Lincolnshire
- Contact:
I'm still paying into my company pension - I put in ?1 and the
company puts in ?2. It's in an 'ethical' trustfund, last year it returned
22% growth, or 66% considering I only paid a third of the contributions.
The company is talking of allowing 'individually managed' pensions,
not sure what that means in practice, but I hope they hurry up...
company puts in ?2. It's in an 'ethical' trustfund, last year it returned
22% growth, or 66% considering I only paid a third of the contributions.
The company is talking of allowing 'individually managed' pensions,
not sure what that means in practice, but I hope they hurry up...
I believe that employers are obliged to pay pension contributions into your own pension fund, if you set one up.
I transferred several little pensions I had into a SPSS (or Sipp) sometime ago, which means that I am in complete control of where it is invested. I could have chosen oil stocks or stocks in renewable energy or just cash in a high interest account, but I put it all into agri land - not much return, but as I rent it to myself, it helps me farm sensibly.
22% return sounds tempting, but one has to remember that it is a gamble. Last year it paid off, next year, who knows. Might get another 22% or might get -47%. Thinking back to two years ago, one pension I had has been shrinking for the previous three years, despite my contributions. By the time I discovered that, that money was gone, just like that
I transferred several little pensions I had into a SPSS (or Sipp) sometime ago, which means that I am in complete control of where it is invested. I could have chosen oil stocks or stocks in renewable energy or just cash in a high interest account, but I put it all into agri land - not much return, but as I rent it to myself, it helps me farm sensibly.
22% return sounds tempting, but one has to remember that it is a gamble. Last year it paid off, next year, who knows. Might get another 22% or might get -47%. Thinking back to two years ago, one pension I had has been shrinking for the previous three years, despite my contributions. By the time I discovered that, that money was gone, just like that
What a shame, seemed quite promising, this human species.
Check out www.TransitionNC.org & www.CottageFarmOrganics.co.uk
Check out www.TransitionNC.org & www.CottageFarmOrganics.co.uk
Cracking post Chris - exactly my thoughts. EVERYBODY TAKE NOTE!clv101 wrote:I am... but it's not being invested in equities. We could eaisly see a 50% fall any day now.
...on Black Monday, 19 October 1987, both the London and New York markets plummeted. The FTSE 100 index fell from 2322 to just 1801 by 20 October, and continued to fall for another few weeks until reaching a low of 1565 [-33%] on 9 November 1987.
On 21 December 1999 the index traded to its highest ever level of 6939. Just over three months later, at the beginning of March 2000, the FTSE Techmark, the index of smaller technology companies, achieved a high of 5743. Then, of course, dot.com boom turned to dot.bomb bust.
Its highest point was on Millennium Eve when it reached 6950.
After 9/11 and the Dot Com crash it finally bottomed at 3287 [-51%, nominal] in March 2003 during the run up to the war in Iraq.
If it has happened before, without anything near as important as Peak Oil and oil depletion, my goodness what are we going to see when the investors suddenly wake up and see that economic growth can be no more and the new reality is economic contraction!
I can barely think about what we will see. In fact I look at the markets on a daily basis now as I am expecting it will occur just about any day. See Jim Kunstler's thoughts on it, http://www.kunstler.com/ and scroll down about one screen to the Daily Grunt - July12th - Very Apt!!
Real money is gold and silver