Reply To: Queuing for retiring savings out of Northern Rock bank


Let’s have a look at the salient facts.

NR has received funding from the BoE. When it’s liabilites become due over the next few weeks, it will use this funding. If it does not it will go into administration. It is highly misleading to imply that NR has these funds as a precaution, and that it won’t need to use them.

Northern Rock’s business model has failed. It has been making highly risky bets on future interest rates and has inevitably come unstuck. It has long term liabilities and has been assuming that it could fund them in the short term market for a cheaper rate. Why should that always be the case?

The price of Northern Rock fell by 30% on Friday. It had already halved on the year to date. This is because the pension and hedgefund managers (the “smart money”) who have billions to invest, don’t want their money in NR. If you bought the share on Friday lunchtime, you would have lost at least 10% of your investment already.

Madinmarbella endorses buying NR shares. Well, if you are a financial advisor, madinmarbella, then your advice should have a public health warning.
Asking a financial advisor when is a good time to buy a stock is like asking an estate agent when is a good time to buy a house. Financial advisors are Salesmen and for this reason have vested interests in earning commissions first and foremost.

It is dangerous to make the assumption that the BoE will cover any more than £31,200 of your savings. This is typical Costa del Sol “don’t worry about it mate”. If the BoE felt confident that it could safeguard 100% of retail customer balances it would make that explicit through law.

Madinmarbella accuses the newspapers of sensationalism and inaccuracies. I think that his version of events would make the likes of Alistair Campbell smile.