Recent Posts
Recent Comments
Popular Articles
Who is Lammo?
Posted by Lammo in 
One of the first questions that people have been asking on forums and messageboards all over the Internet this past weekend is “Should I buy shares in Northern Rock?”
After it emerged that the bank had sought emergency funding from the Bank of England last week, its customers feared for the security of their savings, despite assurances to the contrary and were queuing up outside branches all over the country and swamping their Internet and Telephone banking systems to withdraw their cash.
Northern Rock had over-exposed itself to the sub-prime lending market, and as a result had to consider selling to a rival bank. When it emerged that this was not a viable option in the current market, it was left with little option but to approach the BoE for emergency funding.
Buying shares based on bad news is a strategy that works tremendously well, and I’ve personally made a lot of money this way. But there’s always one common factor that explains why it works: The companies I invest in are good, strong, cash-rich companies that may have had a wayward profit forecast, or missed targets, and the market has over-reacted to the bad news. fundamentall, they are still a strong company, but their price is marked down by 5-10% for a month or two.
Investing when the market over-reacts is fine. When the general public over-react though, that’s a very different picture. Since Friday, over £2billion in cash has been withdrawn by Northern Rock customers – You show me any company in the world who wouldn’t miss £2bn disappearing from their balance sheets in the space of three days. Add to this the knock-on effect once the withdrawal spree has ended – Who’s going to choose a Northern Rock product over any other bank in the near future – Mortgages, Personal Loans, Insurance, Savings – They’re all going to be hit hard.
There’s very little doubt in my mind that the only future for Northern Rock is a takeover, and clearly at some price, the shares have to be attractive. It is a very brave person though, who invests in a company whose customers are literally queuing up to leave. I would go so far as to say the shares are that volatile right now, that only gamblers would throw money at them.This isn’t your standard “Oops, we’re going to miss Interim profits by £5m” kind of bad news – This is unnecessary public hysteria, encouraged by the media. And you just can’t predict how the general public will react. As they say up North, “There’s nowt as strange as folk”.
If you enjoyed this post, make sure you subscribe to my RSS feed!
You might also like to read...
All Change! DGM go private, and IBG merge with TMN
Well, I’m still recovering from the dreaded Man-Flu, hence why I’ve not yet commented on the big news from last week, that DGM have taken the advice I offered in my podcast with Fraser last month (I’m sure the consultancy fee…...
IBG Share Price falls
IBG 12 month chart It came to my attention that the price of Internet Business Group plc’s (IBG.L, parent company of Affiliate Future and proud owners of my old site Net Free Stuff) shares took a bit of a tumble recently due…...
A red day is a bad day, but not the end of the world
Here’s a quick glance at the movement column of my shares portfolio today: As you can see, there’s a lot of red in the movement column (indicating a loss, grey= no movement, and green = a gain) – The only green…...
If you enjoyed this article, please consider submitting it to the readers of Affiliates4u so that they can enjoy it too! Just click the following button:
It’s just over a week since I wrote this article, and it’s amazing the number of people who have arrived here after searching Google for “Should I buy shares in Northern Rock” – come on guys – If you’re asking a Search Engine whether or not to buy a stock, then please, for your own sake, KEEP YOUR MONEY IN YOUR WALLET.
I still wonder how many people have failed to heed the warnings in this article, and are now stuck with a share that has lost a FURTHER 50% since this post, and has just today had its dividend withheld.
No doubt they’ll make some comment about how it’s going to recover and soar, but then don’t all bad gamblers believe their luck will change at some point?
hmmm have you got egg on yuor face now?
No, I don’t believe I’ve got “egg on my face” for advising people to actually do some bloomin research before parting with their cash, and pointing out that if you’re asking a search engine for stick tips, you’re better off holding onto your money.
Share prices react to news and opinion, and today’s news that Virgin are looking to take a majority stake has been well received, which is already reflected in the recent rise. The news will no doubt cause the price to rise further due to the public’s perception of Sir Richard Branson as a “white knight” about to sail in and save the day.
Seasoned analysts though will look at Sir Richard’s history of stock-listed companies, which is far from successful, and note that his forte does not really lie in turning around troubled companies. Any rise in the next few days will simply inflate the price as the gormless masses pile in “cos Richard Branson’s gonna buy em” – Virgin haven’t bought any shares yet, and they might not – At this stage it is purely speculation.
Once again, PLEASE if you are thinking of investing in Northern Rock (or ANY company) – Do some bloody research, find out everything you can about the company, the people in charge, the state of the finances, their position within the industry as a whole. if you can’t be arsed to do that, then just head down to the casino, and put your money on the roulette table. It’s about the same odds as Investing in a company you know nothing about.
Well, today, on news of possible devalued Virgin takeover, NRK.L shares are at just over 1 pound.
Is it good time to buy now? Could it get any worse?
Isn’t that safe to think that in a long-term shares will return to something at least half close to where they were?
Hi “Anonymous Coward” (great name btw),
As I said in the main post back in September, they have to be attractive at some price. As the situation plays out, it is apparent that the only future for Northern Rock right now is a takeover (as confirmed by Alastair Darling). And the only way any gains will be made by shareholders now is if the price paid by whoever exceeds the share price you paid. Indications today are that all the bids received were been “significantly less” than the market cap of £559 million NR stood at last Friday (when bidding closed)
This news alone knocked £120m off that market cap, so you have to ask whether a bid will be accepted for more than the current market cap of £439m (assuming you buy at 104p) – and if it is, will it be a cash offer, or cash plus shares? Do you want to have half your money back, plus shares in X Bank?
I’m still staying out, but it’ll be interesting for all those who piled in at 270p because “it looked cheap” and “must go up” to see how this one pans out.
Hi John, firstly thanks for some interesting articles, I’m a regular reader now!
On a slightly similar subject, you say that anyone who looks up a site to find out whether they should buy shares or not is crazy, and I’d have to say I tend to agree!
What do you think of newspaper or television shares tips in that case? Is that similar in that you’re just taking someone’s word for it, or can they be trusted to have done the research for you?
Or is there ever the case that columnists might want to influence the price slightly for their own gain?
Is there anywhere in particular you look for your investment tips or is it all done via personal research?
Thanks!
Colin
Hi Colin, I’m glad you’re enjoying the articles.
I’m not a fan of following tipsters – If you take out the small minority of tipsters who are keen to ramp their own portfolio (and it is a VERY small minority), then you’ve got the problem that the Market Makers tend to watch the tipsters columns and shows very closely, and adjust the price accordingly.
Follow this for a few of the tips from the Sundays – If a share is tipped as a buy in a Sunday newspaper, expect it to open a few points higher on Monday morning (i.e. before anyone has had a chance to buy) and the reverse is true for the sell tips.
You can’t beat personal research for finding those gems – The Internet makes it very simple to check recent company news, rumours, charts, accounts and reports.
If you’re going to follow the share tips of a financial journalist, then you’d get a better return (and tax free) from just choosing a suitable ISA with a professional money manager. Leave the newspaper tips where they belong – For gamblers and chip-shop owners.
I’m so broke at the moment. I almost bought a lottery ticket last week. Then I thought “Hang on, Hippy. If you go to a casino you could stick the remainder of your overdraft on red.” Attractive option…
But I chickened out. “Good move” I hear folk say. But now I see NR shares at 84p. I could probably buy a couple of hundred of them now. Its not as if I’ll be able to afford to eat in 4 weeks time anyway so I’m asking myself “Why not, Hippy? Why not?”
Except, I’m asking you John. “Why not? Is this Enron or Marconi? Could I, in a couple of months (assuming I haven’t starved) buy a ticket out of this godforsaken country where I pay Alistair Darling £225 of my paltry £800 monthly wage? Could I be sunning myself on a beach in Kenya by Easter?”
The Happy Hippy,
I have been where you are, really struggled to make ends meet (only most of my salary went to Gordon Brown so he could spend it on losing the countries Gold Reserves and screwing old people out of their pensions).
It’s all too easy to look for the easy road to riches – Many do get there, but it’s more through luck than judgement. BBC News reported tonight that Virgin are the favourites to take over Northern Rock, and literally 30 seconds later, the traffic to this page spiked, as people searched google for the following terms:
what do you predict of northern rock share price
should i buy northern rock shares
should you buy northern rock shares
northern rock buy share tips
should you invest in northern rock
buy northern rock shares
Once again, people are sat at home watching the news, and then ask a search engine whether they should invest their hard-earned money in a company that is for-all-intents bankrupt?
I don’t think it’s an Enron or Marconi – the government loans (of OUR money don’t forget) should prevent that, and there are buyers there for the bank’s assets. It’s just a case of at what price – and I feel the price paid will be less than the current share price.
NR is certainly not a share that you can look to make money on as an investor right now. If you’re determined to be on a beach in Kenya by Easter (I can recommend a lovely resort in Mombassa.. we went there for our honeymoon), then you’re gonna need to work for it.
If you’re not already into affiliate marketing, then why not look into becoming an affiliate? You don’t need any HTML knowledge – I know very little, and started with none, and you hardly need any money to get going.
There are links to pretty much all the Affiliate Networks and programs in the Right Hand menu of this site, as well as links to some other affiliate’s blogs.
Read through these, as well as the Affiliate Marketing posts here at lammo.net and you’ll have all the info you need to increase your income dramatically.. you’ll still have to pay tax etc, but you can even work from that beach in Kenya once you’re set up.
Hi John…
Yes I too googled whether to buy the shares or not, on the basis that what comes down,
must go up. I bough Laura Asley shares ages ago at half they are now..even though they
are still pence, I doubled my money! (Ok, from £350 to £700 ish, but its better than nothing).
What I’m most interested in now though…as an ex web developer, who does know HTML.. whats
this about becoming an Affliliate?? I’ve never heard of that, but it sounds interesting.
I have plenty of time on my hands, a website I’ve not done much with yet and HTML knowledge.
Any advise about where to go or how to get started?? That would be very appreicated.
I may have to drop out of college if I cant start earning extra cash soon
Hi Penniless Student, welcome to Lammo.net – it’s always good to have new readers, even if they are googling for share tips lol
Just to touch briefly on your Laura Ashley result – It wasn’t because “What goes down, must go up” – That rule doesn’t apply to the stock market. It went down for a reason,and it went back up for a reason. NRK went down for a reason, and it hasn’t gone back up for a reason. Always look at the facts behind any movement, and don’t just assume it’ll go back up – I’m sure there’s many poor people out there who have lost thousands on Northern Rock shares in the last few months by thinking that way.
Don’t worry about never having heard of Affiliate Marketing.. Most of my family and friends haven’t either – and I’ve been doing it full time for 7 years now! To sum it up basically, if I send someone to Currys via my website, and they buy a washing machine, I get paid a commission. That’s affiliate marketing in a nutshell – Now multiply that by over 2000 different merchants and 2 million different products and services to promote, and you’ll see there’s a hell of a merket out there.
The best way to start is to get a website going for something you’re passionate about (else you’ll not be motivated to keep it updated) and try and monetise it with a few links and content units/ads etc. Then you can expand into different sectors etc as you get more and more familiar with AM as a whole.
To get started, make sure you sign up with all the Affiliate Networks that are listed at the top of this page (in the Right Hand Menu) – There are around 25 networks in the UK at the moment – The main ones I’d advise you to start with are Affiliate Future, Affiliate Window, Buy.at, DGM, Paid on Results and Tradedoubler, as they cover most of the merchants that you’ll need to get you going.
Now comes the hard bit… It’s a lot of work, and you’re gonna make a load of mistakes. Don’t beat yourself up about it – It took me nine months to earn my first cheque (It was for £13) and since then I’ve earned over £1,000,000 from Affiliate Marketing (I should point out of course I haven’t still got all of that million else I wouldn’t be sat here working at 6pm lol). to help avoid some of the more obvious mistakes that everyone makes, you should do a load of research.
Go to http://www.affiliates4u.com and sign up. Read through all the forums (that should take you about a month), and take it in.. Ask questions, and people with years of experience will help you out (including me… I’m username “John” on there.. original huh?)
Have a read through all the AM related ramblings I’ve made on this blog: http://www.lammo.net/category/affiliate-marketing and read some of the blogs of other affiliates also in the RH menu (Kierons and Kirsty’s are particularly good for newbies)
And then just do it! You can research and ask questions forever, buit nothing beats making a few mistakes and learning from them.. it’s how I (and many others) did it 7 years ago when Affilate Marketing was born.
And finally, come back here, change your name to “Loaded Student”and tell us how you got on!