Don't follow me down this road. Contrarian moves.

The markets took the single biggest battering since the 20% fall off experienced in the 1987 crash. It came on the back of a rejection of the $700 billion bailout plan in the USA. The markets had earlier rallied based on the belief it would go ahead. The S&P dropped 8.8%, the Dow is down 7%.

This is first for me, I was alive and well in 1987 but I wasn’t in the workforce and did not have a full appreciation for what was happening. This is the first big crash I will have worked through, the dotcom crash was no fun, but it was not as big as the mess we seem to be seeing form in the finance world.

In belief that everybody will run scared I am choosing to stay, tomorrow I will buy Irish financial stocks (Tuesday 30th Sept), I’m saying this on record, so if I lose then I lose, that can’t be glossed over. My intention is to get a small portion of the most distressed shares I can buy and to purchase them …

Read More

Where is my bailout?

The average investor has seen their portfolio decrease in value by about 20%, the average property owner is not far off that either. The economy is slowing down and everything seems to be more expensive, so today’s question is: Where’s my bailout?

I am not Bear Stearns, or IndyMac, I’m also not Northern Rock, Fortis or Bradford & Bingley, I am not any number of financial institutions that will soon be set to receive money from the Fed, and even by third world terms I am not ‘too big to fail’. The fact of the matter is that I’m all alone on this one, and I don’t have enough faith in our leaders that I would be comfortable ‘leaving it up to them’. Instead, I want a port in this storm.

Now we can sit back and face the inflation, the inflation that will one day ‘inflate away …

Read More

Fancy a bit of inflation? What does a $700bn bailout and the 6% national wage agreements have in common?

There are two types of inflation, ‘headline’ and ‘core’. Put simply headline inflation takes into account everything, petrol prices, the cost of food etc. it’s cosidered volatile (lots of up and down) and therefore is not used for economic forecasting. Core inflation however is used all the time, because it is considered more consistent and measurable.

So let’s take a look at things that might cause inflation? Well, for a start the US plan for a $700 billion bailout is going to cause inflation, the cost will effectively be $2,300 for every man woman and child alive in the USA. That is quite a consideration, and it is coming directly from tax money, the question I would have as an American would be ‘Why will I give $2,300 dollars to banks who didn’t and likely never will repay me?’, adopt an underwriting approach to it and yo would quickly give it the stamp of ‘failed application’. However, the coffer strings are not …

Read More

Deposit Guarantee Scheme revamped to cover €100,000

The Deposit Guarantee Scheme has been revamped as of yesterday to cover any depositer in an Irish institution for up to €100,000 per person. This move is being done to help restore confidence in the Irish financial markets.

The scheme was created in the mid 90’s and throughout its history cover was never index linked or adjusted for inflation and therefore it never increased. The recent move is designed to restore confidence in the Irish banking system, however, there is one small oversight that Mr. Lenihan has omitted from the story, namely, the amount of money in the scheme.

Prior to this the scheme covered people for 90% of their deposit to a limit of €22,000. This meant that in effect you could only ever expect to get a maximum payout from the scheme of €20,000, this was amongst the lowest levels of cover in Europe and now, in a pen stroke we are one of the highest (only Italy covers more).

However, there is still that issue I mentioned earlier of the …

Read More

Resisting that which is easy: Why economic health must outweigh lobbyists for first time buyers in the budget

There is something awful that might be about to happen, namely the current Government are considering a special type of loan for first time buyers in order to help them get onto the property ladder. It probably comes across like a contradiction, saying that ‘helping first time buyers is a bad thing’ when most of us feel that it is not, however, it is not so much the fact that first time buyers are doing anything wrong, more so, it is about flawed economic planning that will hurt generations of tax payers.

Property prices have not reached their market clearing level as of yet, what that means is that property is not selling at a speed and price that is conducive to that of a healthy market. Supply (at least for now) outstrips demand by quite some way, if we look at the current overhang as put forward by some lobbyists the number is 30,000 units (CIF), that is actually the number of properties that have not sold, it doesn’t mean it is the number that are empty. We would …

Read More

It's Official, we are in a recession: Irish recession 2008

I had said back in January that we were on the cusp of a recession, that this would have started out in Q1 and only be realised further down the line. I was wrong, my estimates flawed by a few weeks. Having taken it in the neck from many colleagues I am now partially smug, but more so disappointed because to be honest it means that all the talk of ‘it might happen’ is no longer considered doom and gloom, instead it is fact.

This news is already being reported as far away as New Zealand! How did they get this story the day before we did? Something to do with the international date line I assume, the CSO (Central Statistics Office) released this information today and we had two quarters of negative GDP meaning that we are officially in a recession. How does it feel to ‘officially’ …

Read More

It’s Official, we are in a recession: Irish recession 2008

I had said back in January that we were on the cusp of a recession, that this would have started out in Q1 and only be realised further down the line. I was wrong, my estimates flawed by a few weeks. Having taken it in the neck from many colleagues I am now partially smug, but more so disappointed because to be honest it means that all the talk of ‘it might happen’ is no longer considered doom and gloom, instead it is fact.

This news is already being reported as far away as New Zealand! How did they get this story the day before we did? Something to do with the international date line I assume, the CSO (Central Statistics Office) released this information today and we had two quarters of negative GDP meaning that we are officially in a recession. How does it feel to ‘officially’ …

Read More

No to Government Bail Outs

WHAT: Peaceful demonstration to protest against Government bail outs of property developers.

WHERE: Outside the Dail at the junction of Molesworth Street and Kildare Street in Dublin 2

WHEN: Thursday 25th September at 1:30 p.m.

WHY: Bailing out the property market is a mistake and will only benefit people who took risks.

“You cannot mortgage the generation of tomorrow for the benefit of the generation of today to buy into an asset that’s falling in value – let the market reach clearing price”

Excerpt of Karl Deeter on Newstalk 106FM, Discussing Government Bailouts of Irish Property Market – 16th September 2008

John Gormley is in contravention of his own parties policies, the Green Party website clearly states that it wants to “Progressively limit the amount of money that lending institutions can lend for house purchase in order to reduce the price of housing” now that it is actually happening should the Government wade in with tax money to fill the gap? No, the wiser choice …

Read More

So with lower house prices you make big savings right?….erm…kind of…

There has been much talk in the papers from many respected sources giving people the message that ‘now that prices have dropped its a good time to buy’. I think that the true nature of what purchasing a property boils down to needs to be examined before such a statement can be shown to be true or false.

Firstly you have to look at what you are actually getting and then you have to consider what it will cost you over the long term and do a like for like comparison for the same time last year, I think that not using 2007 as a control is one fundamental flaw that commentators are making because you can’t simply look at something and say that because its cheaper today it makes sense, if you do happen to believe that please call me immediately as I happen to have some cans of dog food that I was selling for €600 last year but you can have them at a steal for €300, but hurry, they’re going like hotcakes!

Anyway, moronic inklings aside, …

Read More

A different idea for bailing out the property sector.

There is a bailout coming, we saw the makings of it for a long time, first there was the talk of the central bank about the underlying strength of Irish financial institutions, the constant lobbying for something to be done for the property & construction sector, then articles stating blatantly that a bailout would occur if there were problems. Now we have read that the government are going to make plans to help first time buyers because mortgage funding is not as readily available as it used to be.

Let us start on the right foot, first time buyers never had it easy to begin with (I actually did an article on this exact topic before – click here). They were either being hit with stamp duty, the need for deposits or other issues. Now the Government are looking to bail out people who haven’t even bought property yet and that is an error.

There are a few …

Read More