Valuations in property are currently meaningless

Free markets, or indeed markets in general, have a tendency to set prices, not through control, not by one person holding up a placard and shouting from the rooftops, but rather through the process of prices reaching a point at where they occur, where demand and supply are reacting with each other.

So if you look for €3 million for a three bed semi in Donnycarney your property will not sell, no matter how much you want it to. At the same time, if you were to list a property there for €50,000 it would sell overnight, and both of these extremes demonstrate a pricing being totally out of balance with the market. The interesting point now though is this: The market itself doesn’t know what is happening, so valuations are currently meaningless. By that I mean the people who go out and value property are not able to make accurate assumptions about property prices in this market, we are seeing this daily, and then dealing with the end result which is …

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Banks ARE lending, just not freely or irresponsibly

I have read several articles in this week in our  national papers and in them the authors said ‘banks are not lending’ and in one it was implied that this was somehow wrong. A point of order must be raised, firstly, it’s not wrong and secondly they actually are lending, just not freely or irresponsibly.

The frustrating thing is that even after all of the fallout, all of the crashing property prices, all of the international crisis news, that so many people still don’t get it. Cheap credit and easy lending is what go us here to begin with, we won’t fix the Irish economy with more mortgages being freely available.

Lobbyists take note: While you might strong-arm or influence the Government (I don’t know which method lobbyists use but either way they are effective) into supplying money for mortgages via recapitalisation or Homechoiceloan or any other plan, the fact is that reasonable people will not sign up to it, they will buy when …

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GO TO JAIL! Do not pass go, do not collect €200 million

The talk of ‘Economic Treason’ and calling for the heads of every banker are sadly starting to gain more and more traction, all of this is happening without concrete evidence thus far of exactly ‘who’ we are chasing and ‘for what’ specifically, largely the financial leaders greed is central to accusations of wrongdoing, and while greed may not be morally acceptable to right thinking individuals it is not actually a crime.

The FT recently had an article showing that executive pay misguided but that it didn’t make them criminal by nature, stupidity is an ‘equal opportuntities’ trait. It is important that every person in finance is not villified for what was something that all of society played a part in.

One question nobody is asking is ‘what part did I play in this?’, as a brokerage we are culpable, as a consumer I am personally culpable and as a citizen I will be paying for mistakes made on both …

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Forensic Underwriting, when is it 'too much'?

Lenders will underwrite loans. That is part of the process, it is a natural and normal occurrence in finance, to underwrite, to ensure that you are researching the proposed deal to the extent that you can be sure that you are not taking a pointless risk, but when is it ‘too much’?

Traditionally an employee would be asked to give several forms of documentation as evidence of their position so that they could be considered for a loan. Normally this would have been a straight forward process, and one that generally works.

However, as of late we are seeing ‘forensic underwriting’ becoming more prevalent. The degree to which a lender wants to delve into a persons situation is rising beyond the traditional norms and in some cases we believe it is going well beyond the call of duty.

Let’s be frank, we need banks, who else will lend money to a stranger to buy an asset? Without banks it would only occur between people who have a lot of money personally …

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Forensic Underwriting, when is it ‘too much’?

Lenders will underwrite loans. That is part of the process, it is a natural and normal occurrence in finance, to underwrite, to ensure that you are researching the proposed deal to the extent that you can be sure that you are not taking a pointless risk, but when is it ‘too much’?

Traditionally an employee would be asked to give several forms of documentation as evidence of their position so that they could be considered for a loan. Normally this would have been a straight forward process, and one that generally works.

However, as of late we are seeing ‘forensic underwriting’ becoming more prevalent. The degree to which a lender wants to delve into a persons situation is rising beyond the traditional norms and in some cases we believe it is going well beyond the call of duty.

Let’s be frank, we need banks, who else will lend money to a stranger to buy an asset? Without banks it would only occur between people who have a lot of money personally …

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Homeloan carry trade, profit from your mortgage?

‘Carry trade’ is where you borrow and pay interest in order to buy something else that pays higher interest, the difference (when it is working as planned) is called ‘positive carry’. Usually this is done in bonds or currency, for instance, if you were to borrow money on short term rates to finance longer term bonds. The interest being paid on the long term bonds minus the interest on the short term borrowing would be the ‘carry return’. In currency the Yen was a very popular carry trade currency as their interest rate was 0%. So you could borrow in Yen, buy something else (unfortunately this money often ended up in CDO’s) such as US Tnotes and keep the difference, the main risk being that one that the Yen would strengthen significantly meaning you couldn’t pay back the original loan.

How does this affect mortgages though?

NOTE: THIS IS NOT A SUGGESTION THAT YOU DO WHAT IS DESCRIBED HERE! THIS IS MERELY MAKING A POINT!

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Will lenders become landlords?

In a recent article on Money Marketing News they said that ‘Lenders in the UK are likely to become landlords by buying up distressed properties in an attempt to halt repossessions and stop house prices falling’ this was according to leading valuations firm eSurv.

This raises some interesting ideas for the Irish market which is seeing bad news filter through constantly, only today NIB released their figures showing they had lost over half a billion in 2008. The losses seem to be concentrated in their commercial lending sector, however, with such small margins on lending being one of their hallmarks, it is fair to assume that a few impairments would have an amplified effect compared to other banks.

In the UK the plan is to set up company that would purchase distressed properties and then turn them into a manageable portfolio until the market allows for disposal at a better price while offering finance against repossessed stock in order to improve marketability.

would this work …

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Trade Unions and recessions, why they should not be considered.

Trade Unions, by definition are not academic organisations dedicated towards finding working solutions for the economy, rather they are protectionist in nature, specifically towards their members, which is why I am constantly surprised by the media leverage they achieve in various ‘solutions’ they arrive at for the current crisis.

To put it simply, Trade Unions are to economic progress as Kryptonite is to Superman. The wage deflation required to restore a working status-quo in our nation will not be achieved with increments, or guarantees of high wages, rather the inverse is true, now more than ever there is an argument for removing the minimum wage and allowing employment to find its own level, alternatively we can tax ourselves into oblivion and support artificially long dole queues and public spending.

‘Artificially’? How? Simply put, there are many people now who would likely show up to work for eight Euro an hour, and there are perhaps employers who would be happy to pay this to them, but the minimum wage …

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The secondary insurance market 'settlements'

Often you hear about a ‘secondary market‘ and often it is related to bonds, in particular the likes of TBills (Tbills are US Government bonds that run less than 12 months, TNotes on the other hand run longer than a year). What this means is that there is a market which operates outside of the primary market – where the transaction first takes place. In the treasury realm (the likes of Tbills) the primary market is from the Government to the buyer – either institutional or private – and the secondary market is between (for instance) one private individual and another. Why does it exist? Simply because the maturity date on the bond may not suit the holder, so private individual A will sell to B rather than wait until the time the bond matures.

A Secondary market exists in many other areas too, one example is that of Life Assurance. There are companies …

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The secondary insurance market ‘settlements’

Often you hear about a ‘secondary market‘ and often it is related to bonds, in particular the likes of TBills (Tbills are US Government bonds that run less than 12 months, TNotes on the other hand run longer than a year). What this means is that there is a market which operates outside of the primary market – where the transaction first takes place. In the treasury realm (the likes of Tbills) the primary market is from the Government to the buyer – either institutional or private – and the secondary market is between (for instance) one private individual and another. Why does it exist? Simply because the maturity date on the bond may not suit the holder, so private individual A will sell to B rather than wait until the time the bond matures.

A Secondary market exists in many other areas too, one example is that of Life Assurance. There are companies …

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