How many kicks can a broker take?!

How many kicks can a broker take before rolling over and crying ‘uncle!’. A whole bunch it seems.

Today AIB informed the intermediary market that they were capping commissions at €1,500 per loan as a maximum irrespective of the loan size. We feel that banks reward people unfairly and in a ridiculous short-term manner, AIB are no different but they are doing so at the detriment of brokerage.

I’ll qualify that: currently, broker distributed loans are highly profitable for AIB, they don’t have to pay for broker overhead, branch costs etc. I have it on good authority that they have explained this to broker representation bodies in the past, so why curtail any money a broker might make? (As if the current market wasn’t making it hard enough already!).

Simple, because it means you have more money to keep branch distribution alive, and in order to support unprofitable branches you have to find excess profit elsewhere, one of the soft targets is …

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Hedgefunds, risk, and finding the silver lining of any dark cloud.

Here is a simple question: ‘how do you protect or even augment your portfolio returns when markets are crashing or where there is systemic risk?’ if you have an answer then you can be a little smug because the majority of fund managers, the best and brightest the world of finance has to offer, for the most part didn’t have an answer during the last two years and if they did they didn’t (by and large) act upon it.

The classic definition of a hedgefund is not the ponzi-schemes run by the likes of Bernie Madoff, rather it was a fund that strategically goes long and short to produce positive gains regardless of whether the market goes up or down, that was what Winslow Jones was doing when he started the first hedge fund in 1949, while managed fund managers are happy to post a 20% loss when the averaage is -30% (for instance), hedgefund managers are meant to be able to …

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Toxic traders, capitalising on volumes

Joe Saluzzi of Themis Trading (I mistakenly read the link initially as ‘the mistrading’!) have recently published a paper which accuses traders of intentionally trading huge volumes where they buy and sell for the same price and in the process make a half a cent per share. The volume of trading is fictitious ‘high frequency traders’, what they do is buy and sell and collect liquidity rebates from the exchange (note: 50 milliseconds is a huge amount of time) in this game. Do it 8 billion times and it really starts to add up.

This is just depressing, actual investors don’t get to join in because the firms engaged in this are doing it within the actual exchanges using the fastest computer technology available. They also have an unfair advantage in how they trade because they use rules intended to match buyers and sellers to their advantage, they find hidden liquidity and in essence remove it from the market as profit.

The most powerful deterrent would be to make a rule …

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WE HAVE MOVED! To 33 Pearse Street.

We have moved our offices to a new location (still on Pearse Street) to 33 Pearse Street.  It’s about 250 metres towards the city centre from our old offices, and three doors down from O’Neills pub (everybody in Ireland seems to use pubs as landmarks!).

The new office decision came when our lease on our old office came up for review, we felt that there were deals to be had on the market and it didn’t make any sense to stay put, if you drive down Pearse Street aiming to go to the north side then you’ll have to pass our offices, its the place painted red and yellow.

Other than our location everything else has stayed the same (our broadband is temporarily down), you can email us at our regular email addresses and our phone number is still 01 679 0990. Individual broker direct dial phone numbers have changed but we’ll publish them soon on our website and make sure that everybody gets an email.

The blog will be back up to full speed as of next week and …

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Why aren't mortgages MORE expensive?

In looking at any product or service you will often hear people mention ‘supply and demand’, it is one of the foundations of Microeconomics.

Generally if supply increases prices drop, if it decreases prices rise. By how much is a question of how elastic the demand is versus supply.

We know from our day to day experience that there is still a high level of demand for mortgage finance, charting our figures back to 2005 has shown us that if we take out ‘noise’ of m/o/m figures that demand is still at relatively high levels.

However, we also know, from our daily interactions with banks that criteria is getting harder, conditions more restrictive, underwriting is more forensic, the supply of mortgages is decreasing rapidly.

Using a simple chart you would get something along the lines the one below, the blue supply and demand lines show  the situation at a certain point in time, we’ll say that is a year ago, the green line of supply shows the current situation – it has moved to the left because of the decrease.

…

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Why aren’t mortgages MORE expensive?

In looking at any product or service you will often hear people mention ‘supply and demand’, it is one of the foundations of Microeconomics.

Generally if supply increases prices drop, if it decreases prices rise. By how much is a question of how elastic the demand is versus supply.

We know from our day to day experience that there is still a high level of demand for mortgage finance, charting our figures back to 2005 has shown us that if we take out ‘noise’ of m/o/m figures that demand is still at relatively high levels.

However, we also know, from our daily interactions with banks that criteria is getting harder, conditions more restrictive, underwriting is more forensic, the supply of mortgages is decreasing rapidly.

Using a simple chart you would get something along the lines the one below, the blue supply and demand lines show  the situation at a certain point in time, we’ll say that is a year ago, the green line of supply shows the current situation – it has moved to the left because of the decrease.

…

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Rent or Buy the 5 year outlook

Today we are going to look at a comparison of renting vs buying with a five year outlook given the current interest rates, the yield outlook and lastly the cost of renting.

The following figures factor in real life examples taken from existing lending rates/rental prices and the forward estimation on rates is taken from presumptions in the current yield curve (chart is below). The terms applied in each example are 30 years, and the purchase is assumed to be a couple buying together, we can examine the impact for a single person in a separate post.

If you were to take a price of €313,000 for a two bed property (current average taken as a mean of prices in todays daft report – this figure is the Dublin average price across all geographic areas, the figures can be determined for any county the same way) and do the following.

1. Compare the total cost of ownership (we are not factoring in house insurance, bin …

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Geithner plan, re-explained by Khan Academy

Another video from the Khan Academy, talking about the working reality of the Geithner Plan. Really it seems that the plans sole purpose is to allow investors to use taxpayer money to buy assets with all upside and little or no downside by using a credit default swap to insure the deal. Even a zero return isn’t to be balked at when investing during a period of deflation, the way it’s described here puts it out in plain english.

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The Criteria Crunch

We have just been informed that one the lenders we deal with are only getting through applications received by the 4th of March, that is a near 20 day delay on new applications they are considering. Why the backlog? Has the market suddenly recovered? Are they being flooded?

No, rather it is a case that in banks nearly everybody has been enlisted to work in ‘collections’ and the staff were taken from every other department, in particular the ‘new business’ section. The bank we are talking about today merged their direct channel with brokerage so even going via a branch makes no difference, the whole company has only four working underwriters.

So inasmuch as the credit explosion saw too many resources being thrown at lending and the expansion of same, the crunch is doing the exact opposite by overshooting the mark in the reduction of resources. For a publicly quoted bank to be 20 days behind means that the market is facing yet another hurdle in reaching its rational level. Lending hasn’t frozen, people are …

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The ‘Rich Man’ died a ‘Pauper’… LTV’s and Life Cover

There is a risk creeping into the lives of many that they are not aware of, one that every generation has continually faced and also one that is the greatest wealth destroyer of all, namely death and debt. Nothing kills wealth quicker than death and in particular in circumstances where the estate is not settled correctly in advance or where there are large debts that were not covered.

Every person I know is bulletproof in theory but corporeal in practice and that means that many of us have risks that we are not covering, you can’t cover 100% of the bases 100% of the time but some do need to be covered and it doesn’t have to be rocket science.

How did the rich man die a pauper? We’ll take an example of a person with a home and two RIP’s (residential investment properties), We’ll say that the lady of the house is a solicitor earning €120,000 a year her name is Jane Doe, and the man of …

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