RTE ‘Talking Money’ with Karl Deeter & Jill Kerby, ‘the fantasy budget’

It was budget week and on ‘Talking Money’ we came up with a ‘fantasy budget’ which considered some of the things we might do if budgetary powers were in our hands. Some are far out, others are novel, some (like car tax abolition) are pragmatic, you can decide for yourself what you think!

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Irish debt, third most likely to default in the world?

Credit Default Swaps hit a record high yesterday for Irish Sovereign Debt. CNBC spoke to Brian Cowen on this topic yesterday, our Student Protests got a mention at the very start, Mr. Cowen believes this is short term sentiment, and while you can use a cyclical argument against Ireland, there is a secular argument about our debt: that it will be more expensive in the future (forever).

Using credit default swaps we are placing ahead (as in more risky) than Pakistan, Argentina and Iraq! Behind only Venezuela and Greece, interesting times….

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Bond Bubble Looming, where does it end?

We have been talking about this for a while (28/01/09, 11/03/09, 23/04/09), it was a popular topic on this blog in 2009 but well covered and for that reason we have not revisited it much, but the alignment of the stars warrants a look at the symptoms of the disease because now they are ever more present than before. At this point we can see a clearer path; which is still leading to a bond bust destination.

It has also becoming a mainstream topic, recently it showed up in an article titled ‘Currency, the weapon of choice in a world of lower demand‘.

If something can’t happen it won’t, and what can’t happen is a world in which we see century bonds (bonds with 100yr terms) becoming commonplace, they will probably be (as is the benefit with all hindsight) the poster-boy of the …

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Why banks support bangers

There have been headlines about the way that AIB underwrote certain loans to Liam Carroll, judge Peter Kelly is of the belief that the security may not be correct because AIB essentially gave him the money in early 2009 on the back of a personal guarantee and some other minor security.

Why would a bank do this? Especially as they were curtailing lending to every other sector of the market? Especially when they were being saved by the taxpayer and had just been bailed out? This isn’t to defend the banks, but to explain the reason why they acted in such a counter intuitive way, any right thinking person would be correct in assuming that they should have been trying to rein in developers, but that is the reverse of what they did, rather they extended more credit to the developer.

Explanation for this is simple, Carroll had brought AIB too far down the rabbit hole for them to turn around and pull the plug, a bank gets to a certain point with a …

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Pete Peterson formerly of Blackstone, CFR, Lehman and Secretary of Commerce

Pete Peterson is a fascinating individual, he came from humble beginnings and went on to work at executive levels in some of the most well known finance houses in the world. He mentions some of the deficit fears that have been laid out in this blog many times in the past and the inflationary risk that comes with it, Peterson is in agreement with Volcker that there is a serious dollar risk forming.

Peterson is also a human, he is one of the few Wall St. legends to come out and admit that he needed psychotherapy in the past, this interview is absolutely worth watching and learning from.

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Bank of Scotland cut back on LTV’s

Bank of Scotland recently announced that no longer will support an applicant seeking to borrow 90% for a newly constructed, or second hand property.

In view of the new homes gathering market clearing pace, I feel Bank of Scotland have been a little short sighted here. This profile of the property market accounts for a huge amount of business, especially with builders seeking to offload newly built properties at knock down prices. I don’t think I am being short sighted when I predict fervent activity over the coming months with many first time buyers eyeing dropping prices as an economical godsend, match that with a low rate environment and it gives mobility, choice, and all of this at a price that won’t break the bank.

Paying € 1,100 / € 1,200 for a 2 bed city centre apartment makes sense for people who don’t wish to live with their parents. If we move this on a step further, it makes even more sense to buy. With very low lending rates, you …

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Bank of Scotland cut back on LTV's

Bank of Scotland recently announced that no longer will support an applicant seeking to borrow 90% for a newly constructed, or second hand property.

In view of the new homes gathering market clearing pace, I feel Bank of Scotland have been a little short sighted here. This profile of the property market accounts for a huge amount of business, especially with builders seeking to offload newly built properties at knock down prices. I don’t think I am being short sighted when I predict fervent activity over the coming months with many first time buyers eyeing dropping prices as an economical godsend, match that with a low rate environment and it gives mobility, choice, and all of this at a price that won’t break the bank.

Paying € 1,100 / € 1,200 for a 2 bed city centre apartment makes sense for people who don’t wish to live with their parents. If we move this on a step further, it makes even more sense to buy. With very low lending rates, you …

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The errors of compensation

One of the most pointed arguments that we hear about is that of bankers pay, some people have even started to refer to them as ‘banksters’ instead of ‘gangsters’. The reality is that both the industry and the shareholders and everybody else got it terribly wrong, even the corporations with their internal and agent remuneration models got it wrong. We were rewarding short termism in a long term game, something akin to having a footballer who has to play the full 90 mins but we base all their pay on the first five minutes.

On one hand the general mass of decision makers didn’t see the financial crisis coming, granted, there were some who were shouting it from rooftops, in some cases those same people have predicted 15 of the last 2 market meltdowns (our most well known one began calling it from late 1999), with others they were just plain ignored. The best analogy I have heard so far came compliments of a very respected colleague with over 40 years of banking experience …

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The banking ‘Whitewash’

Meredith Whitney talks about the ‘banking whitewash’, saying that the recent gains in many banks (they have been beating expectations by and large in Q1) are not all down to ‘recovery’ but instead due to other factors.

She says that the factors that lead to these gains are not replicable and that the underlying assets are still deteriorating. This makes for some interesting observation because the great deleveraging of both companies and individuals is still in full swing so there is little reason to doubt the observations Meredith Whitney makes, rather it will be how these factors play into the real economy that concern me.

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The banking 'Whitewash'

Meredith Whitney talks about the ‘banking whitewash’, saying that the recent gains in many banks (they have been beating expectations by and large in Q1) are not all down to ‘recovery’ but instead due to other factors.

She says that the factors that lead to these gains are not replicable and that the underlying assets are still deteriorating. This makes for some interesting observation because the great deleveraging of both companies and individuals is still in full swing so there is little reason to doubt the observations Meredith Whitney makes, rather it will be how these factors play into the real economy that concern me.

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