Competitive Currency Devaluations

I have been talking for some time about a ‘rip off’ that the US will attempt to make against China, that it could take a belligerent form (default) or a traditional and less likely to cause a war option (devaluation of the dollar). It seems to be playing out and going for option two.

Competitive currency devaluations are alive and well in the world, why? Well, in early 09′ I wrote about it on the Paddy Power Trader blog:

“One way of paying bond holders back (but not ‘rewarding’ them) is via a devalued currency with an inflationary environment thrown in, in fact the big robbery of this century is going to be (as it was in the past as per the 1870s first, and then via Presidential Executive Order 6102 in the 1930’s) a dollar based one, the only way the US can pay its debts is to essentially rip off the debt holders, domestically that won’t be so bad, but internationally it …

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Interbank Yield Curve: 28th September 2010

It has been a while since I posted on the yield curve, the main reason was that I lost my daily treasury letter from Bank of Scotland when all of their reporting went back to the UK and the daily replacement by Lloyds didn’t offer sufficient time-line to give a full curve.

The interesting thing that has happened in the interim is that the rules regarding forward rate prices between mortgage rates and Euribor rates has disconnected, in the same way that the ECB and Euribor disconnected in 2007, by this I mean that it is fascinating to see the established relationship end but the implications are horrifying for borrowers because it has meant that their monthly payments have gone up at a time the ECB is keeping rates low for the purpose of loosening up the financial cogs.

Take a look at the difference between February of this year and today, we can see that the long term rates are coming down and that flattening of the curve means two things: the ‘new normal’ is predicted to be one …

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RTE ‘Frontline’ with Pat Kenny: NAMA for the little people?

RTE Frontline 12th April 2010 – NAMA for the little person? from Irish Mortgage Brokers on Vimeo.

Irish Mortgage Brokers was featured on RTE’s ‘Frontline’ with Pat Kenny on Monday the 12th of April 2010. The topic of the day was about bailouts for home owners who are in trouble with their mortgages.

Noleen Blackwell of Free Legal Advice Centre was there on behalf of favouring methods to save home owners, and Karl Deeter of Irish Mortgage Brokers was there promoting the use of market mechanisms as a solution, along with arguing the case that for many people, bank ownership of their home is not necessarily a bad thing.

This is a hot topic in Ireland, in particular because many people feel, that taxpayers stepped up to save our banks, so now they should do the same in return.

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The most important step for preventing future mortgage meltdowns

I have been asked several times ‘what would you change’ in the mortgage market in order to prevent serious financial melt-down in the future, the truth is there is no single thing that will ever do it, our issues are a perplexing intertwining of regulation failure, greed, banking errors, mismanaged risk, fundamental misunderstanding of money markets and national failure. There are key players within this, first and foremost is our government, after that is our central bank/ regulator, and finally financial institutions.

Anyway, the one thing I would change if I could would be the security on asset lending, in a nutshell I would just change one rule, therefore removing the need to revamp the entire system, the rule would mean that asset lending is non-recourse beyond the asset upon which the loan was secured.

In plain English, if you got a mortgage then the only recourse a bank would have wouldn’t be to you (currently you are on the hook for 12yrs and more) it would be to …

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Free markest create jobs, not governments

In this clip John Stossel talks about the free market being a job creator as opposed to Governments, he covers points similar to those that Milton Friedman covered in his documentary ‘Free to Choose’, and the truth of the matter is that governments are highly inefficient in creating growth, they have a place in prevention of disaster but managing the economy too closely is an error, sadly it is a popular one.

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When will we get a real picture on repossessions in Ireland?

The mood has definitely changed in the markets and across the world in the last year, we have gone from being on the precipice of total destruction to being tentatively optimistic, and in many cases outright bullish. The news is becoming ‘less bad’ (perhaps we are getting immune to bad news too!) across several key metrics in many countries such as the ‘speed of the increase in the rate of unemployment’ – which is a roundabout way of saying ‘lots of people are losing jobs but not as quickly as before and thus its a good thing’.

One of the headline grabbers this year was that of repossessions, they make for poignant reading and often they are naturally heartbreaking stories, but are we seeing the full picture? Today we will consider some of the reasons why we believe that we are not seeing anything like the full picture, and it relates to the implementation of several key policy areas which have essentially delayed the problem for another …

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Short selling, what is it? Why would a person do it?

When you’re bullish (think prices will rise) on the market or a stock, you go long (buy and hold, one day sell). When you’re bearish (think prices will fall), you go short, (sell and hold, one day buy). People often think you can only ‘buy and sell’ shares, well, you can also ‘sell then buy’ and that basically describes what happens when you ‘short’ a stock, often people think ‘short selling’ means you don’t hold the stock for long, as in ‘I bought Lloyds at 65p and sold the next day for 70p’, in that case you just didn’t ‘go long’, trading rapidly is not what short selling is, or is about (I only say this because it’s a thing I have been asked a few times).

Today we will take a look at how ‘short selling’ works.

1. In order to ‘short’ a stock you sell it first then buy it later. You do this in the belief that prices will go down, you’re hoping to …

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Get ahead of the curve on fixed rates… Oops! Too late!

We have been touting fixed rates for quite some time on the basis that people needed to fix at the time rates were heading for historic lows, not after the fact, as well as that, the indications from the ECB that they would not go below 1% and instead would seek alternative options (such as QE) meant that once we got close to the 1% the forward market would price that in, but when we actually reached the 1% base that equally the forward market would price in rising rates.

That is exactly what has happened, it wasn’t front page news when we said it, although the Sunday Times did do a big story in their business section in mid-February, but now that banks are starting to raise their interest rates it certainly is!

It gets back to planning, without exception every client we had that deliberately went for a fixed rate in the interim is in a good position, some who have opted for variable rates are doing well …

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House prices in the near term: Robert Schiller

Economist Robert Schiller of ‘Case Schiller’ report fame says that he believes the housing market will fall further, confidence is everything in the property market and he says that confidence is at a record low and that is one of the primary reasons for his feelings on future prices. This makes for some interesting viewing, his book ‘The subprime solution’ and another called ‘Irrational exuberance’ are both excellent reads if you want to get a view on the current situation from a man who saw this coming. A vital point he makes is that avoiding additional supply is part of the solution.

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