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:
It’s kind of funny how you can pick things up anecdotally and then see official figures confirm your suspicions. In August we saw a good number of draw-downs, I called a few friends in other brokers to see what was happening with them and they said the same thing, bumper numbers (albeit by 2010 standards they are still horrific).
The high savings rate has translated into a higher level of repayment/prepayment on mortgages, in our annual prediction we said that lending would sit still or drop for this very reason, but that may yet prove mistaken if the trend continues.
2010 is the first time I can remember ever having a flipped season, normally nothing happens in the summer, the action is all in spring and autumn. However, the thing that every other broker said [and this goes for our firm too] is that August wasn’t necessarily ‘busy’, rather it was the flow through of all the constipated pipeline of the first half of the year. That isn’t exactly a beautiful connotation but …
The fact that NAMA is now set to leave loans under €20 million with the banks is debunking the justification for its original creation.
Yes, there were bigger loans with bigger problems, and they have been covered on every facet, and that will form the bulk of NAMA’s asset book, but what doesn’t go across will be handled by the banks (who incidentally already manage NAMA loans on behalf of the agency, only the legal ownership goes to the agency).
In Bank of Ireland’s case this will account for €2.1 billion of loans of which €1.6bn is already impaired! That’s a massive 76% impairment rate, of which €800m has been provisioned for – so about half of the expected loss is covered.
That tells us nothing about every other institution though, because BOI is likely to be one of the healthier ones, they neither …
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 …
The EBS is on the block and there have been countless headlines regarding the idea that debts might get written down by Wilbur Ross if the Cardinal Capital group (who he is backing) are the successful bidder. I have said that I doubt this will happen and will set out why in this post.
EBS carried out a PCAR (prudential capital assessment requirement) test in March 2010, it showed that they required €875 million in funding to come up to scratch. Thus far they received €100m in cash from the state and a further €250m in a promissory note leaving a gap of €525m to fill. The bids being touted are in the region of €550m meaning that whoever buys in is effectively bridging the gap and paying a small premium as well.
Take a look at a balance sheet and you’ll see that no matter what happens, that in the end assets=liabilities. That is an accounting identity, in our example we have a hypothetical bank which has assets and liabilities worth (for example sake) €100 million Euro.
Jim Chanos, the famous short-seller talks about government bailouts and whether or not they are very effective. A brilliant overview of the role of investors and how government bailouts are perhaps not the panacea they are flaunted as.
This is a very healthy sign for the mortgage market, and in our opinion it could mean that 2010 might mark the low point for credit that we have been watching out for.
In 2009 KBC under-lent, they had €1bn and didn’t lend out anywhere near that, they are also here to stay, and prior to the crisis they had about 1/8th of the market share. The fact that they are rolling out a higher loan to value is a very confident sign that
Banks have a few internal policy tools to control lending 1. Curtailing the amount of lending – we see that already, mortgage lending is about 85% down from the peak of 40bn p.a. , peak wasn’t exactly a gauge of normal, but half of that would be normal, and even on that basis it’s down 75% – that story still has to play out 2. Rate increases: this has the same effect as central bank rate increases, it reduces lending and everybody has increased their margins by at least 1% in the last year, you and …
Brian O’Donovan of TV3 covered this story, which relates to a press release by the Financial Regulator.
The Financial Regulator has voiced ‘concerns’ over the manner in which disclosure and transparency are enacted when people move from a tracker rate onto any other rate in a press release yesterday.
There were no firm figures given, and no direct accusations (although the Financial Services Ombudsman has received c. 60 complaints). The release comes on the back of a story in the Sunday Business Post by Emma Kennedy which outlined that PTsb ‘misclassified’ up to 300 mortgages and put them on standard variable rates rather than trackers. The issue was spotted by PTsb and rectified by them, customers have been refunded (on average €5,000) the difference they paid plus interest.
The way in which people ‘come off’ trackers tends to be by their own volition, if they opted for a fixed rate while on a tracker contract they do not need to be re-offered their tracker rate at the end. If they were on a fixed rate and are coming …
Youtube version of the clip available here
