Buying stocks to protect yourself?

Marc Faber makes some salient points to Yahoo! tech-ticker on where he feels the markets and world economy are going and he strongly disagrees with Ken Fisher about the USA having ‘too little debt’. He is strongly anti-cash and feels that commodities and stocks (despite what many believe is simply a bear market rally) are the place to be for the next 2-3 years. An interesting point made on tech-ticker was that the world economy doesn’t need as many people any more, it makes for compelling reading.

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NAMA uncovered

Yesterday the National Asset Management Agency (NAMA) legislation was brought out in the Dail (that’s the Irish Government buildings for our international readers) . We have put some of the developments into simple graphs to give an idea of the way NAMA will work and what the prices are as well as what they mean (for the pedants out there- they were drawn by hand to demonstrate the point).

So the total value of the loans is €68 billion, adding on €9 billion in rolled up interest – development accounts often had this factored into the end sale price, generally showing c. 15% profits (as a minimum) with the roll up included.

The €77 billion in loans will receive a 30% haircut (across the board) meaning the price paid will be €54 billion. It is important to note that different institutions will see larger haircuts than others, so it might be that BOI gets 20%, AIB 25% and Anglo 37% / INBS 42%, the 30% represents …

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Bank margins after NAMA

The current debate is raging over NAMA and the pricing of loans, much of it centres on the value of the properties in question and about the way in which a ‘loan’ is valued (as opposed to the underlying asset). This makes for good headlines, but it doesn’t help the average person who is not shaping policy and who’s sole role in this mess will be to carry the can and pay their part in the tax pool which will ultimately fund the bailout.

However, you may be affected in other ways, and these are things which you have the choice of opting out of, namely that of the margin you are paying if you currently have any debt/credit outstanding.

Once NAMA comes in it will be extremely likely that banks increase their margins, it is important to consider the ‘why’ as much as the ‘when’ though so we’ll take a look at those.

Why?

PTsb lead the way on this, because they are not getting NAMA protection they have no need to worry …

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NAMA pricing, and why we’ll over-pay

The ‘haircuts’ we are hearing about in the papers of late are not ‘bobs’,’mullets’ or ‘short back n’ sides’, it is all about the pricing of NAMA assets, and when the pricing does become public don’t be disappointed to hear that it isn’t as big as many have felt it must be, the taxpayer is going to (ultimately) over-pay for the assets that NAMA takes on, try not to feel ripped off, in fact, overpaying is perhaps the only way we can get NAMA to work and the alternative is worse. I don’t envisage a haircut of any more than 18-20% at most if we are to ensure that banks and Government are truly working towards one aim when it comes to NAMA.

It is vital to remember – any NAMA losses will be levied upon the banks with interest, so even if there are losses (and there has to be, because there is no way anybody could get things 100% right) the tax payer is -in the long term- sheltered. While …

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Irrational banking, non-competition creating profits unexpectedly.

That banking in Ireland is a little irrational at present is a given, however, there are occurrences in the market which will change pricing structures in the near future, interestingly, by trying not to compete for business, several banks will ultimately make the market more profitable for all of the banks, achieving almost the opposite of what they had hoped to do.

I’ll explain, at the moment we have seen widespread Sovereign Credit Retrenchment, that’s a fancy way of saying that banks who are bailed out by certain countries are only really focusing on their indigenous markets because it is those markets that bailed them out. Irish banks have done this, Irish owned UK operations are closed. Equally, UK banks here are doing this by making their existing business rates higher and their new business rates exceptionally high.

Bank of Scotland’s new business variable rate is 6.19%, a whopping 5.19% over the ECB, they are doing this to avoid lending, and they are also paring back LTVs so that you have to have greater equity in the deal to borrow, …

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Charlie Rose interviews Paul Krugman

Charlie Rose talks to Paul Krugman, in this interview we see an opinion that is contrary to the previous interview with Pete Peterson in which higher debt levels are encouraged. This is a fascinating opportunity to look at two sides of financial thought, that of the practitioner and that of the academic.

Peterson is totally adverse to defecits whereas Krugman is happy to see them baloon in order to get the Keynesian reaction in the market that he believes will come about, so now we have a grand scale and real life experiment, something that hasn’t really existed since the 30’s, that of seeing what comes about as a result of massive bailout plans when markets collapse, my hope lies with Krugman but by heart is with Peterson.

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I wish I was a banker

The nationalisation of banks has taken up many of the editorial pages of late, everybody has their own opinion and in particular there is some serious divide in the academic realm. However, the reality is that if banks are nationalised then the people working in them should by right, become public servants, and if I was a union organiser in any of the large banks I would be ensuring that everybody is organised so that the necessary steps are taken, when the state becomes the new boss, that state worker benefits are part of the deal.

Why not? Why should the state be able to offer teachers a certain contractual benefit but not other people who will be in essence, in the state employ? It’s not semi-state we are talking about, rather a nationalised bank is fully state owned. There is only one shareholder and that is the government.

There are plenty of precedents for bank employees not getting state job style benefits but there is something that nobody has mentioned yet, …

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A tale of two developers.

The builders, developers, and even architects I know are all having a really tough time at the moment, with some they are talking to the banks about how much they are willing to lose on the deals they financed because the numbers no longer add up with the market the way it is now. The adjustment is painful, but at the same time it means there are going to be a few who buck the trend, who are able to not only weather the storm but come out of it stronger.

The two types will have to have one or more of the following traits

1. They have no stock for sale at the moment, if you are going to market today it means you likely financed the deal on figures which were calculated at 05/06 prices, you paid wages and costs that were high during the remaining days of the boom and now you have property where the cost outweighs the market clearing price.

2. Any land bank was bought a long …

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