Who owns the UK’s debt?
March 8th, 2010
This is an excellent BBC News articleby Anthony Reuben, with these two neat graphs. Click on them for enlarging.
New Short Sale Program will pay for homeowners to sell at a loss
March 8th, 2010
Times are changing and the banks are getting pressured to streamline the short sale process due to the overwhelming amount of delinquent notes on the market. And while trying not to tank the economy in the process, by flooding the market with devalued REO’s, they are launching a new program instead.
For More info click the link: http://www.nytimes.com/2010/03/08/business/08short.html
Can boring brands create word of mouth?
March 8th, 2010
This is the sixth of my crowd sourced blog entry ideas as suggested by . Ben wanted to get my thoughts on the following:
“Can boring brands and products create word of mouth?” Discuss.
In a word, no. But given the task is to discuss, I’d say the fact that matters here is the word emotion. Does a brand generate an emotional response from the audience. Does it generate passion and fervor? Good or bad? If the response isn’t emotional. There will be no discussion.
The product or service may be very good, have a reasonable price and even be a market leader. Yes it may suffice or dominate it’s category, like cornflakes do as breakfast cereal, but I’m hardly about to email my brother with a link to the Kelloggs website.
We need to think about things that are emotional responses: Joy, Anger, Sadness, Elation, Fury, Disappointment, Love, Hate….
The heavy emotions every human is familiar with. A brand has to engender these type of emotional responses to get on the word of mouth agenda. Case in point is banks. They are seen to take advantage of their customers, and we have a strong distrust and hate for them. And even though the response is negative, it’s emotional and generates a great deal of discussion. That is, it’s not boring. It’s often the case that brands which have factional parties in the for and against camp (love / hate) generate the most word of mouth. Some recent examples of brands with this effect include:
All of these have been worth talking about. Our brand reputations as people wouldn’t be hindered if we mentioned these.
As far as start ups are concerned we should thinking less about trying to generate a viral campaign, and more about the emotional impact our offer has on our audience. Being new and innovative isn’t enough, it’s got to have an emotional impact on people. With boring brands we are simply indifferent, and so we just get on with our lives.
Do you trust your bank?
March 7th, 2010
Are they the banks here to fleece us? Well they are not designed to be concerned for social welfare. And with all the investment opportunities of war, they clearly must be supporters. They can lend to the weapons manufacturers and gawk at the natural resources..
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Trickle down fleecing. You can’t rise to the top, unless you support the wars. And paying heedence to the war cry becomes a prerequisite for promotion. Enter the Muslim worker. This is a cog in the works. After all, fleecing, laundering and pilfering are all the same side of the coin..
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And there sits a teller wearing a head scarf. They need to be harassed out of the profession. And that is precisely what I witnessed in a bank the other day. A customer hassling the poor dear out of her mind. I have enough experience of these sordid times to realize he was a paid harasser. He probably doubles up as a paid (double agent) participant in social justice or anti-war groups.
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Part of the war against Islam is for the rights of speculators. And they have made some strong inroads. Bourses in Saudi Arabia and Iran, I doubt if these institutions are truly Islamic, because in Islam it is forbidden to trade money without an exchange of goods.
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Nevermind, it is just an observation, I am not holier than anyone else. I just draw the line on killing the weak. And killing women and children is now the hallmark of the West’s wars. And as for the laundering, I mean the banks, how long till we see the evil they have become? That they tax us for the war effort, and by any means.
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Iceland To The Banksters and EU: Drop Dead
March 7th, 2010
Icelandic voters have overwhelming rejected a bill that would have required the public to pay nearly half of its GDP to Great Britain and Holland to compensate for the failure of a private bank.
Ninety-three percent voted against the so-called IceSave Bill, which asked the island nation to take on US$ 5.3 billion in debt. That amount equals 45% of ’s 2009 GDP and breaks down to US$ 16,400 of debt for every man, woman, and child in the country.
Rapid deregulation and easy loans spurred by currency and other speculation over the last decade allowed one bank, Landsbanki Islands, to create an Internet banking system named IceSave. It was marketed to investors, mostly in Great Britain and Holland, as a safe and easy place to put their money with high interest rates, which the Icelandic banks were able to offer due to the strength of the Icelandic krona.
Iceland’s troubles began with the spectacular economic crash of October 2008, when all three of the country’s banks collapsed and were put under government control in the span of a week’s time. IceSave customers found their accounts had been suddenly closed and their money gone.
In an effort to freeze the financial contamination from spreading through the rest of the British economy and elsewhere, UK PM Gordon Brown put Iceland on the country’s terrorist watch list, which immediately froze any financial assets Icelanders had there.
Britain and Holland later sued Iceland to recover the lost assets its citizens had in IceSave.
In an effort to pay off the debt, Iceland took out an IMF loan and the newly-installed Left-Green Socialist Party placed exorbitant taxes on petrol and alcohol, as well as increasing taxes on its wealthiest citizens. A bill was introduced in the Icelandic parliament, the Althing, which became known as the IceSave Bill.
After a passionate debate in the Althing, with some parliamentarians even calling for Iceland to default on its loans, the bill passed with 33-30 majority.
Olafur Ragnar Grimsson
The Icelandic people mobilized after the Althing vote in protest over how much debt would be incurred and began circulating a petition calling President to not pass the bill into law.
Nearly a third of the nation signed the petition.
Seeing the negative response to the bill and not wishing to commit political suicide, President Grimmson decided to not sign it. Instead, he turned the bill over to a public referendum.
“Ordinary people, farmers and fishermen, taxpayers, doctors, nurses, teachers, are being asked to shoulder through their taxes a burden that was created by irresponsible greedy bankers,” President Grimmson said when he announced his turning over the bill to public referendum.
This weekend’s vote has already had repercussions for Iceland by the International banking interests. Its IMF loan is now in limbo and Fitch Ratings was prompted to cut Iceland’s credit grade to junk. Moody’s Investors Service and Standard & Poor’s have signaled they may follow suit if no settlement is reached.
The Icelandic government says it already has begun looking for other ways to pay off the debt. “The government’s survival doesn’t rest with this Icesave vote,” Prime Minister Johanna Sigurdardottir told RUV after the preliminary count was announced. “The government coalition remains solid,” Finance Minister Steingrimur Sigfusson told RUV.
One alternative to paying off the debt would be to responsible for starting the mess. Landsbanki assets are currently valued at 90p in the £1 and could pay off most of the £3.4bn owed to Britain and the Netherlands.
Government leaders are looking to re-negotiate a deal with Great Britain and Holland which focuses on lowering the interest rate on the amount owed.
The island’s economy shrank an annual 9.1 percent in the fourth quarter of last year, the statistics office said on March 5, and contracted 6.5 percent in 2009 as a whole.
Household debt with major credit institutions has doubled in the past five years and reached about 1.8 trillion kronur ($14 billion) in 2009, compared with the island’s $12 billion gross domestic product, according to the central bank.
Icelanders, the world’s fifth-richest per capita as recently as 2007, ended 2009 18 percent poorer and will see their disposable incomes decline a further 10 percent this year, the central bank estimates.
Grimsson, who has described his decision to put the depositor bill to a referendum as the “pinnacle of democracy,” says he’s not concerned about the economic fallout of his decision.
“The referendum has drawn back the curtain and people see on the stage the matter in a new perspective,” he said in an interview. “That has strengthened our position and our cause.”
Video: SNL Presidents skit - unregulated banks rip people off. It’s time to enact obvious solutions
March 7th, 2010
(Examiner) – Funny or Die stated the obvious in their SNL Presidents’ reunion to promote consu
Michael Moore’s Capitalism
March 7th, 2010
This week, I had the pleasure to watch “Capitalism: A Love Story”, Michael Moore’s latest movie. To begin with, I must say that I always liked Moore’s material, and I especially enjoyed “Bowling for Columbine” and “Farenheit 911″. These two movies were very effective at raising relevant issues and contribute to the public debate, although they obviously had to be taken with a grain of salt.
Being immersed in the finance world, I was looking forward to seeing what Moore would put on the table to go toe-to-toe with the principles of our capitalist system. The verdict: after two hours of good laugh, my view on this movie was mixed.
“Capitalism: A Love Story” starts with Moore brushing a very emotional picture of the housing crisis. Through mainly anecdotes, he presents some people that have suffered from the crisis, without digging and going to the roots of what really happened. Although I do agree that some people ended up in fucking awful positions post-2007, I think that Moore would have benefited from going above the first-level.
Another important segment of the movie compares the 1950s with today, as we see happy families of yesterday (Moore uses the example of his family, among others) that are able to make ends meet during an era when the riches were taxed 80%+. Then, an apocalyptic event unfolds (at least, that’s how it’s presented): the election of Ronald Reagan. At this point, one graph representing the 1980-2000 period illustrate an explosion in bankruptcies, debt, bankruptcies, incarcerations, antidepressants, etc., as the salaries of CEOs are skyrocketing. Let me say that this part left me a bit sceptical. OK: I realize that I am not an historian. Yes, I am also quite young, and I didn’t live throughout the 50s. However, I can tell you that much with confidence: I’ve been told all my life how better off our generation is compared to the predeceasing one, and this is also a phenomenon I had the chance to study numerous times from sociological and economic points of view. Who should I believe? Let’s just say that I did not buy the simple causations that Moore tried to feed his audience.
Then comes the part of the movie which I thought was brilliant, as it raised several issues that definitely needed some attention. During this segment, Moore presents some good examples of capitalism miserable failures (Google “Dead Peasants Insurance” for a good laugh), as well as some horrible inconsistencies that persist within the capitalist system (how little some pilots are paid, for example, which is just plain scandalous…). Anyway, this segment was interesting and even initiated some burning debates with my flatmates.
After that, “Capitalism: A Love Story” takes a more political turn, as Michael Moore goes back to 2008 to describe how everything unfolded at the White House when the system imploded, and shows the link between Goldman Sachs and the government. I can’t say that I learned anything new here. I also feel like the people Michael Moore chose to interview are pretty weak (with all due respect Mrs. Rep. Marcy Kaptur, you don’t know shit about economics and finance…) and consequently, this bit was not credible at all.
The documentary finishes on a very funny note, as Mr. Moore pays a visit to Wall Street with an armoured truck to claim the “people’s money”, and wrap several investment banks with yellow tape that says “Crime scene: do not cross”.
To conclude, “Capitalism: A Love Story” is an interesting film, to be taken WITH A GRAIN OF SALT. Although Michael Moore bases many of his arguments on out-of-context anecdotes, there are a few interesting things in there that most of us will appreciate.
Best,
- M
RBS clocks up $6b loss for bad debts
March 7th, 2010
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Multifamily Market Arlington Richfield
March 7th, 2010
The apartment rental market — multifamily housing — is poised to gain from a rise in household formation. Multifamily vacancy rates are likely to decline from 7.4 percent in the fourth quarter of last year to 6.6 percent in the fourth quarter of 2010, and possibly edge down to 6.1 percent next year.
Average rent is projected to decline 3.4 percent this year, following a decline 3.6 percent in 2009. Multifamily net absorption is expected to be 115,000 units in 59 tracked metro areas this year.
The “COMMERCIAL REAL ESTATE OUTLOOK” is published by the NAR Research Division for the commercial community. NAR’s Commercial Division, formed in 1990, provides targeted products and services to meet the needs of the commercial market and constituency within NAR.
Washington’s Fixes Have Become the Problem
March 7th, 2010
Uncertainties over taxes and access to credit are driving U.S. businesses to hoard cash rather than lead the economy into recovery by spending and hiring, according to a prominent real estate researcher.
The private sector has squirreled away trillions of dollars that could revitalize the economy, but businesses are reluctant to part with cash they may need for operating capital in the absence of credit, and to pay higher tax bills at all levels of government, according to Dr. Mark Dotzour, chief economist at the Real Estate Center at Texas A&M University.
“We are used to thinking of the federal government as the solution to these problems for economic growth and they have rapidly become the source of the problem because of the uncertainty that they have created for business people,” says Dotzour, who was one of several presenters at a symposium hosted by the CCIM Central Texas chapter on Feb. 23 in Austin.
What uncertainty? Taxes, for one. Early proposals to raise the capital gains tax from the current 15% to 24% have been scaled back to 20%, but even that hike would reduce initial returns on investments in commercial real estate, Dotzour says. That threat of a bigger tax hit will lower initial returns on investments in commercial real estate. That would lower the price an investor can pay for commercial real estate and push down already sinking asset values.
Similar worries about higher income tax rates, increasing energy costs as a result of cap and trade legislation, and health-care reform proposals that leave members of the medical and insurance industries guessing as to what their incomes will be next year are collectively weighing on the minds of business owners and would-be entrepreneurs.
Just as tight credit and tax hikes by President Herbert Hoover’s administration exacerbated a recession to create the Great Depression in the 1930s, which Dotzour dubs “the Hoover maneuver,” a lack of credit and potential tax hikes will stifle business growth as the nation struggles to climb out of the current downturn.
Washington’s response to the recession with stimulus dollars has served to prop up ailing financial institutions and state governments without doing enough to correct underlying problems that brought on the credit crunch and banking crisis, Dotzour contends.
By allowing banks to extend loans that are covering their debt service payments but that are underwater, meaning the value of the asset has fallen below the remaining loan balance, the federal government is postponing the inevitable write-downs — and bank failures — that must occur in order for surviving banks with healthy balance sheets to resume lending to small businesses.
Dotzour says redefining fair market value to reflect an owner’s asking price, rather than what a willing buyer would pay for a real estate asset, has allowed banks to avoid write-downs on loans that would otherwise be deemed underwater. He compares the practice of extending bad loans at U.S. banks to the Japanese government allowing banks to keep bad real estate loans on their books, which mired bank balance sheets and crippled that nation’s economic growth for more than a decade beginning in the 1990s.
“Now let’s try the Hoover maneuver and the Japanese thing all in one year,” Dotzour says. “This is a cocktail for disaster.”
Others at the conference took a more reserved view of the government’s approach to bad real estate loans. In a presentation on the capital markets, Phil Capron, president of Austin-based real estate investment firm Falcon Southwest agreed that the federal government is “supporting the fiction of minimal loan problems.”
By allowing banks to extend underwater loans, however, government regulators are enabling banks to write off bad debts a little each year and work through their problems without much pressure to speed up the process, Capron told the group.
An even greater source of uncertainty is the looming fiscal crisis for state and local governments that have relied on federal stimulus dollars to help balance their 2010 budgets rather than cut programs and staffing, says Dotzour. With major indexes showing commercial real estate values down by 40% or more from their peaks in 2007, tax appraisal rolls must soon realize a massive decline in the tax base that funds everything from state government to school districts.
“That is the biggest threat to a double-dip recession,” Dotzour says. “Government entities from the states on down are going to have to lay people off to balance their budgets.”
On the positive side, consumers have reined in their debt balances and discretionary spending, corporate profits and shareholder earnings are increasing and businesses have right-sized their spending, Dotzour says. “The only component of the economy that hasn’t right-sized yet is government at the state, city, county and federal level,” he says. “That’s going to have to happen.”
Dotzour’s contention that federal regulators aren’t doing enough to force banks to write down bad real estate loans and revalue commercial real estate collateral struck a chord with Tim Hendricks, senior vice president in the Austin office of Atlanta-based Cousins Properties Inc. (NYSE: CUZ). Hendricks says the creation of the Resolution Trust Corp. (RTC) in the 1980s enabled the banking sector to deal with bad real estate loans and resume lending in an environment of corrected real estate values.
“At some point there has to be a re-adjustment in the market,” says Hendricks, who was among the more than 200 real estate professionals at the Austin gathering. “The RTC dealt with flushing through those buildings and we’re going to need to do something similar to that this time around. The feds are going to have to make that happen and make the banks work through their problems.”