The coming worldwide credit crunch

Dear All,

here in the sunny-south-east we have the start of Spring with tulips now following daffodils into flower and some bursts of actual sunshine.

but we still have the absolute misery of colds to deal with, we cough and sneeze through the day and agonise over children and babies puking on green phlegm and being packed off to doctors for yet more antibiotics.

what it is like further North I don't know, but better weather will always be a strong pull.

does that pull in itself create a rental demand?

also with many thousands of Spanish families trapped into unpayable mortgages, surely they need rented accomodation?

do they get rental assistance?

housing benefit around here will pay £650/month  for a modest family house.

Rod, if WB invested with all his expertise in BYD and you joined him whilst the "herd" declined, surely at 50% with nothing else changed, shouldn't you and he be jumping in with both feet?

How are you privy to what he is doing?

Whilst I will never match the loss of life savings I have saved a little and am heartily sick of the interest the banks are offering whilst inflation is about 5%.

Surely investing should not be "evaporation".

Regards

Norman

Dont forget that you still have the costs to pay on these bank properties which will account for about 12%, also the properties that the banks are offering are massivly overpriced , they are available through other sources at up to 50% less if you are paying cash.

There are plenty of good agents offering these properties and some are offering mortgages as well.

Hi Norman,

I would say it's far too risky to invest in Buy to Let in Spain.

The market is at best stagnant and may well drift down further. Also, it's difficult to find quality Long Term Renters at Rent levels that would cover all of your overheads and give you a reasonable net return on your investment?

Banks offering 100% Loans are often given against property that they now own and cannot shift.

I looked at a Bank Repossession property recently that was offered with a 100% mortgage priced at €230,000. A cash offer would have bought it for €180,000!!

This thread started by the marvellous TJ222 is now 3/4 years old and many of the pitfalls he and others predicted are still very much with us today and probably will be for some years to come?

Thanks All,

What do you think of buy to let in Spain now, given that you need no deposit and prices are so low that even the lower income renters can cover low interest mortgages?

Assuming of course that you are taking up banks repo' stocks with their mortgages.

Regards

Norman

I doubt there's many (if any at all) that have beaten Buffet's long term average annual return of 21.5%.  He has managed this over a period of 40+ years.

Peter Lynch managed a 29.2% average annual return, but that was only over a 13 year period.

Norman

Warren Buffett has performed an average of 20% per annum over the last 40 years he is a company director not a fund manager

Category A shares in Berkshire Hathaway peaked at just over 100000 us dollars i seem to remember a few years ago

He is I think over 80 yrs old now, one of his most recent purchases which i invested into as well was BYD a chinese car company i am down 50% on what i invested but it should come back over time.

Regards Rod

Dear All,

is it not true that many anonomous fund managers regularly outperform him, year on year?

Regards

Norman

 From the most famous and successful investor in the world

http://news.yahoo.com/s/nm/20110324/bs_nm/us_buffett_euro

Sure TJ

You easily qualify for one of the MEP posts.

You can sit next to Nigel Farage! He can be the Sub and you can feed him the torpedoes!

 ads

I really have no idea where the EUR/BGP is going in the immediate future or long term. What I do know is that both are rapidly loseing purchasing power against hard assets, particularly oil and precious metals. In the short term it looks like the EUR/GBP is stuck in a range between 82 and 89. Despite the known and unkown skeletons in the cupboard, the eur is strengthening against the USD which is the real worry and is the pair to keep an eye on. Given the dreadful state of the EUR it makes you wonder just how much trouble the USD is in. A clue might be in the fact that just one state in the US is equivalent to Portugal in GDP and they are all bust. The sunshine state is alone the 7th biggest economy in the world, and they are well past bankrupt.

With regards the GBP it was announced that not just inflation is higer than forecast at a shattering 5%, but that the budget deficit was getting BIGGER. In other words despite all the song and dance about the swingeing cuts and all the gnashing of teeth, it still apppears that the UK is going BACKWARDS. Apparenty one BOE member voted to hold rates and add 50Bn more QE. That just shows you how confident they are in this imaginary recovery.

In summary all paper currencies are in the process of being diluted to worthlessness, its just a question of which one will get there first. 

Kenny - Re the MEP job I have no idea, do you think with my views I am in with a shot? I think Portugal and Greece will pay back their debts and become paragons of fiscal discipline first.

TOP man TJ222.

Knew you couldn't stay away too long when Socrates threw the towel in.

What's your comments on the MEP Den Dover  who has been ordered to pay back £345,000?

You're the political and finance guru on here, please, give me the inside track on how I can get one of those MEP jobs.

 TJ222 many thanks for all your educational updates.

What is your prediction for the immediate future value of euro currency against the pound sterling? Is it best to hold onto euro currency for a while or is it best to exchange back into sterling until these insecurities are resolved?

As certain as night follows day Portugal collapses. Now what to do - I know lets pour more good money after bad. After all what does a country need that suffers from too much debt, but more debt. Thats bound to sort it!

 Following the resignation of Prime Minister José Sócrates, after a series of austerity measures were voted down by Parliament, Portugal is now without a permanent government. Due to constitutional rules an election is not expected until the end of May.

·         In 2011, the country needs to refinance 25% of its national wealth – in relative terms, this is even more than Greece. The country’s borrowing cost has been above 7% for 38 consecutive days. Greece and Ireland lasted 13 and 15 days respectively at these kinds of rates before asking for a bail-out. 

·         We estimate that a bail-out package for Portugal would need to be between €60 and €70 billion. This should allow Portugal to cover all bond repayments as well as any government deficits for three years.

·         However, a bail-out is unlikely to solve any of Portugal’s fundamental problems. Both Ireland and Greece are already looking to renegotiate their bail-out terms. This illustrates that short term loans are simply not sufficient.

·         Portugal’s cost competitiveness relative to Germany has decreased by 21% since the introduction of the euro. An increase in ECB interest rates, which is widely expected next month, will also lead to a decrease in the availability of credit and domestic demand in Portugal. This could cause Portuguese GDP – already estimated to shrink by 1.4% in 2011– to contract further.

·         Although we expect a bail-out, we believe a more viable solution would be to restructure some of Portugal’s debt. In the long run this may prove cheaper despite a larger initial cost, since, unlike in the case of a bail-out, it would cut Portugal’s debt rather than increase it. It would also reduce the burden on taxpayers, instead transferring more of it to investors. Crucially, the longer Portugal waits, the costlier a restructuring will be for the country, since its debt is expected to continue to build up over the next three years.

·         In order for a restructuring not to spread contagion to Spain, it would be best to combine it with a limited bail-out, which would involve smaller contributions from member states, since more of the cost is borne by investors.

·         The hope is that Portugal will use the cash and breathing space, freed up through a restructuring, to invest wisely in its own economy, including pushing through more economic reforms. However, the country will still be stuck with an over-valued currency, and the unanswered question of whether it can ever become competitive as long as it shares a currency with radically stronger economies such as Germany.

 Roberto

Actually let your head or your pets head spin no more. From the DT last year.

"Mr Cameron gave voters an “cast-iron” promise in 2007 that a Conservative government would hold a popular vote on Lisbon.

Now my head is spinning. A poll showing how many people would like a vote on whether or not we should have a vote?

On the matter of whether (or when) Spain might revert to the peseta:

 http://www.dailymail.co.uk/news/article-1365931/Give-vote-future-Europe-Cross-party-campaign-launched-secure-historic-referendum.html

Cost to the UK to be bullied by unelected EU eurocrats

8 billion pounds - enough for 275,000 nurses or other vital jobs!!!

 From what I can see as a very brief summary, the situation with the Euro is as follows.

Things come to a head on the 24/25 of this month when European leaders meet and try and fudge a deal to stem the crisis. make no mistake what matters here is not what is or is not agreed, but wether the outcome satisfies financial markets. As should have been obvious to the politicians before and if not, certainlt is now, is that they can huff and puff all they like, but markets are in control.

If the buffoonary that goes on that w/e is judged by markets on monday as just what it is, empty promises of more debt to add to already unpayable debt, then I think things will rapidly get out of hand as bond spreads make international borrowing of any duration impossibly expensive, not just for Greece and Portugal, but for Spain too. This is what they are really worried about. Then the only route will be for more and more bailouts from the ECB courtesy of the taxpayer, the taxpayer being the only entity dum enough to lend money into a balck hole.

And here in lies the problem. The poor old taxpayer, be he German or British is sick to the back teeth of bailing out periphery nations, who they deem to have enjoyed the boom, but now are unwilling or more likely unable to pay what is due. The Greeks budget deficit is not just not getting smaller its getting bigger.

So to cut the crap and boil it all down, it comes down finaly to an uneasy standoff between how much the northern european taxpayer is willing to be bled dry to save the doomed project and how much austerity the peripheral nations can take.

My take is either the tax payer says no more and politicians like Merkel are booted out at the pols, OR the Greek and Portugese realise that this debt can never be paid back , austerity or no austerity and revolt and default.

Both the above seem only months away. Merkel has been punished in local elections and is under no illusion that she can cough up any more cash on behalf of tax payers.

Ireland who recently ended 60 years of power for the ruling party have elected a new leader on the back of revulsion at the austerity being placed upon them and the promise of renegotiating the gruesome burdens. Kenny now has imho an impossible tighrope to walk with a revolting population on one side and the EU with a gun to his head on the other.

Anyone who thinks a green shoot recovery is just around the corner is on another planet.

So it comes down to how long and how much damage do the EU want to do by holding this impossible alliance together. An awfull realisation is dawning that we are not just talking about financial damage either. As Farage said in his speech when people feel like their democracy is being taken away they have nothing left to lose with violence.

Dear All,

many thanks TJ, please keep it coming it is invaluable and Roberto is right, ignore the idiots.

there are many out there who may not post but do need the wisdom.

Regards

Norman

Good idea. And like all good ideas.............http://uk.zopa.com/ZopaWeb/public/lending/lending-at-zopa.html

 Pah!  Penny ante stuff.  Go to Wonga.com and their typical APR is 4714%.  Yep, no full stops in there.  Four Thousand Seven Hundred and Fourteen percent!

Anyone want to borrow a few euros for a week or two?  Might start up my own business.