Financial Crisis

[midas]

I agree with everything you say particular about the 'patience' shown by the economy. I think China is a perfect example of a state run/capitalist economy. Obviously the word 'perfect' is an exaggeration but what they have achieved (and, to a degree what they are achieving) has outdone any 'capitalist' led economy or 'state run' economy especially given its size.

I suspect it is unparalleled that such growth has been achieved without either a political crisis (as wealth leads to demands for democracy) or financial crisis (usually a result of financial liberalization that has been carefully avoided in China.)

The odds are against China in the future - productivity has halved, demographics are atrocious but unlike say Japan, noone can take away what they achieved and the model with which they have achieved it. I suspect that many of the ways they have achieved their growth over such a long period, such as capital controls, a lack of financial liberalization and state influenced banks (basically policies that many people would like to get rid of) will become very much a part of emerging market growth models. I guess as we have found in Thailand (with the exception of the last bozos) a non-elected totalitarian political system can help.

“but what they have achieved (and, to a degree what they are achieving) has outdone any 'capitalist' led economy or 'state run' economy especially given its size.”

But at what price to individual security ?

The reason I asked LaoPo about the legacy of Mao is because some regarded him as an evil dictator , complicit in the death of millions.

Despite China's apparent success economically, I often wonder to what extent ( if any ) this huge apparatus of State today ( CCP ) is

still involved in " inhuman " activities ?

I have only ever visited China wheras I lived and worked in India - the other beacon of hope .

I think about the stark difference in the 2 justice systems. India has an incredibly

transparent system based on the UK legal system. Maybe too transparent because its very slow.

But China’s justice system can seem intimidating. In fact Abrak your sentence of summary execution

reminded me about my morbid fascination with the Chinese Government’s absolute right to harvest organs

from executed prisoners. What if a very senior Communist

party official with a rare blood type urgently needed an organ transplant- they could achieve

this one way or another possibly even from an innocent party with a rare blood type that could be “ framed “ by the

state to achieve this result and no one would know any better.

[Naam]

-i just made one Venezuela deal, posted timely in Thaivisa (Flying is my witness because based on his demand i explained some details by PM to him) which yielded realised 32% in one month between middle of december 09 and middle of january 10. i am not really in favour of annualising yields achieved in such a short time because the claim "400% p.a." sounds ridiculous although it is correct.

Dont be shy Naam.... it is actually about 2000% p.a.

-why should i invest for you and split profits 50/50 when my bank is providing me with fancy amounts of available dollars or euros for a decent debit interest between 1.00 and 1.50% p.a. depending on currency and maturity and without involving a second hand car as collateral?

Are you really telling us that you are 'borrowing' at 1.00 to 1.50% p.a. - surely that cant be right - even assuming say 300% collateral with a portfolio. (When I say that cant be right, I simply assume that no bank would lend at those rates.) Is it one of those subsidized bank employee loans so you dont jump ship to do God's work?

your assumption is wrong Abrak. the conditions i mentioned are in fact not generous at all based on the fact that the bank is still making a profit of at least 300% as they refinance at Libor but charge me by adding triple and quadruple of their actual cost.

besides, i don't know any bank which uses different collateral values to charge different debit interest rates when financing tradeable paper. that might apply to long term finance of real estate of which i have no idea. correct in this context is that the bank determines the collateral value of assets you hold or assets you want to buy. but -as mentioned- that is independent and has no bearing on the applied rates. in other words, you either have the required collateral or you don't. as simple as that.

but mind you, i am only talking USD and EUR and maturities of max 12 months! the picture changes in case i'd take loans in other currencies. for JP¥ min 100mm i'd pay i mere 0.485% p.a. whereas for NZD or AUD it would be a multiple.

"Dont be shy Naam.... it is actually about 2000% p.a."

HAVE MERCY Abrak! why cause sleepless nights for some readers of this discussion and/or answer their question "why 2000%"? not to mention the fact that we both could argue about the actual percentage per annum

[AlexLah]

Quote Naam:

-why should i invest for you and split profits 50/50

Becrouse I am a nice guy and you invited me for a drink.

Take care all, we are just having some fun here.

[flying]

One of the very key thoughts of Austrian (and my guess RP) is 'Laissez Faire' or 'Government intervention is generally bad'. Why this is particularly appealing at the moment is due to Bernanke/Greenspan policy/theory. Particularly Bernanke theory.

Actually it goes back much further as outlined in his recent book very well.

So RP/Austrian theory just makes common sense against extremely bad bubble theory policy which has no logic or academic backing (apart from Bernanke). (Well actually that is unfair on the basis there is quite a lot of academic backing that a lot of government policies are worse than useless - still that doesnt add to an argument for dependency on market forces.)

Again in the end all this bubble repair is after the fact that they themselves created the mess & then created more of it in the hopes of repair. It not only lacks common sense.....It lacks any sense at all other than keeping the BS rolling.

I am at a point where Anarchy might be a refreshing change....Which not surprisingly RP brought up in those 3 clips I posted. I believe he is also correct in that it will usher in the martial laws that are probably hoped for anyway.

If we are to judge a tree by its fruit what does that say about this policy that has gotten us where we are today?

[flying]

BTW one currency that looks rock solid is the Thai baht.

I too have noticed this & have recently thought about adding to it.

It is not like I wont use it in the future...well most likely since we have 2 residences there.

But I am planning to add to the Physical PM's late this month if things look like I think they will.

Perhaps adding to the baht accounts is a good idea too....(Not meant as investment of course)

[Abrak]

your assumption is wrong Abrak. the conditions i mentioned are in fact not generous at all based on the fact that the bank is still making a profit of at least 300% as they refinance at Libor but charge me by adding triple and quadruple of their actual cost.

Now you are the one playing with percentages - afterall 300% profit on nothing is effectively nothing. You cant honestly believe it is sound business practice to lend to you at 1.5% p.a. (from the banks perspective). Anyway, by the time you attach some capital to the funding cost there isnt anything left over to pay your banker's bonus. The chances are you could make a 500% mark up simply lending it back to the bank by buying its perpetual sub debt.

Still I wouldnt invest a penny in a bank that is prepared to lend to me at 1.5% p.a..

[Naam]

your assumption is wrong Abrak. the conditions i mentioned are in fact not generous at all based on the fact that the bank is still making a profit of at least 300% as they refinance at Libor but charge me by adding triple and quadruple of their actual cost.

Now you are the one playing with percentages - afterall 300% profit on nothing is effectively nothing. You cant honestly believe it is sound business practice to lend to you at 1.5% p.a. (from the banks perspective). Anyway, by the time you attach some capital to the funding cost there isnt anything left over to pay your banker's bonus. The chances are you could make a 500% mark up simply lending it back to the bank by buying its perpetual sub debt.

Still I wouldnt invest a penny in a bank that is prepared to lend to me at 1.5% p.a..

once in a while you should update your knowledge on LIBOR and EURIBOR rates if you think they are "nothing"

interbank rate plus 0.50-1.00 is the average going rate for bank loans financing tradeable paper for clients of good standing (max maturity 12 months) and sufficient collateral as long as i can think back... and i can think back more than 30 years when i first started using interest rate differentials.

[BEENTHEREDONETHAT]

I’m curious as to why people keep working and attempting to make more money when they are already seriously wealthy? Now my definition of rich is if you were to receive a million dollars it would make no change whatsoever to your lifestyle. Which of the following apply?

The money is a scorecard and determines if you have been a success or not.

You enjoy the chase of making money.

It comes easy to you so why not.

More money is more happiness.

Want to insure the future of my offspring.

I prefer good wine to beer.

Now I for one find as long as my earnings are a fair bit higher than my spending I am happy. So I spend almost zero time worrying about my money and spend the majority of my time stress free and enjoying life. My kids will get what’s left when the wife and I kick off but I have no desire to continue working so they do not have too.

[Abrak]

While lending to Naam at 1.5% is an absurd concept (to me) I was amazed at how the price of short term risk has fallen.

If you take say the Barclays short term corporate bond ETF, the average coupon is 5.4%, average time to maturity 1.9 years and average YTM to 2.5%. If you put a gun to my head I would rather lend to Naam as it is secured. There is a short term high yield junk bond fund run by Lipper (a fairly ridiculous concept imho as it is being run for yield rather than capital gain returning just 15% last year.) (Surely it would have been virtually impossible to do that badly.)) That yields 3.9% (average YTM). I just dont see how a YTM of 3.9% can equate to anything that could be regarded as 'junk'. Also it rather absurdly charges a 2% redemption fee - a higher rate than the short term risk free return.

So most people have some rather dodgy currency sitting in their bank account that is essentially risk free and yields nothing. Risk free short term rates are zero but risk adjusted rates look negative. You certainly dont need a PPT (or PPE) to justify asset price rises.

Behind the absurdly low short term lending rates is the maturity mismatch caused by the fiscal deficit (mid term borrowing) and deposits (short term funding).

Obviously this is a wet dream for hedge fund managers. It is also going to turn into a nightmare for Asian countries on the basis that raising interest rates will only exacerbate any inflationary pressure. Waiting for the US to raise short term rates could be a long wait.

[LaoPo]

While lending to Naam at 1.5% is an absurd concept (to me) I was amazed at how the price of short term risk has fallen.

If you take say the Barclays short term corporate bond ETF, the average coupon is 5.4%, average time to maturity 1.9 years and average YTM to 2.5%. If you put a gun to my head I would rather lend to Naam as it is secured. There is a short term high yield junk bond fund run by Lipper (a fairly ridiculous concept imho as it is being run for yield rather than capital gain returning just 15% last year.) (Surely it would have been virtually impossible to do that badly.)) That yields 3.9% (average YTM). I just dont see how a YTM of 3.9% can equate to anything that could be regarded as 'junk'. Also it rather absurdly charges a 2% redemption fee - a higher rate than the short term risk free return.

So most people have some rather dodgy currency sitting in their bank account that is essentially risk free and yields nothing. Risk free short term rates are zero but risk adjusted rates look negative. You certainly dont need a PPT (or PPE) to justify asset price rises.

Behind the absurdly low short term lending rates is the maturity mismatch caused by the fiscal deficit (mid term borrowing) and deposits (short term funding).

Obviously this is a wet dream for hedge fund managers. It is also going to turn into a nightmare for Asian countries on the basis that raising interest rates will only exacerbate any inflationary pressure. Waiting for the US to raise short term rates could be a long wait.

Yes, it did.

Even for short period mortgages for one year.

I was offered for one of my real estate investments where I still have a small mortgage amount a percentage of 3,6% p/a, down from 4,25% but I think I can negotiate it a little lower, although I'm thinking to pay off the mortgage; better and have my hands free and when I told my banker he wasn't happy to hear that I wanted to step out and pay off

With these percentages Naam's explanations make sense since the Banks still make money.

It's a crazy world.

LaoPo

[Abrak]

interbank rate plus 0.50-1.00 is the average going rate for bank loans financing tradeable paper for clients of good standing (max maturity 12 months) and sufficient collateral as long as i can think back... and i can think back more than 30 years when i first started using interest rate differentials.

Very true and I was very surprised. To me base lending rates below 1% is an oxymoron.

Still I know banks are essentially charities but even with deposit funding at zero%, it would be impossible to create a viable bank based on a gross spread of 1.5%. Somehow I think you will look back and tell your grandchildren.

Usually after a banking crisis, the banking sector is partially recapitalised by basically keeping short term rates low and lending long. So the risk inherent in the maturity mismatch is far less than than the gain in spread. Spreads widen helped by a lack of competition. Capital is still short.

I just find the whole concept of say lending at 1% inherently ridiculous. And really they all go bust and get bailed out sooner or later.

[Naam]

I’m curious as to why people keep working and attempting to make more money when they are already seriously wealthy? Now my definition of rich is if you were to receive a million dollars it would make no change whatsoever to your lifestyle. Which of the following apply?

1. The money is a scorecard and determines if you have been a success or not.

2. You enjoy the chase of making money.

3. It comes easy to you so why not.

4. More money is more happiness.

5. Want to insure the future of my offspring.

6. I prefer good wine to beer.

Now I for one find as long as my earnings are a fair bit higher than my spending I am happy. So I spend almost zero time worrying about my money and spend the majority of my time stress free and enjoying life. My kids will get what’s left when the wife and I kick off but I have no desire to continue working so they do not have too.

1. for some people yes

2. it can be a hobby

3. it does not always come easy

4. definitely not

5. not applicable (in my case)

6. definitely applicable

but there are many other reasons to make money. in fact too many to list all. here a few examples:

-the more money you have the less risk you have to take and the less yield you have to chase.

-you might have grown up as a poor boy, made money beyond your wildest dreams and dread the thought of being a poor boy again.

-what is the definition of "seriously wealthy" seen from the perspective of Bill Gates and a farm labourer in north-eastern Thailand. will both agree on a certain amount of money which makes a person "serious wealthy"?

-money does not necessarily buy happiness but having it comes in handy when making decisions like "shall i fly economy, business or first and should i book the run-of-the-mill hotel room with the balcony to the backyard or the one-bedroom suite with the terrace and seaview?"

[Naam]

interbank rate plus 0.50-1.00 is the average going rate for bank loans financing tradeable paper for clients of good standing (max maturity 12 months) and sufficient collateral as long as i can think back... and i can think back more than 30 years when i first started using interest rate differentials.

Very true and I was very surprised. To me base lending rates below 1% is an oxymoron.

Still I know banks are essentially charities but even with deposit funding at zero%, it would be impossible to create a viable bank based on a gross spread of 1.5%. Somehow I think you will look back and tell your grandchildren.

Usually after a banking crisis, the banking sector is partially recapitalised by basically keeping short term rates low and lending long. So the risk inherent in the maturity mismatch is far less than than the gain in spread. Spreads widen helped by a lack of competition. Capital is still short.

I just find the whole concept of say lending at 1% inherently ridiculous. And really they all go bust and get bailed out sooner or later.

it's not ridiculous at all but based on present market conditions (which will most probably not last). market conditions priced crude oil in autumn 1987 at 8 dollars a barrel and market conditions priced it 1½ years ago at nearly 150 dollars. was it ridiculous then pumping crude and cashing in 8 dollars?

no corporation goes bust which manufactures a product at a cost of 1,000 dollars and sells it for 4,000 dollars and no bank goes bust which (by mere keystrokes) borrows within seconds a certain amount for which it pays 1,000 dollars, make that amount available to me and charges me 4,000 dollars. in olden times banks have survived with much lower margins, i.e. when "libor plus one" equalled "10 plus one = 11" and the profit margin was not several hundred percent but a mere 10%.

[Abrak]

1. The money is a scorecard and determines if you have been a success or not.

2. You enjoy the chase of making money.

3. It comes easy to you so why not.

4. More money is more happiness.

5. Want to insure the future of my offspring.

6. I prefer good wine to beer.

1. I learnt some time ago that this is how I judge myself (although it is certainly not how I judge other people.)

2. Investing is the greatest game there is for me. I put in 78 multiple applications for the BT float when I was 13.

3. Actually I work really hard at it. As I see it, there is nothing worse than losing money because you havent done your homework - it is bad enough losing money when you have.

4. Certainly not. Wealth is a law of diminishing returns. Still I like the game.

5. Actually not my philosophy. Sort of like Great Gatsby the road is more exciting than the arrival. I came from a very privileged background and it was noticeable how so many of my friends suffered because their parents had achieved everything for them. I am all for creating the best opportunities for my children but I am more likely to spend or give away my wealth than give it to them.

6. I enjoy a good wine or beer as much as anyone but I still find investing gives me the ultimate thrill. I used to be CEO/Chairman of a listed company and a real business - it was a) boring and bloody difficult (to say make 25% ROE.) Investment is far more fun. In a world dedicated to 'having fun and making money' you might as well enjoy it rather than reveling in some angst about how shallow and meaningless it all is.

[midas]

I’m curious as to why people keep working and attempting to make more money when they are already seriously wealthy? Now my definition of rich is if you were to receive a million dollars it would make no change whatsoever to your lifestyle. Which of the following apply?

1. The money is a scorecard and determines if you have been a success or not.

2. You enjoy the chase of making money.

3. It comes easy to you so why not.

4. More money is more happiness.

5. Want to insure the future of my offspring.

6. I prefer good wine to beer.

Now I for one find as long as my earnings are a fair bit higher than my spending I am happy. So I spend almost zero time worrying about my money and spend the majority of my time stress free and enjoying life. My kids will get what’s left when the wife and I kick off but I have no desire to continue working so they do not have too.

1. for some people yes

2. it can be a hobby

3. it does not always come easy

4. definitely not

5. not applicable (in my case)

6. definitely applicable

but there are many other reasons to make money. in fact too many to list all. here a few examples:

-the more money you have the less risk you have to take and the less yield you have to chase.

-you might have grown up as a poor boy, made money beyond your wildest dreams and dread the thought of being a poor boy again.

-what is the definition of "seriously wealthy" seen from the perspective of Bill Gates and a farm labourer in north-eastern Thailand. will both agree on a certain amount of money which makes a person "serious wealthy"?

-money does not necessarily buy happiness but having it comes in handy when making decisions like "shall i fly economy, business or first and should i book the run-of-the-mill hotel room with the balcony to the backyard or the one-bedroom suite with the terrace and seaview?"

But what is important ? Striving every way possible to achieve 1 – 6 at any cost or acting collectively to ensure the business community

adheres to moral and ethical behavior to safeguard the future welfare of our siblings and earn their respect ?

“My kids will get what’s left when the wife and I kick off but I have no desire to continue working so they do not have too “ – It doesn't need to be a matter of how much you leave them in $ terms……….what about just leaving them with an ethical business environment in which they have a fair chance to compete ?

Right now it feels like they will be left to pick the bones.

[Abrak]

But what is important ? Striving every way possible to achieve 1 – 6 at any cost or acting collectively to ensure the business community adheres to moral and ethical behavior to safeguard the future welfare of our siblings and earn their respect ?

“My kids will get what’s left when the wife and I kick off but I have no desire to continue working so they do not have too “ – It doesn't need to be a matter of how much you leave them in $ terms……….what about just leaving them with an ethical business environment in which they have a fair chance to compete ?

Come on Midas - 'ensure the business community adheres to moral and ethical behavior to safeguard the future welfare of our siblings and earn their respect'. By doing what exactly?

I am a confirmed Marxist but capitalism and faux democracy are what drives this world and has done this past 100 years. Where does this moral and ethical business community exist, anywhere at anytime in history?

When it comes to children we simply send them to the best schools 'so they have 'more' than a fair chance to compete.'

And lets face it noone gets any respect by lecturing people in an anorak on Clapham Common. In a world in which Blankfein is chosen as man of the year by the FT (or was that just a joke?) and Paris Hilton makes the World top 100 you realize how respect is earned.

In fact the whole thing is like some totally ridiculous farce.

But here is the rub. Your goal might be to change the World and make other peoples lives better BUT the reality is that easiest way to make other peoples lives better is through wealth or making other people wealthy. You see it really is God's work....

[midas]

But what is important ? Striving every way possible to achieve 1 – 6 at any cost or acting collectively to ensure the business community adheres to moral and ethical behavior to safeguard the future welfare of our siblings and earn their respect ?

“My kids will get what’s left when the wife and I kick off but I have no desire to continue working so they do not have too “ – It doesn't need to be a matter of how much you leave them in $ terms……….what about just leaving them with an ethical business environment in which they have a fair chance to compete ?

Come on Midas - 'ensure the business community adheres to moral and ethical behavior to safeguard the future welfare of our siblings and earn their respect'. By doing what exactly?

I don’t know where to start and I don’t even believe you are asking this question if you came from a privileged background and attended a decent school. What about going after the lawmakers ( who are paid for their “ services “ by the public ) who are involved in sleazy( criminal ) behavior themselves. What about seeing the government prosecute fraud and put an end to it instead of lawmakers participating in it – just one example in the USA Senator Christopher Dodd of Chairman of the Senate Banking Committee .

In the U.K. the number of M.P.’s who so shamefully cheated the expenses system is beyond my wildest dreams – I don’t know about you. So their integrity and standing as a Member of Parliament was worth just a few thousand quid………..how pathetic. Are they any better than those that wear an anorak on Clapham Common ?

I am a confirmed Marxist but capitalism and faux democracy are what drives this world and has done this past 100 years. Where does this moral and ethical business community exist, anywhere at anytime in history?

I am a capitalist but this isn’t capitalism – its dog eat dog - the first rule….there are no rules.

Yes I absolutely believe a moral and ethical business community existed about 30 years ago – maybe not perfectly but chalk and cheese compared to now !

When it comes to children we simply send them to the best schools 'so they have 'more' than a fair chance to compete.'

That’s doesn’t guarantee anything Abrak !! Big deal – so then they leave school and even university now, cannot get a job and they see business leaders like your hero blatantly lying before the Senate to protect the interests of a small group of people.

As teenagers see this today they will be perfectly justified in adhering to the same “ values “ – i.e. honesty means nothing.

Grab what you can anyway you can.

And lets face it noone gets any respect by lecturing people in an anorak on Clapham Common. In a world in which Blankfein is chosen as man of the year by the FT (or was that just a joke?) and Paris Hilton makes the World top 100 you realize how respect is earned.

In fact the whole thing is like some totally ridiculous farce.

But here is the rub. Your goal might be to change the World and make other peoples lives better BUT the reality is that easiest way to make other peoples lives better is through wealth or making other people wealthy. You see it really is God's work....

My goal is not to change the world Abrak…………I just remind people about our ' values ' just a few decades ago when you did business with a handshake while today even the written contract means sod all !

Ask the GM bondholders about that – I don’t think they believe God anymore

[BEENTHEREDONETHAT]

Perhaps I have a different outlook on passing on wealth to my children than many of you. For one thing my youngest turns 50 this year and the oldest is 57, so saying for my children can be a little misleading as at 50 if you haven't got it all together chances are slim that you ever will regardless of money. Chances are very good that they will be retirement age before the wife and I are both gone.

We travel business class as I cannot bring myself to pay the first class prices. If there is something we really want we buy it but I expect value for my $ and don't piss away my money. I can appreciate the fact that some of you truly enjoy the challenge of making money.

I came from a average family and certainly not a privileged one, my money came from hard work and lots of good luck. But I will leave the making a better world to my children and grandchildren. The values today are nothing like they were a few decades ago and I can remember the good old days. But the good old days brings to mind a quote of Franklin Adams a journalist a couple of hundred years ago "Nothing is more responsible for the good old days than a bad memory."

For some people on this forum, Naam comes to mind, they could not make another penny and still not have to worry about the price of champagne and caviar. I have the feeling it is done for the fun of it. Which I admire. Doing it to make it easier for the offspring takes the challenge away from them. Enjoying life is #1 and having $ does make it easier, up to a point. I imagine Buffett could lose 90% of his money and his lifestyle would not change. To me the best scorecard is how much pleasure you get out of life.

[Naam]

But what is important ? Striving every way possible to achieve 1 – 6 at any cost or acting collectively to ensure the business community adheres to moral and ethical behavior to safeguard the future welfare of our siblings and earn their respect ?

Midas, i can't make up my mind whether to think of you as a deplorable fake or a naïve daydreamer who has no contact with reality or a saint to whom i should look up, adore and become his follower.

[AlexLah]

How about some pictures?

Na?

[AlexLah]

Quote Naam:

correct in this context is that the bank determines the collateral value of assets you hold or assets you want to buy.

Not sure if I understand you correctly but from my understanding, it are housing agents (sorry not sure how to call them) that determine the price of real estate for example by looking at prices that houses have been sold in the same area and general condition of the house and any special features it has now or in the future.

[lannarebirth]

Quote Naam:

correct in this context is that the bank determines the collateral value of assets you hold or assets you want to buy.

Not sure if I understand you correctly but from my understanding, it are housing agents (sorry not sure how to call them) that determine the price of real estate for example by looking at prices that houses have been sold in the same area and general condition of the house and any special features it has now or in the future.

Dr. Namm is not talking about houses Alex. House valuations are done through appraisal by appraisers.

[AlexLah]

Quote Naam:

besides, i don't know any bank which uses different collateral values to charge different debit interest rates when financing tradeable paper. that might apply to long term finance of real estate of which i have no idea. correct in this context is that the bank determines the collateral value of assets you hold or assets you want to buy. but -as mentioned- that is independent and has no bearing on the applied rates. in other words, you either have the required collateral or you don't. as simple as that.

Am I right in saying that banks do not estimate the value of real estate when providing a loan?

[midas]

Ah Naam I found this quote today.....never seen it before....what do you make of this ......

“For more than a century ideological extremists at either end of the political spectrum have seized upon well-publicized incidents such as my encounter with Castro to attack the Rockefeller family for the inordinate influence they claim we wield over American political and economic institutions. Some even believe we are part of a secret cabal working against the best interests of the United States, characterizing my family and me as "internationalists" and of conspiring with others around the world to build a more integrated global political and economic structure - one world, if you will. If that's the charge, I stand guilty, and I am proud of it."

David Rockefeller in 2002 in his own autobiographical memoirs ...................

[Naam]

Quote Naam: correct in this context is that the bank determines the collateral value of assets you hold or assets you want to buy.

Not sure if I understand you correctly but from my understanding, it are housing agents (sorry not sure how to call them) that determine the price of real estate for example by looking at prices that houses have been sold in the same area and general condition of the house and any special features it has now or in the future.

whenever i talk of banks, loans, collateral, assets, interest rates etc. i don't refer to immobile property/real estate and i normally mention that specifically. basic rule for any of my investments is that i don't buy anything which i might have problems to sell 30 minutes later.

[pkrv]

Quote Naam: correct in this context is that the bank determines the collateral value of assets you hold or assets you want to buy.

Not sure if I understand you correctly but from my understanding, it are housing agents (sorry not sure how to call them) that determine the price of real estate for example by looking at prices that houses have been sold in the same area and general condition of the house and any special features it has now or in the future.

whenever i talk of banks, loans, collateral, assets, interest rates etc. i don't refer to immobile property/real estate and i normally mention that specifically. basic rule for any of my investments is that i don't buy anything which i might have problems to sell 30 minutes later.

Except a home - where else would you put those adorable dogs ];-) ?

[Naam]

Quote Naam: correct in this context is that the bank determines the collateral value of assets you hold or assets you want to buy.

Not sure if I understand you correctly but from my understanding, it are housing agents (sorry not sure how to call them) that determine the price of real estate for example by looking at prices that houses have been sold in the same area and general condition of the house and any special features it has now or in the future.

whenever i talk of banks, loans, collateral, assets, interest rates etc. i don't refer to immobile property/real estate and i normally mention that specifically. basic rule for any of my investments is that i don't buy anything which i might have problems to sell 30 minutes later.

Except a home - where else would you put those adorable dogs ];-) ?

luckily (except once when i was a "starter") i was always in a position to pay for my homes in cash without using any financing. i also don't consider a home an investment (as most people here do). for me it is a basic necessity as well as (i admit) a luxury which the Mrs and i enjoy and therefore it is completely irrelevant whether its price goes up tenfold or drops 90%.

[quiksilva]

Quote Naam:

besides, i don't know any bank which uses different collateral values to charge different debit interest rates when financing tradeable paper. that might apply to long term finance of real estate of which i have no idea. correct in this context is that the bank determines the collateral value of assets you hold or assets you want to buy. but -as mentioned- that is independent and has no bearing on the applied rates. in other words, you either have the required collateral or you don't. as simple as that.

Am I right in saying that banks do not estimate the value of real estate when providing a loan?

In a way yes, as they use valuers* too, albeit sometimes directly employed by the bank. (* or appraisers, call us what you will)

Edited January 26, 2010 by quiksilva

[siamamerican]

A recent report indicates, oil rich but mismanaged Venezuela has the highest cumulative probability of default of any country's sovereign debt in the world with a cumulative probability of default of 57.7%.

not only "recent" reports but reports of the last nearly 20 years (especially the last decade since Hugo Chavez is in power) contain this claim. some investors are shitting in their pants when reading these reports, others (like me) chuckle, have a dirty grin on their face and rake in since 17 years extremely fat yields (in "good" times >25%, in "bad" times <10% p.a.).

to each his own

Just curious - do you buy this economic doom and gloom. You've seen some ups and downs in your lifetime and I have only a few experiences to draw on. What I see is a 'World' growing at a breathtaking pace. If you have myopic view of economics then the huge opportunities will fly by while you dwell on all the crap. The crap has always been there, albeit currently it is a little more tangible for Americans and Europeans.

Last year 3 of the four most populous nations didn't experience a recession and actually experienced robust growth. The real problems the world faces are not economic but environmental. As wealth balloons and people like myself reap the financial benefits, more natural resources will be consumed, especially by developing nations (most the world). What's the environmental impact of 2 billion more automobiles, 4 billion people consuming 3 fold the energy they are using today....????

As for people loosing trust in capitalism, I actually see more trust than prior decades. Countries like China have become richer as they adopted capitalist ideals. As they become richer, I expect their economies to be a mirror image of Europe and America. Corporations have and will continue to do great and terrible things. Nothing new out there today, just recycled arguments, fear, and insecurities.

I shoot blanks so my personal posterity isn't an issue. Guess I'll just keep enjoying the circus and as Bob Mcfarland sang "don't worry just be happy".

Edited January 26, 2010 by siamamerican

[Naam]

A recent report indicates, oil rich but mismanaged Venezuela has the highest cumulative probability of default of any country's sovereign debt in the world with a cumulative probability of default of 57.7%.

not only "recent" reports but reports of the last nearly 20 years (especially the last decade since Hugo Chavez is in power) contain this claim. some investors are shitting in their pants when reading these reports, others (like me) chuckle, have a dirty grin on their face and rake in since 17 years extremely fat yields (in "good" times >25%, in "bad" times <10% p.a.).

to each his own

Just curious - do you buy this economic doom and gloom. You've seen some ups and downs in your lifetime and I have only a few experiences to draw on. What I see is a 'World' growing at a breathtaking pace. If you have myopic view of economics then the huge opportunities will fly by while you dwell on all the crap. The crap has always been there, albeit currently it is a little more tangible for Americans and Europeans.

that's a question i can't answer with a simple "yes" or "no". it is correct that i have seen quite some ups and downs. some of them considered by "experts" as impossible and "no way that this can happen". but what i did not experience before and not expected to experience was the sort of crisis which hit us after "Lehman" and which lasted more or less till november 2008. most people have no freaking idea what i am talking about and what Damocles sword was hanging over our heads in october 2008, namely a complete global freeze of all financial transactions.

now, a year later i don't believe in economic doom and gloom but add the caveat that doom and gloom cannot be quantified. we are still in (what i call) uncharted territory and in my [not so] humble view it is impossible to evaluate or make forecasts how it affects the future of different individuals respectively different countries. i therefore still proceed with extreme caution notwithstanding the fact that 2009 "the year after" was for me the most profitable year of my career as investor. that's why i cashed in most of my profits, keep just enough invested to have the chimney smoking where the bean soup with pork knuckles is cooked, use some money trying to make a hit once in a whilke (see Venezuela) and poke my nose how to secure whatever i own.