A view on the stock-markets

This is an extract from a recent statement by Anthony Bolton, Managing Director of Investments at Fidelity. Anthony is someone for whom I would have huge respect as he's a very successful, very experienced and very level-headed investor.

“In my three decades of stock-market investing, I have experienced many economic cycles and extraordinary events. The circumstances behind the current volatility might be unique, but investors’ reactions to them have many parallels to those I have witnessed in the past. The market falls around the middle of 2007 were clearly prompted by concerns over financial liquidity in credit markets. Six months on, the credit crunch is now taking its toll on growth in the broader economy, in Europe, the United States, Japan, and other parts of the world.

The actions of central banks may help to restore stability to stock markets, and I remain optimistic about the long-term prospects for equity investing. Investors should be prepared to ride out these fluctuations and take a longer-term view. Today’s volatility comes at the end of a bull run for world stock markets that has lasted much longer than the average. There is no reason to suggest that another bull run won’t follow at some point.”

How Independent is your broker...really?

Happy New Year to all our customers and friends.

That time of year again - reviewing business for 2007 and wondering where it will all come from in 2008.

In January last year I published details of where the mortgage business went to in 2006. See this post. This year, I've done the same exercise and expanded on it.

In 2007, we placed mortgage business with six lenders and no one lender got more than 32% of our overall mortgage business. In the same year, we placed life/pension/investment business with eight companies and no one company got more than 44% of our life/pension/investment business.

While many brokers will claim independence, the acid test is how many can confirm that they actually placed business with fourteen different financial institutions on behalf of clients in a business year? Be wary of so-called brokers who only place business with two or three companies - you've got to ask why.

Are Tracker Mortgages dying out?

Permanent TSB today announced that they are withdrawing Tracker Mortgage guarantees in the New Year. For those who don't know, a Tracker Mortgage is one which is at a variable rate, but the margin over the European Central Bank (ECB) rate is fixed for the life of the loan. Permanent TSB's news now means that they are only guaranteeing the margin for one year. Effectively this is no longer a Tracker Mortgage in the commonly accepted sense.

The stated reason is the cost of funds. I wonder if other lenders will follow suit. If you've been considering switching to an attractive tracker mortgage deal, maybe now is the time.

Merry Christmas from the ECB

Looks like borrowers can breathe a brief sigh of relief in the run-up to Christmas, following today's ECB meeting. At the meeting, the ECB decided to leave interest rates alone for November and gave no hints that they would be increasing rates in December.

Interpreting the hidden meanings of ECB President, Jean-Claude Trichet's speeches has become something of a science in recent years. Imminent rate increases have been flagged by use of the words "strong vigilance" in the preceding month. There was no mention of "strong vigilance" today, which would seem to indicate no rate rise in December.

Are lenders to be punished for greed?

There has been some speculation in the media recently that solicitor Michael Lynn or companies controlled by him borrowed €26 million this year alone and there have been suggestions that some of these transactions may not have had full security for the respective lenders.

How is it that small borrowers can be made jump through hoops by lenders when they want to borrow relatively modest sums in the hundreds of thousands to buy homes, while this man apparently got access to €26 million?

It wouldn't possibly be that the size of Michael Lynn's borrowing and the resulting profits to me made could have dazzled the normally cautious bankers? Time will tell.

Here's one of the many articles on this topic.

A little less conversation on pensions please

The Government's long-awaited Green Paper on pensions was finally published last week, having been postponed since March and September. You can see it here.

It's frankly disappointing that there's not one hard proposal in it - just an invitation for submissions and debate. This has been done before. Check out this link from the Pensions Board about the National Pensions Policy Initiative. The objective of the Initiative was to facilitate national debate on how to achieve a fully developed national pension system and to formulate a strategy and make recommendations for actions needed to achieve this system. It was started in October 1996.

After eleven years, can we have a little less conversaion and a little more action please?

I've expanded on this theme in the Sunday Business Post here.

All this uncertainty is creating a property blight

I read that Michael McDowell has now promised to abolish Stamp Duty for First Time Buyers and bring down the Duty for other buyers by charging the higher rates only in respect of the portion of the price that exceeds the relevant limit.

For example - there's a Stamp Duty threshold limit at €381,000. Under current rules, anyone who buys for €380,000 pays the lower rate on the whole purchase price. Anyone who buys for €382,000 pays the higher rate on the WHOLE €382,000. Under the PD proposals only the €1,000 excess over the limit would be charged at the higher rate, with the remaining €381,000 payable at the lower. I use this example just to illustrate the principle - the thresholds may well be changed under a new administration also.

Michael has also pledged that if the PDs are returned to Government the Stamp Duty reforms will be brought in before the Summer Recess, rather than at some unspecified point in the future.

This is all very well. It seems Stamp Duty has become a major election issue for all parties. So it's beginning to look like there will be reforms no matter who gets elected.

BUT

Very few people are going to buy a house between now and the election. Who wants to be the poor sap who pays a big chunk of Stamp Duty, only to hear that a few days later it was abolished for his size of house?

Bertie - please call the election now and let's get it over with.