A Complete Explanation Of Everything
Wednesday, August 22, 2007
Trichet = Tricheur?
Our dear friend Jean-Claude here, head of the European Central Bank holds the key to the next phase of the grief cycle for the Irish Property Market. All bets were off as recently as two weeks ago that two extra quarter percent hikes were on the way, even in the face of the FED cutting rates in the States but now...
Well now, things aren't so certain. The way both the ECB and the FED have pumped short-term liquidity into the market for banks that were finding it tough to borrow has muddied the waters inexorably.
What is clear, is that a further quarter percent rise in September or October would ramp up the decline of the Irish bubble. The real question is what do people want? Do they want this to be as long and drawn out and ugly as possible or a medium term debacle. Yes, there'll be lots of pain and lots of kicking and screaming and many a gnashing of teeth and wigs on the green. But, to paraphrase moneyweek.com, this Irish bubble and looming crisis was as visible as the US sub-prime mortgage scandal. Perhaps it's just like a tip of the iceberg to the financially illiterate, only looming out of the water at the last minute whilst thousands of tons of behemoth ice float beneath.
The only people left on board and exposed in the Irish Property market are the ordinary Joe Soaps. People who don't understand risk or yield and have an undeniable faith in bricks and mortar. Make no mistake, "savvy" and "canny", two bygone assessments of Irish investors that are now gone from our daily news media thankfully have long left the building.
Anybody who wasn't off this ship by August 2006 was really just lining up to tune the strings of the band as the Titanic begins to list badly.
If you bought early 2005 or previous to this, you're probably fine.
If you hold more than one property but have a high degree of equity, you are fine.
If you have an interest only mortgage, you are never fine.
If you bought five apartments off the plans in late 2005 because you just had the estate agent in and he told you that your crappy semi-detached four bedroom home was worth a million and you thought you'd leverage.
Well.
You're really up the shitter.
Like taking a nasty plaster off your arm, coming off this thing is going to hurt. Just go for it, no messin' around, don't drag this out unnecessarily.
Over to you Trichet.
Well now, things aren't so certain. The way both the ECB and the FED have pumped short-term liquidity into the market for banks that were finding it tough to borrow has muddied the waters inexorably.
What is clear, is that a further quarter percent rise in September or October would ramp up the decline of the Irish bubble. The real question is what do people want? Do they want this to be as long and drawn out and ugly as possible or a medium term debacle. Yes, there'll be lots of pain and lots of kicking and screaming and many a gnashing of teeth and wigs on the green. But, to paraphrase moneyweek.com, this Irish bubble and looming crisis was as visible as the US sub-prime mortgage scandal. Perhaps it's just like a tip of the iceberg to the financially illiterate, only looming out of the water at the last minute whilst thousands of tons of behemoth ice float beneath.
The only people left on board and exposed in the Irish Property market are the ordinary Joe Soaps. People who don't understand risk or yield and have an undeniable faith in bricks and mortar. Make no mistake, "savvy" and "canny", two bygone assessments of Irish investors that are now gone from our daily news media thankfully have long left the building.
Anybody who wasn't off this ship by August 2006 was really just lining up to tune the strings of the band as the Titanic begins to list badly.
If you bought early 2005 or previous to this, you're probably fine.
If you hold more than one property but have a high degree of equity, you are fine.
If you have an interest only mortgage, you are never fine.
If you bought five apartments off the plans in late 2005 because you just had the estate agent in and he told you that your crappy semi-detached four bedroom home was worth a million and you thought you'd leverage.
Well.
You're really up the shitter.
Like taking a nasty plaster off your arm, coming off this thing is going to hurt. Just go for it, no messin' around, don't drag this out unnecessarily.
Over to you Trichet.
posted by Christophe at 22.8.07
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