Eddie's Rocket Free ad hoc bulletins from Eddie including hot tips on property investments, trouble spots and trends. |
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Well how are ya and thanks for registering for Eddie’s Rocket, occasional short and concise bulletins that you can read on the go or in the john! This is our first and I’d like to formally welcome you to our readership list. I hope you can pick up a new idea or two or that, at the very least, Eddie’s Rockets will help you to make informed decisions about your own stuff. Squeezing the juice out of Cash Deposits 
Recent inflation numbers climbed over a scary 5%, lots of it to do with Government controlled sectors like energy and waste and, of course rising ECB base rates so no matter where you stash cash you’ll still be negative after DIRT and inflation. Still and all would you believe that half of the €70 billion held in deposits gets paid less than a lousy 1% according to IFSRA. I reckon that means a loss to the holders of about €90 million per year in interest when compared to the best deal in town. That’s still Northern Rock’s instant access on-line account paying 4.3%. If you’re of a mind to shovel away monthly sums Haliax, AIB and Anglo Irish bank are battling it out neck in neck for the ex-SSIA savers. Each pays over 7% but read the small print. Screwing the Banks, leveraging new competition 
Ever thought about moving your mortgage? You didn't, no wonder, sure what was the point. First there were the costs and, anyway, the rate you’d move to could be re-priced shafting you all over again. Well, Holy God how times have changed since Bank Of Scotland, now trading as Halifax entered the Irish market on 28th August 1999 with the proposition to link their pricing directly to the ECB base rate. T’was heresy, see because all the Irish, so-called competitive lenders were collectively doing us with margins at 2.5% above the base rate. Nobody guaranteed their margin over the life of a mortgage allowing lenders plenty of scope to fatten them as interest rates bopped about and borrowers eyes were elsewhere. Oh how times have changed. Recently the latest new competitor to have entered the fray is Danske bank who quietly tiptoed into the Irish market by buying NIB- remember those? George Lee and Charlie Bird wrote a bestseller about them. All’s changed under the new owners and they’ll now pay your legal costs for switching and offer you a staggeringly low 0.5% pa above the base rate. Today that’s 4.25% variable but for lots of us on higher margins (typically averaging 1.3% pa) the cuts to be made are really juicy. Consider a thirty year €400,000 mortgage on 5% costing €2,120 per month. On the NIB rate it would fall to €1,949 saving over two grand a year. But if the old contribution rate was maintained into the new NIB mortgage the term would be cut to 25.6 years. The bargain basement 0.5%pa tracker rate is on that part of your mortgage under 50% of the value of your home. For lots that means the whole mortgage but even if your loan to value is higher and provided it’s under 80% the savings are still juicy. NIB don’t deal through commission paid mortgage intermediaries so don’t expect that lot to be jumping up and down about this deal You can contact NIB directly at 1890 818 800. Love us or Laser us - what will the Property behemoth do next? 
Ah the great sweaty question of our time, will Irish Residential Property love us or laser us. Since Siapan the nation hasn’t felt so much trepidation. Often early indicators, much of them anecdotal are ahead of headline numbers, but even these @0.1% growth year to date tells us that prices are on track to give negative returns against inflation. T’was written large though, rental yields at nearly half the risk free rate of return as interest rates rose either meant rapid rental inflation or capital falls. I reckon we’re getting both. Privately senior bankers and real estate folk are in a fret. Sales volumes have collapsed. Buyers are standing off, there’s no more stretch in the borrowing elastic and sellers are in denial. Canny developers are camouflaging falls with concessions like conservatories and the like. Prices are already reversing in the weaker spots. The ESRI
estimate of a 15% over-valuation feels about right based on what’s happening. Behavioural specialists point to mood and Hyman Minsky’s bubble theory reckoning that sentiment will push the market sharply down. I’m not convinced but right now I’d be a seller not a buyer if I was over-extended with high-octane interest only mortgages on a range of recent purchases. One thing is certain, speculators will get burned but long term investors should ride it out, failing any external catastrophic shocks like a US recession or further sharp declines in our competitiveness. On balance the economy, despite risks, is still in very good shape and there isn't sufficient weight to expect anything other than what I would call a hard soft landing for the moment. Property - Getting the Highest Rate of Return at the Lowest Rate of Risk 
Never ceases to amaze me how novice investors, despite the warnings, are still hopping on planes to places they never been, with languages they can’t speak, in cultures they can’t fathom, to pick up so called bargains in the local residential market. Even if you're stupid lucky and haven’t been ripped off by an Irish or overseas firm selling you a pup at double its resale value with a fairytale about rental potential, you’re still investing in the higher risk segment of the market especially in the event of a cycle recession in the world economy Why do so, makes no sense when you consider that investment opportunities are available with gross rental yields of 6% to 7% from blue chip tenants in central locations diversified across several European countries and wrapping around very large commercial, retail, logistics and shopping centres. These geared syndicated gross roll up funds typically leverage a further €2 for every €1 from investors. Me, I prefer to take my chances with regulated professionals at the upper end of the Pan European market provided schemes are well designed and fairly priced and I suggest you do to. 
The more I read about oil and gas supplies and the growing imbalance between rampaging demand and restricted supply at current prices, the more it seems to me that we are on the cusp of a stormy transition to a new energy age. Vast fortunes will be made by firms holding the keys to the existing and new sources of energy. Already huge sums are pledged for investment in new technologies like clean coal, wave, synthetic fuels and the like. But even a commodity as simple as water is seeing bumper returns, but it’s not the only one with a strong story underlying its long term path as global demand, particularly from China and India grows for everything from copper to cement. For Heavens sake even Bush, the Oil President, has bowed to the inevitable and supercharged American efforts at making transport fuel from crops. That’s why, notwithstanding the wild volatility of these sectors, it seems to me the fifth asset class that is now a must in all diversified balance sheets is Energy and Commodities. Although the fund market is still in its early response stage to investor demand some good stuff is available. The website profiles three; JP Morgan’s Natural Resources Fund that invests in the supply side in mining stocks principally in Oil, Gas and Metals, New Ireland’s multi-fund wrapper that invests in a series of KBC specialist funds including Water and Eco-Energy and Eagle Star which tracks the Goldman Sachs Global Commodities Index, a trade weighted index that largely covers Oil, Gas and Metals future prices. Covering off the Trap Door with Gold 
For as long as I can remember there’s always been the doomsayers predicting the end of global economic growth, like a great yawning trap door that would open and engulf us all. It always seems like there’s a battle between the Yin and Yang in economics, the pessimists and optimists. Time and again, notwithstanding very near misses like the Dot.Com collapse, markets and policy makers have responded well. But that doesn’t mean that a long recession isn’t possible under certain circumstances. One of these is a collapse in the value of the Dollar as the debt-laden US decides to take the unpalatable step of letting it free-float downwards to lessen the size of its trade and current account deficit. The other economic threat is a sharp hike in energy costs pushing Oil to well over €100 per barrel and triggering boom and bust cycles like the 1970’s. Needless to say world geopolitics is another threat especially from a catastrophic terrorist act like a dirty bomb. These are real and have the capacity to put a big hole in any balance sheet reliant on weaker property and on shares. While itself a commodity, Gold is also a store of value that responds positively during bad times as more gold is bought to hedge against falls in other assets or in the value of major currencies like the Dollar. So Gold acts like insurance and holding 5% to 10% of investible assets in Gold is not unreasonable. You can buy Gold through an Exchange Traded Fund like Lyxor Gold Bullion securities quoted on the LSE or in the form of Perth Mint Certificates through Irish specialists Silver and Gold Investments Ltd 
We’d be delighted to hear from you and you can email me at eddie@eddiehobbs.com. If you'd like to invest through us, or through our partners Liberty Asset Management, you can do so by first ringing 045 442051 or going through the website Invest with Eddie. We offer fund investments on discounted terms which adds lots of extra lolly to your money compared to normal retail pricing. A formal advisory process is required and that’s why we need financial profiles etc. We'll explain more when you ring us. |
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