Barry Ritholtz

Columnist

On Investing: The many hats of great investors

The crowd becomes an unthinking mob at tops and bottoms. Being able to read the emotional state of the market, as well as keeping your own emotions in check, are hallmarks of great investors.

Trial lawyer: Good litigators are always skeptical, but not negative. Is that witness telling the truth? What is motivating him? Is the opposing counsel’s argument logical? Being able to answer these questions makes for a good lawyer – and a good investor.

All CEOs want you to buy their company’s stock; every analyst wants you to follow his equity calls; every fund manager wants to run your money. When it comes to investing, everyone is trying to separate you from your money. Good investing requires good judgment. Being able to recognize valuable intel versus the usual blather is a huge advantage.

Like a good litigator, you must question data, consider alternative explanations, argue against the obvious. You cannot blindly accept everything you hear as truth, nor can you reject everything out of hand. Being able to discern between information that is valuable and that which is not, is crucial.

Mathematician/statistician: Investing is filled with math: compound interest-rates, dividend yields, long-term gains, price-to-earnings ratio, risk-adjusted returns, percentage draw downs, annualized rate of returns.

Don’t worry if you suffer from math anxiety: If you can operate the simplest calculator — even the free one that came with your computer — you have the requisite math skills needed.

If you follow the professional literature there is a plethora of advanced mathematical formulas of dubious utility. Value-at-risk is a complex mathematical formula that was supposed to tell Wall Street banks how much risk they could safely assume. It failed to prevent them from blowing themselves up during the credit crisis. The Sharpe ratio measures the excess return — the “risk premium” — an investment strategy has. Even William Sharpe, its creator, has said it’s been misapplied by Wall Street’s wizards.

Investors can ignore these sorts of mathematical esoterics. But understanding basic math is key.

Accountant: When you buy a stock, you are buying an interest in a company’s future revenue and profit. How much you pay for that future cash flow determines whether you are over or under paying. That means understanding the basics of a company’s books is a key to recognizing value.

An understanding of basic accounting is essential to grasping the fundamental health of a company or business model. It is how you determine whether an existing company is profitable, or when a young firm might become profitable. But it also can help you determine when a formerly profitable company is heading down the wrong path.

You don’t have to be a forensic accountant. These are sleuths in green visors poring over pages and pages of quarterly filings and footnotes, looking for evidence of fraud or accounting shenanigans. Forensic accountants are the guys who discovered the frauds at Enron and Worldcom, and they warned about AIG and Lehman Brothers.

Amazingly, even after these frauds were revealed, many investors refused to believe them. Having a basic knowledge about accounting can help you understand and heed the work of forensic accountants.

You don’t need to have an MBA or doctorate in economics to be a good investor. Indeed, as the spectacular blow up at Long-Term Capital Management has taught us, these can be impediments to good investing.

Instead, you need to develop more general skills. Learn market history, understand crowd psychology, how to think critically, be able to do simple math and understand basic accounting. Do this, and you are on the path to becoming a much better investor.

Ritholtz is chief executive of FusionIQ, a quantitative research firm. He runs a finance blog, The Big Picture.

How stagnant house prices are sapping spending

Leith van Onselen

May 24, 2011 - 1:37PM

Comments 24

Your home as an ATM Photo: Glen Hunt GTH

Feedback loops are an important concept in finance and economics. In a nutshell, positive feedback loops are pro-cyclical in that they act to make an economy more volatile by accentuating booms and then busts.

By contrast, negative feedback loops are counter-cyclical in that they act to reduce volatility and make an economy more stable by mitigating boom/bust cycles.

Positive feedback loops come in various forms. With respect to the Australian housing market, there are two positive feedback loops that can dramatically impact the Australian economy via their effect on the level of credit growth, aggregate demand, and employment:

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Australian home equity withdrawals

1.mortgage hypothecation – the process whereby increases (decreases) in home values result in decreases (increases) in bank capital adequacy requirements, leading to increases (decreases) in mortgage lending; and

2.wealth effect - the process of rising (falling) asset prices leading to rising (falling) consumer confidence, borrowing, household expenditure and employment.

The topic of mortgage hypothecation has been explained in detail elsewhere on MacroBusiness, and I will not expand on it further in this column.

New Zealand home equity withdrawals

Rather, I want to focus on the second point – the link between Australian home values and consumer confidence, borrowing, household expenditure and employment.

As I have argued before throughout the 2000s, when global credit conditions were benign, household debt levels and asset prices rose continually. These conditions made Australians feel richer (the "wealth effect"), spurring consumer confidence, spending and employment growth.

With house prices rising inexorably, Australians began using their homes as ATMs, withdrawing large amounts of their new found home equity…Much of this money was spent on consumption, thus further boosting incomes and employment.

UK home equity withdrawals

However, the process of debt feeding asset prices feeding confidence, consumer spending and employment growth appears to have stalled now that house prices have flat-lined. Australians have, instead, begun reducing consumption and repaying debt…

The golden era for retailing that was 2000 to 2008 is now over and the age of frugality has begun.

Wealth effect loops

Recently, a number of reports have explained the "wealth effect" positive feedback loop in greater detail.

First, today's Australian Financial Review contains an interesting article entitled Falling house prices stifle shopping, which draws on research by Citigroup showing that changes in home values are a leading determinant of household consumption expenditure:

Retailers can blame the poor housing market for lacklustre consumer spending and should expect the weakness to continue…

Citigroup…found that changes in personal wealth, together with income and interest rates, play a big role in spending…

The largest determinant of household consumption is income… But changes in the value of household assets are a leading determinant too. Houses comprise about 60% of household assets…

A 10% increase in wealth translates to 1.7% growth in final consumption expenditure in the following quarter.

This means that when house prices go up, people spend more.

The problem for retailers has been that most peoples largest asset is their home, and property values have been falling, or have been at best flat in recent months.

Citigroup's findings are supported by recent experience in Australia, New Zealand and the United Kingdom (see charts showing home equity withdrawals), where the rapid rise in household net worth up until 2007, most of which was on the back of rising home values, led to households withdrawing large amounts of home equity between 2001 and 2008. Much of this borrowing was spent on consumption, which further boosted incomes and employment.

GFC and consumption

In all three countries, rising home values between 2002 and 2008 created a positive feedback loop whereby households borrowed against their homes to fund consumption expenditure.

However, as soon as the Global Financial Crisis hit, and housing prices corrected, households began reducing consumption and repaying debt, as evident by the increasing home equity injection.

Another recent report by Deutsche Bank also lends weight to the positive feedback loop created by rising (falling) asset values. The report argues that wealth and the terms of trade have been key determinants of household savings over the past 40 years, and sees these factors as being behind the recent rise in the household saving rate.

In regards to the "wealth effect"' discussed above, Deutsche provides data plotting the household savings rate against private sector wealth. Much of the decline in the household saving rate (the flip-side of which is increased borrowing) since the early 1980s can be attributed to a rapid increase in wealth over that period, much of which was due to rising home values. With the negative wealth shock seen during the GFC there's an associated increase in saving.

Once the positive feedback loop caused by rising (falling) home values is understood, it's easy to dismiss the common misconception that unemployment would need to rise before home values would fall. Rather, rising (falling) home prices tends to lead decreases (increases) in unemployment simply because of the wealth effects described above.

Put simply, as long as Australian housing values remain stagnant or falling, consumption expenditure, credit growth and job creation will remain subdued, even with Australia's terms of trade at 140-year highs.

Leith van Onselen writes daily as the Unconventional Economist at MacroBusiness (www.macrobusiness.com.au), Australia's economic superblog. He has held positions at the Australian Treasury, Victorian Treasury and currently works at a leading investment bank. This article was republished with permission.

Read more: http://www.brisbanetimes.com.au/business/how-stagnant-house-prices-are-sapping-spending-20110524-1f1uf.html#ixzz1NJRY73vu

Which direction for term deposits?

John Collett

May 21, 2011

Illustration: Rocco Fazzari.

Interest rate rises don't automatically translate to better deals on deposits, writes John Collett.

As everyone knows, the big banks have been the big winners out of the global financial crisis. Not only are they writing nine out of 10 new mortgages but they dominate the term-deposit market as well.

About 80 per cent of the $600 billion in term deposits is with the major banks. Yet, their term deposits pay between 0.5 percentage points and 0.7 percentage points less than the best rates in the market, says the managing director of term-deposit broker The Term Deposit Shop, Grant Goodier.

Those wanting to secure good interest rates may have to act soon as term-deposit interest rates have come down slightly over the past couple of months.

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A spokesman for InfoChoice, Dirk Hofman, says the top rates for one-year to five-year term deposits have all dropped this year.

Growth in lending for houses has dropped to its lowest level in 10 years because of last November's interest-rate increase and the big banks' top-up to their mortgage rates.

In recent years, the banks have secured other sources of funding and are not as reliant on retail investors.

Even though financial markets are expecting the official cash rate to rise by 0.25 percentage points once or twice this year, that does not mean the interest rates offered on term deposits will rise, Goodier says.

''In fact, the banks may use any increase in the cash rate to reduce the margin they pay for term borrowings from the retail market,'' he says.

Canstar Cannex's tables of term deposits show Teachers Credit Union, with an ''effective'' interest rate of 6.8 per cent a year, is the best-paying three-year term deposit for $25,000. Interest is paid monthly. The next best is Victoria Teachers Credit Union, which has interest paid annually, and RaboDirect, with interest paid monthly, each with effective rates of 6.75 per cent.

The effective rate is a better indicator than the nominal rate as the effective rate includes the frequency with which interest is paid. Two term deposits may have the same ''nominal'' rate but the term deposit with the highest frequency of interest payments has the highest actual, or effective, rate.

Credit unions

Some of the highest-paying term-deposit rates are offered by credit unions and building societies.

Yet the share of the term-deposit market held by credit unions and building societies is only about 5 per cent.

Credit unions and building societies are just as safe as banks. They are regulated to the same standards as the banks and are also covered by the government's retail deposit guarantee.

The guarantee covers each investor for cash deposits of up to $1 million per institution, provided the institution is an ''authorised deposit-taking institution'' regulated by the Australian Prudential Regulation Authority.

To help the non-banks compete with the banks, the government has said it will retain the guarantee after it is due to expire on October 12 this year. It is expected, though, that the government will lower the limit from $1 million.

Those with very large amounts should spread it between institutions in case the limit is lowered, Goodier says. They could also spread the money between term deposits with differing maturity dates.

''Put the money into smaller parcels over different terms - some short-term, some medium-term and some long-term - that way, you have a hedge against changes in interest rates paid on term deposits and access to at least some of the money,'' he says.

DIY term deposits

Investors do not just have to accept the term offered by financial institutions on their term deposits.

Banks will generally be flexible and the investor can specify their desired maturity date for term deposits, says a financial analyst at Canstar Cannex, Adam Beu.

Perhaps an investor wants to settle on a house purchase and the settlement date is in three months and 10 days' time. Investors can ask for a term deposit that matures then.

ING Direct, for example, has a calendar on its website where investors can put in the date they need to have their money returned - up to one year - and the interest rate is provided.

''A lot of the term-deposit market is negotiated,'' Beu says. ''Particularly for amounts of more than $100,000.

''Local bank branches also have manager specials from time to time, because the local bank branch has targets to hit.''

Beware rollover rates — don't let inertia cost you dearly

Investors may think there is no more simple investment than a term deposit. But in the race to secure the cash of small investors, financial institutions have been engaging in some slick and tricky practices.

Last year, the Australian Securities and Investments Commission released the results of a survey of term deposits that showed many financial institutions engaged in "dual pricing", where new savers are paid a higher rate to put their money in a term deposit than existing investors, who roll over into a new term deposit of the same term.

Dual pricing was found mostly in deposit terms of less than one year. The regulator warned investors not to allow themselves to be passively rolled over into lower-paying term deposits but to shop around.

Read more: http://www.smh.com.au/money/saving/which-direction-for-term-deposits-20110520-1ewlq.html#ixzz1NJR3kxdS

Innovation key to Nestlé long-term growth

Innovation key to Nestlé long-term growth
Published: 2011/05/22

Most Malaysians are familiar with MAGGI instant noodle, MILO ice and "NESCAFÉ tarik".

Their popularity is such that they are available in most Indian Muslim restaurants and on the shelves of sundry shops and hypermarkets.

It is not easy to maintain this position as the consumers’ tastes change and new products emerge, but MAGGI, MILO and NESCAFÉ are still popular and are the top products of Malaysia's leading food and beverage company, Nestlé.

The company started in Malaysia in 1912 as the Anglo Swiss Condensed Milk Co in Penang, and over the years has continued to ensure that Malaysians go for its products.

In an interview with Bernama, Nestlé Malaysia managing director, Peter R. Vogt, attributed this preference for Nestlé products to innovation and the fact that the company always understood what the locals wanted.

"When you analyse our products, like NESCAFÉ instant coffee, there are about 100 different variants worldwide," he said, pointing out that this was because Nestlé understood that taste was different between one market and another.

"You cannot sell the same products in different markets.

"Customers’ needs continue to change. For this reason, every few years, Nestlé reviews and improves the taste of its products," he said.

Vogt said innovation was the key strategy for Nestlé to achieve long-term profitable growth.

He said the company managed to sustain its brand here as it emphasised on sustainable sourcing of raw materials, cleanliness and high quality in production in order to have the winning taste.

On Nestle's innovation plans, he said: "We have different product categories like NESCAFÉ, MILO, MAGGI, yogurt drink and breakfast cereals and each has its own innovation plan. We have recently launched the new MILO Sejuk and NESTEA Iced Lemon Tea.”

He said although Nestlé was already looking at the next five years and would continuously work on innovation plans to give its consumers the best.

"Nestlé has spent a substantial amount on research and development (R&D) via its 29 R&D centres around the world.

"Innovation is a continuous effort. At the moment, we have around 50 ongoing innovation projects in different areas and categories. For each category, we have different plans. So, it is an on-going process," he said.

With its continuous innovation effort, Vogt said, the company was confident of sustaining its brand name in the market and remain profitable in the long term.

Vogt said another important area to maintain its market position was nutrition.

"People want to have good quality and nutritious food that tastes great," he said.

He said Nestlé was upbeat on its performance for this year, projecting a positive trend for the company based on strong sales both domestic and overseas.

It registered a higher pre-tax profit of RM191.1 million for the first quarter ended March 31, 2011, from the RM170.62 million in the same quarter last year. Revenue jumped 16.1 per cent to RM1.2 billion from the RM1.02 billion recorded previously.

For 2010, Nestlé posted a turnover of RM4 billion, 7.5 per cent higher than the year before, while pre-tax profit stood at RM465.7 million, a 5.8 per cent increase versus the previous year, driven by positive developments in the local and global economies.

"Based on the first-quarter performance, we are confident of achieving better growth driven by the positive economic development in the country with the spearheading of Economic Transformation Programme," he said.

This, he said, would support the export activity in the country as well as for the company to achieve better growth. -- Bernama


Read more: Innovation key to Nestlé long-term growth http://www.btimes.com.my/Current_News/BTIMES/articles/20110522131040/Article/index_html#ixzz1N5aiTukq

Dutch Lady eyes record year amid cost pressures

Dutch Lady eyes record year amid cost pressures

Written by Nadia S Hassan
Friday, 20 May 2011 12:44

KUALA LUMPUR: Dutch Lady Milk Industries Bhd is looking to sustain its current earnings momentum, but warns that the current high prices of raw materials globally will pile on the pressure.

“For 2011, the outlook for the market is definitely promising. The dairy market as far as we can see has grown by around 10% year-on-year [y-o-y] during the first quarter, and there is a shift... toward more premium products. But we do have to remain cautious,” said managing director Bas van den Berg.

According to Van den Berg, the company’s actual cost of raw materials such as sugar, oil and milk had increased by 29% since last year.

“Skim milk powder, an important component for Dutch Lady, for example, was around US$2,000 (RM6,040) per tonne in 2009. Now we are expecting that the price could reach around US$3,500 per tonne this year,” he said.

Last year, Dutch Lady reported its highest pre-tax profit in its history of RM90.1 million, 9.2% higher y-o-y. Its net profit for the period was RM63.9 million or 99.82 sen a share, 5.7% higher than the previous year when net profit came in at RM60.4 million.

It should be noted that revenue for the period only grew by 3% to RM710.6 million compared with RM691.8 million for FY09 ended Dec 31.

“This was achieved due to a mixture of us refocusing our business direction, keeping control of our costs and differentiating our portfolio. We will be keeping to this strategy for the coming year as well,” said Van den Berg.


Dutch Lady Milk Industries Bhd chairman Datuk Zainal Abidin Putih (left) and Van den Berg show off the company's products at its AGM in Petaling Jaya.
For the current financial year, he said that due to rising raw material costs, it would be inevitable that the prices of Dutch Lady’s products would go up.

“We have already started with price increases for some of our growing up milk products and more will follow in June. We are mindful, however, of the impact on our customers so we are working to minimise the impact. The price increases will be around 5% to 6%,” he said.

However, despite the cost pressures, Van den Berg said Dutch Lady is hoping to at least maintain the same level of dividend payout seen last year.

Last year, the company paid out RM46.4 million or 72.5 sen a share comprising normal dividends and a special interim dividend. The payout was about 73% of FY10 net profit. For 1QFY11, it declared a gross interim dividend of 30 sen per share. The stock closed at RM17.84 yesterday.

For 1QFY11, Dutch Lady saw its net profit increase to RM28.3 million from RM20.8 million reported in the previous corresponding period.

Asked if the company saw any opportunities for mergers and acquisitions in line with what is happening globally among food companies, Van de Berg did not rule out the possibility.

“Asia in general is an important region for us and one where [we] will continue to focus, so we do not exclude... acquisitions, not only in Malaysia but also in the region. However, there are no plans to do so at this time,” he said.

It should be noted that Dutch Lady’s parent company, FrieslandCampina is also the result of the merger between Friesland Foods and Campina in 2007.

Dutch Lady’s main divisions currently are powdered milk, liquid milk, yoghurt products and condensed milk.

On the possibility that the company may eventually hive off any non-performing unit, Van den Berg offered no comment.

“We do have a long-term business plan when it comes to our portfolio. However, if a division is not performing it will prompt us to take a look into that segment and maybe invest less,” he said.

He also would not comment on Dutch Lady’s capital expenditure for the year, simply saying that the company would continue to invest in research for its portfolio and in its facilities.


This article appeared in The Edge Financial Daily, May 20, 2011

CIMB positive on proposed Latexx-YTY merger

Written by Kamarul Azhar
Friday, 20 May 2011 12:48


KUALA LUMPUR: The proposed merger of YTY Industry Holdings Sdn Bhd’s wholly-owned subsidiaries with Latexx Partners Bhd is viewed as a positive surprise by analysts. It will create the largest nitrile glove player in the world and the third most profitable rubber glovemaker after Hartalega Corp Bhd and Top Glove Corp Bhd.

According to a CIMB report yesterday, the merged entity would have a combined capacity of 16.2 billion gloves with an estimated 12.8 billion pieces of nitrile capacity, which is a commanding 36% market share. YTY has been focusing on nitrile gloves that make up almost 90% of its production mix.

“We take a positive view of the merger as it could create the largest nitrile glove player in the world. The proposal values YTY at a historical price-earnings ratio of 11.3 times. Assuming FY12/13 earnings growth of 15% per year, in line with demand growth for nitrile gloves, YTY could be valued at a CY12 PER of 8.8 times, a slight premium over the sector’s 8.6 times,” said the report.

Latexx told Bursa Malaysia on Wednesday that it had received a merger proposal from YTY to acquire the latter’s four wholly-owned subsidiaries for RM1.37 billion to be satisfied by RM409.5 million cash from Latexx and 382.2 million new Latexx shares of 50 sen par value at an issue price of RM2.50 per share.

The offer will remain open for acceptance for 21 days.

The proposal arrived just two days after the proposed buyout by Navis Asia VI Management Co Ltd for RM852 million fell through.

CIMB said the proposed Latexx-YTY merger could create an entity that can match Hartalega based on profitability and valuation. Based on CIMB’s pro forma net profit forecast for Latexx of RM162.3 million for the last four quarters, the merged entity could have exceeded Top Glove’s profitability and narrow its valuation as a discount to Hartalega.

“Both Latexx and YTY’s factories are located in Perak; Latexx in Kamunting and YTY in Sitiawan. Note that our pro forma net profit of RM162.3 million has not adjusted for potential cost and revenue synergies arising from the merger,” CIMB said, adding that cost savings of 10% could raise the merged company’s net profit to circa RM180 million.

CIMB also expects the proposed merger to result in Latexx’s existing shareholders enjoying a 20.2% rise in the value of their shares, assuming their equity interest in Latexx is valued at 10.7 times forward PER.

The research house maintained its “neutral” call on Latexx, and recommended a switch to Kossan Rubber Industries Bhd and Hartalega.

This article appeared in The Edge Financial Daily, May 20, 2011.

Is Your Psyche Ready For A Bull Market?

by David Allison 

The psychological hardwiring that helped us survive in primitive times also make us vulnerable to dangerous errors and biases when handling our investments in both bull and bear markets. Read on to learn about the catch phrases to watch for in a bull market, and some of the mental errors and biases they could signal.

"I know investment markets are going to pull back. I will put the money to work then."  When you hear a phrase like this, the investor could be suffering from "confirmation bias." Confirmation bias is a result of our brains trying to avoid cognitive dissonance, or having two conflicting thoughts. It occurs when investors filter out relevant evidence about their investments that contradicts their beliefs. With all of the information available about the direction of investment markets and theeconomy, it is easy to latch on to what you want to hear and filter out information that contradicts your past judgment. In a new bull market this bias can cause investors to ignore information that the economy and the financial markets are recovering. It would mean that they were wrong about their recent decision to sell or not buy certain investments. It can cause them to "sit on the sidelines" too long while investment opportunities pass them by. It is always good to think independently when investing, but make sure that you keep your ego in check and have an alternative plan if markets do not go your way.

"I finally had a profit, so I sold that investment."There is nothing wrong with taking profits, but keep in mind that investors are constantly fearing regret and seeking pride. This is what is called the "disposition effect." It is a result of the pain of an investment loss hurting much worse than the pleasure of a gain. Academic research has shown that investment losses hurt about two and a half times more than the positive feeling you get from an equivalent investment gain. Net of taxes, whether you have a gain or a loss in an investment says absolutely nothing about its future prospects. In a new bull market this bias causes investors to sell winners too early (seeking pride). Also, the painful regret associated with taking losses can keep investors from selling past bear market losers to buy new bull market leaders. To help yourself avoid this bias, make sure that you have a process for buying and selling investments that is disciplined, fundamentally sound and repeatable. The bragging rights associated with quick gains are great, but the future profits you may miss could have been even better.

"The market has gone up too far and too fast. We are due for a market correction"This phrase could signal what is known as "anchoring" or "reference point." Anchoring occurs when someone assigns a number, like a 52-week high or low, to compare the price of an investment. Most academics and investment professionals would agree that the stock market is at least weak form efficient, meaning that past price movements are poor predictors of future price performance. Long-term investing using past price patterns alone can be compared to driving your car forward while using your rearview mirror as a guide.

In a new bull market, anchoring can lead to "market acrophobia," where investors believe that because investment markets went up quickly from their lows they are due for a largecorrection. It can also give investors a false sense of value and lead to excessive risk taking in the initial stages of a bull market. Because investors have a tendency to believe that an investment is "cheap" or not as risky if it has already fallen a lot in price. Keep in mind that prices and investment fundamentals are constantly changing. Whether or not an investment has risen or fallen in the past tells you very little about its current fundamental valuation and long-term investment prospects today. (To learn more about the different levels of market efficiency and what they mean see Working Through The Efficient Market Hypothesis.)

"I will never buy stocks again"This phrase could signal the "snake bite effect." Snake bite effect occurs when investors take large losses in a certain asset class, like stocks, and become more risk adverse. The emotional toll from their past bear market losses can be so great that they feel the need to reduce exposure to the asset class or abandon it all together. It is important to think about your investment objectives, risk tolerance, and capital market expectations, and invest accordingly. In a new bull market this bias can lead to an under-diversified portfolio, or a portfolio that does not match the investor’s objectives. It may stink, but if it meets your long- term investment goals sometimes you just have to hold your nose and buy.

ConclusionFamed investor Benjamin Graham once said, "Individuals who cannot master their emotions are ill-suited to profit from the investment process." Mr. Graham knew that having control over your emotions when investing can mean the difference between success and failure.

It is important to understand that, because we are all humans and not computers; we will not always make perfectly rational and timely investment decisions. Knowing some of the catch phrases to look for and the mental errors and biases that they may signal can help you make more rational investment decisions and suppress your inner "Captain Caveman" when investing in a new bull market. (To continue learning about investor behavior read Taking A Chance On Behavioral Finance and Understanding Investor Behavior.)

by David Allison (Contact Author | Biography)

David L. Allison is vice president and the founding partner at Allison Investment Management LLC, an investment advisory firm offering managed accounts to high-net-worth investors and institutions. He received a bachelor's degree from the University of North Carolina at Wilmington where he majored in finance. He currently holds the Series 7 and Series 66. David has earned both the Chartered Financial Analysts (CFA) and the Certificate in Investment Performance Measurement (CIPM) designations. He is an advisor to CFA Institute serving on the CIPM Examination Review Panel. He is a member of the CFA Institute, the CIPM Association, the North Carolina Society of Financial Analysts (NCSFA), and the CFA Society of South Carolina, where he currently serves as President. In addition, he is First Chair on the Coastal Carolina University Wall College of Business Finance Advisory Board. Securities are offered though Triad Advisors, Inc. Member FINRA & SIPC.

UK house prices predicted to fall further amid drop in mortgage lending

House prices predicted to fall further amid drop in mortgage lending
Mortgage lending plunged 14 per cent last month as the bank holidays removed the focus on house buying, figures have suggested.

House prices predicted to fall further amid drop in mortgage lending Photo: PA

By Myra Butterworth, Personal Finance Correspondent11:59AM BST 20 May 2011

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The Council of Mortgage lenders said gross lending fell to £9.8 billion in April, down from £11.4 billion in March, and 5 per cent lower than a year ago.

The bank holidays last month – including Easter and the Royal Wedding - saw many workers enjoy extended holidays in exchange for taking just a few days annual leave.

Bob Pannell, CML chief economist, said: “It represents an unfortunate temporary loss of signal, at a time when it would be useful to gauge the resilience of house purchase demand to economic uncertainties and the pressure on household incomes.

“Levels of activity look set to remain broadly flat over the near-term. It now seems unlikely that interest rates will rise much, if at all, this year and this should help keep the market on an even keel.”

Analysts warned reduced activity in the housing market would translate into falling house prices. The average value of a home in Britain has already dropped to £160,000, down from £200,000 four years ago before the beginning of the credit crisis.

Howard Archer, an economist at Global Insight, said housing market activity remained low compared with long-term norms, even if it had edged up from its recent lows.

He said: “We suspect that further modest falls in house prices are more probable than not over the coming months as tighter fiscal policy and the possibility of gradually rising interest rates before the end of 2011 maintains pressure on the housing market.”

http://www.telegraph.co.uk/finance/personalfinance/8525831/House-prices-predicted-to-fall-further-amid-drop-in-mortgage-lending.html