Buffett's strategy for coping with a down market is to approach it as an opportunity to buy good companies at reasonable prices.
Buffett makes concentrated purchases. In a downturn, he buys millions of shares of solid businesses at reasonable prices.
And even in a bear market, although Buffett had billions of dollars in cash to make investments, in his 2009 letter to Berkshire Hathaway shareholders, he declared that cash held beyond the bottom would be eroded by inflation in the recovery.
Monday 19 October 2009
Know When to Sell
Indefinite growth is not a realistic expectation, yet investors often expect rising stocks to gain forever. Putting a price on the upside and the downside can provide solid guidelines for getting out while the getting is good. Similarly, if a company or an industry appears to be headed for trouble, it may be time to take your gains off of the table. There's no harm in walking away when you are ahead of the game.
(To learn more about when to get out of a stock, see To Sell Or Not To Sell.)
http://www.investopedia.com/articles/stocks/07/when_to_sell.asp
(To learn more about when to get out of a stock, see To Sell Or Not To Sell.)
http://www.investopedia.com/articles/stocks/07/when_to_sell.asp
Buying good companies when the headline news is bad
Buying good companies when the headline news is bad is the hardest thing to do (psychologically), but it's the simplest way to buy low. And buying low makes it a lot easier to sell high.
It's Different This Time – Or Is It?
In 2009, the global economy fell into recession and international markets fell in lockstep. Diversification couldn't provide adequate downside protection. Once again, the "experts" proclaim that the old rules of investing have failed. "It's different this time," they say. Maybe … but don't bet on it. These tried and true principles of wealth creation have withstood the test of time.
Discovering if we learnt the lessons of Black Monday, October 1987 Crash
From The Times October 19, 2009
Discovering if we learnt the lessons of Black Monday
Gerard Lyons: Economic view
Today is the twenty-second anniversary of Black Monday. On this day in 1987 stock markets around the world crashed. The Dow Jones fell 22.6 per cent in one day, London shed one fifth of its value over two days. The newspapers and television were full of pictures of traders in panic. Sound familiar?
Reflecting on 1987 is interesting in its own right and has lessons for today. Many of the factors that led to the 1987 crash are now being repeated around the globe: equity markets seen as out of touch with reality; concern about the twin US trade and budget deficits; and worries about the dollar.
Poor US trade figures on the preceding Thursday had spooked the markets, which had been worried already by a small interest rate hike by the Germans the week before.
That rise had triggered worries that global policy co-ordination was at an end. The period from September 1985 to the summer of 1987 was the golden era of policy co-ordination, with the Plaza and Louvre accords marking a time when the G7 acted together to first weaken and then stabilise the dollar. By October 1987, co-ordination was at an end.
The crash led to fears of a depression and prompted central banks to pump liquidity into the markets and to cut interest rates. The Bank of England base rate was 10 per cent on Black Monday and reached a low of 7.5 per cent the following May. At the time, I wrote in The Times of the problems to come. A year later, in October 1989, base rate was up to 15 per cent. Boom then became bust.
Today’s crisis has been worse, as the financial system almost collapsed, jobs have been lost, firms have gone bust. As a result, the policy response has been more aggressive. But, as in 1987, perhaps the stimulus may work better and quicker than initially expected.
If anything, Black Monday was a watered-down version of what we have experienced now and an early warning sign of the underlying volatility of markets. Then, there was talk of pro-cyclicality on the way up and down, triggered by programmed trading systems.
Also, I remember a speech by Robin Leigh-Pemberton, the Bank of England Governor, in February 1988 in which he placed the blame on regulation and supervision and said: “This will have implications for the capital resources that participants must be required to maintain.” Banks, we were then told, must learn the lessons about credit exposure and capital adequacy. How times change? Not much it would seem.
These issues were still centre stage ten days ago at the International Monetary Fund (IMF) meetings in Istanbul, where the mood was one of optimistic caution. Relief that policy had pulled us back from the brink was mixed with fears of over-regulation and concerns that we may be sowing the seeds of the next crisis.
The global outlook depends on the interaction between three key factors: the economic fundamentals; the policy response; and confidence. In Istanbul, the outlook for policy was at centre stage.
Central banks and policymakers in the West appear to be keen to co-ordinate their exit strategies from their stimulus. This is something they plan to discuss at next spring’s IMF meetings in Washington. Yet the next six months might test this accord to the full. There is every likelihood of a strong bounce over that time, as previous policy easing feeds through.
Just as we saw with the Bundesbank rate rise in early October 1987, coming months may force many countries to think about tightening policy to suit domestic needs. This great dilemma is already being played out across the world.
In recent weeks Israel and Australia have raised rates. The further east one goes, the greater the temptation to tighten policy. Indonesia and India have already hinted at higher rates, South Korea is in two minds, while behind the scenes in China policymakers appear to be at odds. There, the worries of the Premier and State Council over exports and jobs may take precedence over central bank concerns about asset price inflation.
The dilemma for many countries is that tightening early may attract hot money inflows, as investors seek higher yields. Waiting, however, may trigger asset price inflation, with liquidity flowing into equities and property, as we have seen recently in China. The question is: can any large exporting nation really tighten monetary policy before the United States, or indeed Europe, given that these are the destinations of the bulk of goods and services?
In view of such uncertainty, many countries appear keen to build up their defences, to be prepared for any eventuality. The lesson of Asia over the past decade has not been lost. After its crisis in 1997-98, Asia’s holding of global currency reserves rose from one third to two thirds now, the bulk in dollars. Others look set to follow suit.
It is not in anyone’s interests to actively sell the dollar, in case this triggers the collapse they fear. Thus, what I call passive diversification is taking place. As reserves rise, less and less are going into the dollar, although it still receives the lion’s share.
Over time, more countries will want to manage their currency against the countries with which they trade. If foreign exchange reserves were to reflect trade patterns, then $2.3 trillion of the present $6.8 trillion of global foreign exchange reserves would have to move out of the dollar. The private sector is already cautious.
As the dollar declines, the gainers are commodity currencies, gold, the euro and the yen.
Not everyone is happy. This dampens recovery prospects in countries whose currencies are appreciating and adds to problems for the most fragile economies in the eurozone. It is also adding to pressure on Asian countries, particularly China, to let their currencies strengthen. Perhaps this merits a repeat of the 1985 Plaza Accord to prevent an inevitable currency crisis.
Yet one currency that seems unlikely to rally against the dollar is sterling. In part, this is because of market caution towards the UK. It is also because a weaker pound is seen as central to Britain’s policy stance. This is alongside the need for a prolonged period of low interest rates and a much tighter fiscal stance.
The UK has had the biggest devaluation in its history. Yet there have been few squeals, as it has been gradual and is taking place in an environment where competition is tough and inflation is not a problem. As history has shown us, sterling remained the world’s reserve currency long after the UK’s economic power had peaked.
This is relevant in considering the dollar’s prospects now. The general feeling in Istanbul was that there are no alternatives to the dollar. Perhaps that is right, but the dollar and sterling face hard times ahead. If there is one thing this crisis and that of Black Monday have taught us, it is not to ignore the fundamentals.
• Gerard Lyons is chief economist at Standard Chartered
http://business.timesonline.co.uk/tol/business/columnists/article6880225.ece
Discovering if we learnt the lessons of Black Monday
Gerard Lyons: Economic view
Today is the twenty-second anniversary of Black Monday. On this day in 1987 stock markets around the world crashed. The Dow Jones fell 22.6 per cent in one day, London shed one fifth of its value over two days. The newspapers and television were full of pictures of traders in panic. Sound familiar?
Reflecting on 1987 is interesting in its own right and has lessons for today. Many of the factors that led to the 1987 crash are now being repeated around the globe: equity markets seen as out of touch with reality; concern about the twin US trade and budget deficits; and worries about the dollar.
Poor US trade figures on the preceding Thursday had spooked the markets, which had been worried already by a small interest rate hike by the Germans the week before.
That rise had triggered worries that global policy co-ordination was at an end. The period from September 1985 to the summer of 1987 was the golden era of policy co-ordination, with the Plaza and Louvre accords marking a time when the G7 acted together to first weaken and then stabilise the dollar. By October 1987, co-ordination was at an end.
The crash led to fears of a depression and prompted central banks to pump liquidity into the markets and to cut interest rates. The Bank of England base rate was 10 per cent on Black Monday and reached a low of 7.5 per cent the following May. At the time, I wrote in The Times of the problems to come. A year later, in October 1989, base rate was up to 15 per cent. Boom then became bust.
Today’s crisis has been worse, as the financial system almost collapsed, jobs have been lost, firms have gone bust. As a result, the policy response has been more aggressive. But, as in 1987, perhaps the stimulus may work better and quicker than initially expected.
If anything, Black Monday was a watered-down version of what we have experienced now and an early warning sign of the underlying volatility of markets. Then, there was talk of pro-cyclicality on the way up and down, triggered by programmed trading systems.
Also, I remember a speech by Robin Leigh-Pemberton, the Bank of England Governor, in February 1988 in which he placed the blame on regulation and supervision and said: “This will have implications for the capital resources that participants must be required to maintain.” Banks, we were then told, must learn the lessons about credit exposure and capital adequacy. How times change? Not much it would seem.
These issues were still centre stage ten days ago at the International Monetary Fund (IMF) meetings in Istanbul, where the mood was one of optimistic caution. Relief that policy had pulled us back from the brink was mixed with fears of over-regulation and concerns that we may be sowing the seeds of the next crisis.
The global outlook depends on the interaction between three key factors: the economic fundamentals; the policy response; and confidence. In Istanbul, the outlook for policy was at centre stage.
Central banks and policymakers in the West appear to be keen to co-ordinate their exit strategies from their stimulus. This is something they plan to discuss at next spring’s IMF meetings in Washington. Yet the next six months might test this accord to the full. There is every likelihood of a strong bounce over that time, as previous policy easing feeds through.
Just as we saw with the Bundesbank rate rise in early October 1987, coming months may force many countries to think about tightening policy to suit domestic needs. This great dilemma is already being played out across the world.
In recent weeks Israel and Australia have raised rates. The further east one goes, the greater the temptation to tighten policy. Indonesia and India have already hinted at higher rates, South Korea is in two minds, while behind the scenes in China policymakers appear to be at odds. There, the worries of the Premier and State Council over exports and jobs may take precedence over central bank concerns about asset price inflation.
The dilemma for many countries is that tightening early may attract hot money inflows, as investors seek higher yields. Waiting, however, may trigger asset price inflation, with liquidity flowing into equities and property, as we have seen recently in China. The question is: can any large exporting nation really tighten monetary policy before the United States, or indeed Europe, given that these are the destinations of the bulk of goods and services?
In view of such uncertainty, many countries appear keen to build up their defences, to be prepared for any eventuality. The lesson of Asia over the past decade has not been lost. After its crisis in 1997-98, Asia’s holding of global currency reserves rose from one third to two thirds now, the bulk in dollars. Others look set to follow suit.
It is not in anyone’s interests to actively sell the dollar, in case this triggers the collapse they fear. Thus, what I call passive diversification is taking place. As reserves rise, less and less are going into the dollar, although it still receives the lion’s share.
Over time, more countries will want to manage their currency against the countries with which they trade. If foreign exchange reserves were to reflect trade patterns, then $2.3 trillion of the present $6.8 trillion of global foreign exchange reserves would have to move out of the dollar. The private sector is already cautious.
As the dollar declines, the gainers are commodity currencies, gold, the euro and the yen.
Not everyone is happy. This dampens recovery prospects in countries whose currencies are appreciating and adds to problems for the most fragile economies in the eurozone. It is also adding to pressure on Asian countries, particularly China, to let their currencies strengthen. Perhaps this merits a repeat of the 1985 Plaza Accord to prevent an inevitable currency crisis.
Yet one currency that seems unlikely to rally against the dollar is sterling. In part, this is because of market caution towards the UK. It is also because a weaker pound is seen as central to Britain’s policy stance. This is alongside the need for a prolonged period of low interest rates and a much tighter fiscal stance.
The UK has had the biggest devaluation in its history. Yet there have been few squeals, as it has been gradual and is taking place in an environment where competition is tough and inflation is not a problem. As history has shown us, sterling remained the world’s reserve currency long after the UK’s economic power had peaked.
This is relevant in considering the dollar’s prospects now. The general feeling in Istanbul was that there are no alternatives to the dollar. Perhaps that is right, but the dollar and sterling face hard times ahead. If there is one thing this crisis and that of Black Monday have taught us, it is not to ignore the fundamentals.
• Gerard Lyons is chief economist at Standard Chartered
http://business.timesonline.co.uk/tol/business/columnists/article6880225.ece
Poh Kong 19.10.2009
http://spreadsheets.google.com/pub?key=th6Y8kWFmNXekgYj_wo6byA&output=html
This is a challenging time for the gold retailers. With gold price going upwards, the prices of their products are higher. This will reduce the demand for these discretionary products. The inventories sold will have to be replaced by new inventories bought at higher prices. There is also the risk of price fluctuations. The gold price can goes up as well as down. These retailers will also have to hedge against these fluctuations. If they got this right, there is exceptional gain. On the other hand, a wrong bet can be a costly affair indeed, especially for those with little working capital.
Did you profit from the best stock rally in the last 10 years?
More specifically, how much of your investment money was in equity in March 2009? One prominent blogger by his admission was 30% or so anxiously invested in first half of this year. But salutation and hooray to those with 80% or more invested in stocks in March 2009. :-)
The Investment World is Changing
Two Images Summarize the Current State of the Investing World
http://seekingalpha.com/article/167118-two-images-summarize-the-current-state-of-the-investing-world
http://seekingalpha.com/article/167118-two-images-summarize-the-current-state-of-the-investing-world
Maxis prepares to relist in Malaysia's largest IPO ever
Maxis prepares to relist in Malaysia's largest IPO ever
By Anette Jönsson | 15 October 2009
Two years after being taken private, Maxis will relist the domestic portion of its business, offering investors a high-quality yield play.
The Malaysian stockmarket is getting ready for its largest initial public offering ever and it is a familiar face that will be rejoining its ranks. Just over two years after Maxis Communications (MCB) was privatised by its controlling shareholder, Malaysia's largest provider of mobile communication services is about to return with an IPO that looks set to raise about $3 billion.
Like most other companies that are relisted following a privatisation, however, it is a smaller and more streamlined company that is currently being pre-marketed. Most notably, the company's mobile businesses outside Malaysia -- primarily the mobile operations in India and Indonesia -- will stay with the unlisted parent company. The change is signalled by the fact that the unit preparing for a listing is named Maxis Berhad, while Maxis Communications will remain a private entity that will hold the international businesses as well asa controlling stake in Maxis Berhad (from here on referred to as Maxis).
Sceptics have noted that Maxis is the portion of the company that remains after the high-growth businesses in India and Indonesia has been taken out, suggesting that this will be a much less exciting business than it was before it was taken private in June 2007. This is indeed true -- at least with regard to the removal of the fastest growing portions of the business -- though the feedback from domestic investors, in particular, suggests there are still reasons to be excited.
Sources involved in the offering note that, before the privatisation, investors were not that keen on the international business, which they saw as a drain on the company's cashflow. Indeed, much of what the company was earning from the steady and cash-generative domestic operations went straight into the funding of its overseas expansion, leaving shareholders with few benefits and a lot of execution risk.
A similar argument is outlined by Maxis in the preliminary listing prospectus as it lists the reasons behind the buyout and de-listing: The principal shareholder at the time, Ananda Krishnan-controlled Binariang, believed that the overseas expansion [existing and future] "would significantly change the financial and risk profile of MCB due to uncertainties surrounding the investment and regulatory environments in new markets, the substantial capital expenditure required, which may strain MCB's cashflow and dividend payment capability, and the increase in gearing to finance such...investments in new markets, which may result in higher borrowing costs."
"As such, Binariang undertook the privatisation of MCB as it believed that private ownership would accord greater flexibility for MCB to realise its vision to be a leading telecommunications company and to adopt a capital structure consistent with the change in its funding and risk profile," Maxis said.
"Previously the minority shareholders didn't get much of the yield. Now, the interests of the parent company and the minority shareholders are aligned," said one source, noting that Maxis has promised to pay out 75% of its annual earnings as dividends. "The company is giving the market what it wanted two years ago."
What investors who buy into the restructured listing candidate will get is a company with a leading position in the domestic market and very strong cashflow generation -- the free cashflow yield is estimated at 6%-7%. Given its size, Maxis will also be a bell-weather stock in the Malaysian market and is expected to go into all the benchmark indices, meaning investors who follow Malaysia or the telecom sector will pretty much have to buy it. Meanwhile, domestic investors are already well-familiar with the company and its ability to make money.
That should ensure a successful IPO at least, but that is not to say that Maxis will be an instant hit once it starts trading. Malaysia is a mature mobile market with a 100% penetration rate and while Maxis is the dominant player with a 46% share of the post-paid market and 38% of the pre-paid subscriptions, it does have competition from the number two and three players -- Celcom, which is owned by Axiata (formerly TM International), and DiGi.
"People don't question the quality [of Maxis], they question the growth and how much competition there is in the market," said the earlier quoted source.
The level of competition will be of particular importance in the wireless broadband segment of the market, which is viewed as a key growth area, particularly in light of the fact that 50% of the Malaysian population is estimated to be younger than 25. The country already has 15.9 million internet users and, over the past three years, they have increasingly started to access the internet through various mobile and wireless devices.
However, in a sense, the Malaysian telecom market is less competitive than other Asian markets as the key players have been expanding overseas and, just like Maxis did in its previous reincarnation, they use their domestic operations to fund this expansion. As a result, the Malaysian telecom operators have refrained from price wars that may have had a negative impact on their cashflow and margins. Aside from the mobile business, Maxis also offers fixed-line and international gateway services.
Maxis will be offering 30% of the company, or 2.25 billion shares, all of which are existing shares sold by MCB. About 7.8% of the deal will be earmarked for retail investors and another 50% will be offered to Malaysian investors recognised as Bumiputras (indigenous investors). The remainder will be split between other domestic institutional and international investors. Reducing the number of available shares even further, sources say the company is in discussion with a number of potential cornerstone investors.
Because of its greater market share, analysts argue that Maxis should trade at a premium to DiGi and Axiata, which indeed it did when it was listed as MCB. DiGi, which is viewed as the closest comparable because most of its businesses are in Malaysia, currently trades at a 2010 enterprise value-to-Ebitda multiple of 7.3 and at a price-to-earnings ratio of 14.9 times. Analysts estimate its free cashflow yield at 6.8%.
Axiata, which aside from Malaysia also has mobile operations in Indonesia, Cambodia, Mauritius, Thailand, Sri Lanka, Bangladesh, Pakistan, Iran and Singapore, trades at a 2010 EV/Ebitda multiple of 7, a P/E ratio of 16.8 times and at a free cashflow yield of 4.5%.
While Maxis will only set the price range ahead of the formal roadshow, which is scheduled to kick off on October 23, there is a maximum price of M$5.50 per share attached to the Bumiputra tranche. That price would value Maxis at an EV/Ebitda multiple of 9.6 and a P/E multiple of 16.5 and would imply a free cashflow yield of 6.2%.
A price of M$5.50 per share would also suggest a deal size of M$12.4 billion ($3.6 billion). That will be more than double Petronas Gas's $1.1 billion IPO in 1995, which still ranks as the country's largest listing, according to Dealogic. Maxis Communications' own IPO in 2002 raised $803 million, which makes it the second largest.
Maxis' final price is expected to be fixed in the week of November 9 and the shares should start trading by mid-November. CIMB, Credit Suisse and Goldman Sachs are joint global coordinators and joint bookrunners for the offering, with J.P. Morgan, Nomura and UBS joining them at the bookrunner level.
http://www.financeasia.com/article.aspx?CIaNID=114764
By Anette Jönsson | 15 October 2009
Two years after being taken private, Maxis will relist the domestic portion of its business, offering investors a high-quality yield play.
The Malaysian stockmarket is getting ready for its largest initial public offering ever and it is a familiar face that will be rejoining its ranks. Just over two years after Maxis Communications (MCB) was privatised by its controlling shareholder, Malaysia's largest provider of mobile communication services is about to return with an IPO that looks set to raise about $3 billion.
Like most other companies that are relisted following a privatisation, however, it is a smaller and more streamlined company that is currently being pre-marketed. Most notably, the company's mobile businesses outside Malaysia -- primarily the mobile operations in India and Indonesia -- will stay with the unlisted parent company. The change is signalled by the fact that the unit preparing for a listing is named Maxis Berhad, while Maxis Communications will remain a private entity that will hold the international businesses as well asa controlling stake in Maxis Berhad (from here on referred to as Maxis).
Sceptics have noted that Maxis is the portion of the company that remains after the high-growth businesses in India and Indonesia has been taken out, suggesting that this will be a much less exciting business than it was before it was taken private in June 2007. This is indeed true -- at least with regard to the removal of the fastest growing portions of the business -- though the feedback from domestic investors, in particular, suggests there are still reasons to be excited.
Sources involved in the offering note that, before the privatisation, investors were not that keen on the international business, which they saw as a drain on the company's cashflow. Indeed, much of what the company was earning from the steady and cash-generative domestic operations went straight into the funding of its overseas expansion, leaving shareholders with few benefits and a lot of execution risk.
A similar argument is outlined by Maxis in the preliminary listing prospectus as it lists the reasons behind the buyout and de-listing: The principal shareholder at the time, Ananda Krishnan-controlled Binariang, believed that the overseas expansion [existing and future] "would significantly change the financial and risk profile of MCB due to uncertainties surrounding the investment and regulatory environments in new markets, the substantial capital expenditure required, which may strain MCB's cashflow and dividend payment capability, and the increase in gearing to finance such...investments in new markets, which may result in higher borrowing costs."
"As such, Binariang undertook the privatisation of MCB as it believed that private ownership would accord greater flexibility for MCB to realise its vision to be a leading telecommunications company and to adopt a capital structure consistent with the change in its funding and risk profile," Maxis said.
"Previously the minority shareholders didn't get much of the yield. Now, the interests of the parent company and the minority shareholders are aligned," said one source, noting that Maxis has promised to pay out 75% of its annual earnings as dividends. "The company is giving the market what it wanted two years ago."
What investors who buy into the restructured listing candidate will get is a company with a leading position in the domestic market and very strong cashflow generation -- the free cashflow yield is estimated at 6%-7%. Given its size, Maxis will also be a bell-weather stock in the Malaysian market and is expected to go into all the benchmark indices, meaning investors who follow Malaysia or the telecom sector will pretty much have to buy it. Meanwhile, domestic investors are already well-familiar with the company and its ability to make money.
That should ensure a successful IPO at least, but that is not to say that Maxis will be an instant hit once it starts trading. Malaysia is a mature mobile market with a 100% penetration rate and while Maxis is the dominant player with a 46% share of the post-paid market and 38% of the pre-paid subscriptions, it does have competition from the number two and three players -- Celcom, which is owned by Axiata (formerly TM International), and DiGi.
"People don't question the quality [of Maxis], they question the growth and how much competition there is in the market," said the earlier quoted source.
The level of competition will be of particular importance in the wireless broadband segment of the market, which is viewed as a key growth area, particularly in light of the fact that 50% of the Malaysian population is estimated to be younger than 25. The country already has 15.9 million internet users and, over the past three years, they have increasingly started to access the internet through various mobile and wireless devices.
However, in a sense, the Malaysian telecom market is less competitive than other Asian markets as the key players have been expanding overseas and, just like Maxis did in its previous reincarnation, they use their domestic operations to fund this expansion. As a result, the Malaysian telecom operators have refrained from price wars that may have had a negative impact on their cashflow and margins. Aside from the mobile business, Maxis also offers fixed-line and international gateway services.
Maxis will be offering 30% of the company, or 2.25 billion shares, all of which are existing shares sold by MCB. About 7.8% of the deal will be earmarked for retail investors and another 50% will be offered to Malaysian investors recognised as Bumiputras (indigenous investors). The remainder will be split between other domestic institutional and international investors. Reducing the number of available shares even further, sources say the company is in discussion with a number of potential cornerstone investors.
Because of its greater market share, analysts argue that Maxis should trade at a premium to DiGi and Axiata, which indeed it did when it was listed as MCB. DiGi, which is viewed as the closest comparable because most of its businesses are in Malaysia, currently trades at a 2010 enterprise value-to-Ebitda multiple of 7.3 and at a price-to-earnings ratio of 14.9 times. Analysts estimate its free cashflow yield at 6.8%.
Axiata, which aside from Malaysia also has mobile operations in Indonesia, Cambodia, Mauritius, Thailand, Sri Lanka, Bangladesh, Pakistan, Iran and Singapore, trades at a 2010 EV/Ebitda multiple of 7, a P/E ratio of 16.8 times and at a free cashflow yield of 4.5%.
While Maxis will only set the price range ahead of the formal roadshow, which is scheduled to kick off on October 23, there is a maximum price of M$5.50 per share attached to the Bumiputra tranche. That price would value Maxis at an EV/Ebitda multiple of 9.6 and a P/E multiple of 16.5 and would imply a free cashflow yield of 6.2%.
A price of M$5.50 per share would also suggest a deal size of M$12.4 billion ($3.6 billion). That will be more than double Petronas Gas's $1.1 billion IPO in 1995, which still ranks as the country's largest listing, according to Dealogic. Maxis Communications' own IPO in 2002 raised $803 million, which makes it the second largest.
Maxis' final price is expected to be fixed in the week of November 9 and the shares should start trading by mid-November. CIMB, Credit Suisse and Goldman Sachs are joint global coordinators and joint bookrunners for the offering, with J.P. Morgan, Nomura and UBS joining them at the bookrunner level.
http://www.financeasia.com/article.aspx?CIaNID=114764
Learning the Ropes of Investing
Learning the Ropes of Investing
Six Benefits of Joining an Investment Club
© Odiete Eneakpodia
Oct 18, 2009
The path to financial freedom goes beyond just earning money from a regular job and saving it. Successful wealth accumulation begins when we learn how to multiply our money.
A lot of people are today familiar with the need to invest their money however they don’t have the requisite knowledge to make profitable investment decisions especially since the world of investment is fraught with risks and uncertainties.
One way to build knowledge and gain confidence about investing is through investment clubs.
1. What is an investment club?
2. Benefits of investment clubs
(Access to investment ideas that could boost your personal investment activities
Club meetings provide you access to smart ideas on attractive investment opportunities such as what stock is currently a must buy in the market, new private placement opportunities etc. Sharing in the research of others and the extra bonus of a group setting for discussing investment ideas and issues often enriches the quality of our investment decision making.
Many clubs also develop unique learning activities that could include listening to and watching investment training videos from top investment experts, playing investment games like cash flow 101 developed by Robert kiyosaki, attending investment workshops, etc.)
3. You could become your own stock analyst
(One thing a rookie investor can learn form joining and participating in the activities of your investment club is the skill to pick stocks he wants to invest in rather than relying on his intuition or his stock broker.
It gives him the skill to analyze stocks and other investments on his own before putting his money. This knowledge acquired will prove useful in his own personal investment activities.)
4. Leverage the power of numbers to minimize risk
5. Build wealth gradually and achieve financial independence
(Joining an Investment club enables a newbie investor master the discipline of setting aside a part of your income periodically to invest an ideal strategy to gradually build wealth and achieve financial independence.)
6. Social networking
Read more: http://investment.suite101.com/article.cfm/learning_the_ropes_of_investing#ixzz0UKk1xBKa
Six Benefits of Joining an Investment Club
© Odiete Eneakpodia
Oct 18, 2009
The path to financial freedom goes beyond just earning money from a regular job and saving it. Successful wealth accumulation begins when we learn how to multiply our money.
A lot of people are today familiar with the need to invest their money however they don’t have the requisite knowledge to make profitable investment decisions especially since the world of investment is fraught with risks and uncertainties.
One way to build knowledge and gain confidence about investing is through investment clubs.
1. What is an investment club?
2. Benefits of investment clubs
(Access to investment ideas that could boost your personal investment activities
Club meetings provide you access to smart ideas on attractive investment opportunities such as what stock is currently a must buy in the market, new private placement opportunities etc. Sharing in the research of others and the extra bonus of a group setting for discussing investment ideas and issues often enriches the quality of our investment decision making.
Many clubs also develop unique learning activities that could include listening to and watching investment training videos from top investment experts, playing investment games like cash flow 101 developed by Robert kiyosaki, attending investment workshops, etc.)
3. You could become your own stock analyst
(One thing a rookie investor can learn form joining and participating in the activities of your investment club is the skill to pick stocks he wants to invest in rather than relying on his intuition or his stock broker.
It gives him the skill to analyze stocks and other investments on his own before putting his money. This knowledge acquired will prove useful in his own personal investment activities.)
4. Leverage the power of numbers to minimize risk
5. Build wealth gradually and achieve financial independence
(Joining an Investment club enables a newbie investor master the discipline of setting aside a part of your income periodically to invest an ideal strategy to gradually build wealth and achieve financial independence.)
6. Social networking
Read more: http://investment.suite101.com/article.cfm/learning_the_ropes_of_investing#ixzz0UKk1xBKa
KLSE Market Performance last week
Asian Economic News
--------------------------------------------------------------------------------
Malaysian Shares May End Win Streak
10/18/2009 6:41 PM ET
(RTTNews) - The Malaysian stock market has finished higher now in four consecutive sessions, collecting more than 20 points or 1.9 percent to hit a fresh closing high for the year. The Kuala Lumpur Composite Index moved above the 1,255-point plateau, but now analysts are forecasting a modest retreat at the opening of trade on Monday.
The global forecast for the Asian markets suggests weakness, thanks to disappointing economic and earnings news out of the United States. Technology and financial stocks are expected to be under pressure, although strength among the commodities - especially oil - may provide some support. The European and U.S. markets finished modestly lower on Friday, and the Asian markets are forecast to follow that lead.
The KLCI finished modestly higher on Friday, thanks to firm support from the financial stocks and the plantations, while the industrial issues saw more modest gains.
For the day, the index added 9.91 points or 0.80 percent to finish at 1,256.77. Volume was 1.147 billion shares worth 1.217 billion ringgit. There were 481 gainers and 239 decliners, with 238 stocks finishing unchanged.
Among the gainers, DBE Gurney Resources, SKP Resources, TA Enterprise, Sime Darby, Maybank, CIMB Group, Tenaga, IOI Corp and Genting all finished higher.
http://www.rttnews.com/Content/AsianMtUpdates.aspx?Node=B3&Id=1096268
--------------------------------------------------------------------------------
Malaysian Shares May End Win Streak
10/18/2009 6:41 PM ET
(RTTNews) - The Malaysian stock market has finished higher now in four consecutive sessions, collecting more than 20 points or 1.9 percent to hit a fresh closing high for the year. The Kuala Lumpur Composite Index moved above the 1,255-point plateau, but now analysts are forecasting a modest retreat at the opening of trade on Monday.
The global forecast for the Asian markets suggests weakness, thanks to disappointing economic and earnings news out of the United States. Technology and financial stocks are expected to be under pressure, although strength among the commodities - especially oil - may provide some support. The European and U.S. markets finished modestly lower on Friday, and the Asian markets are forecast to follow that lead.
The KLCI finished modestly higher on Friday, thanks to firm support from the financial stocks and the plantations, while the industrial issues saw more modest gains.
For the day, the index added 9.91 points or 0.80 percent to finish at 1,256.77. Volume was 1.147 billion shares worth 1.217 billion ringgit. There were 481 gainers and 239 decliners, with 238 stocks finishing unchanged.
Among the gainers, DBE Gurney Resources, SKP Resources, TA Enterprise, Sime Darby, Maybank, CIMB Group, Tenaga, IOI Corp and Genting all finished higher.
http://www.rttnews.com/Content/AsianMtUpdates.aspx?Node=B3&Id=1096268
Sunday 18 October 2009
The 20 Golden Rules of Investment
May 21, 2008
The 20 Golden Rules of Investment
Investing your own money is a complicated and potentially dangerous business. One slip in the tricky world of stocks and shares can prove very costly. So Times Money offers a guide on how to survive and profit in the investment jungle.
1) Buy low; sell high.
2) Don’t chase performance. If you like a stock or fund, buy on the dips.
3) Run your winners. In other words let your profts roll up and don't be in too much of a hurry to kiss goodbye to your best-performing investments.
4) Cut your losses before they become excessive.
5) Never get too attached to a share or a fund. As the late Sir John Harvey Jones once said: “You sometimes have to kill your favourite children.”
6) In general, think long-term. As Warren Buffett, the great US investor once said: “Never buy a stock unless you would be happy with it if the stock exchange closed down for the next 10 years.”
7) But don’t let that stop you reviewing your portfolio regularly. You need to check that your portfolio is properly balanced.
8) Reinvest your dividends. The power of compounding your reinvested share or fund dividends makes a massive difference to your overall return.
9) Don’t put all your eggs in one basket. If you had had all your money in tech stocks in March 2000 you would probably have had about 90 per cent of the value of your portfolio wiped out over the next couple of years.
10) Although it makes sense to hold shares for the long term you don’t necessarily want to hold them forever. In the end shares are for buying and selling not for buying and forgetting about.
11) To that end make sure you spend as much time thinking about selling shares as you do about buying them. Most investors neglect this vital discipline.
12) Make sensible use of tax-privileged investment vehicles such as pensions and Individual Savings Accounts (Isas) but never let the tax tail wag the investment dog.
13) If you don’t understand how a particular investment works it’s probably not a good idea to put money into it.
14) Don’t be afraid to ask the ‘what if’ question. In the late 1990s many investors bought supposedly ‘low risk’ savings products linked to the performance of the stock market. Few asked what would happen if the stock market fell off a cliff, as it did from 2000 onwards, slashing the value of the so-called ‘precipice bonds’.
15) Be flexible and don’t back yourself into a corner. If you bought a stock for 500p and it’s now languising at 50p, don’t stubbornly hold on to it indefinitely in the misguided belief that it’s bound to recover to 500p - it may never do so.
16) Don’t be afraid to go against the crowd - some of the most successful investors have been contrarian investors.
17) Never be influenced by ‘special offers’ such as the discounts sometimes advertised by fund groups for purchasing funds within a specific time. It’s much better to buy the right fund than to get a few pounds knocked off the purchase price of the wrong fund.
18) Ignore all stock market ‘tips’, whether offered in the workplace or at the nineteenth hole of the local golf course. Remember the old stock market adage that “where there’s a tip there’s a tap”.
19) Never get too carried away by investment euphoria, whether for stocks and shares or bricks and mortar - nothing goes up for ever.
20) Remember that if something looks too good to be true - it probably is.
http://timesbusiness.typepad.com/money_weblog/2008/05/the-twenty-gold.html
Bull market
Share prices are consistently rising. Think “bull in a china shop” – excited, but potentially dangerous
Beginner's glossary of Investment terms
Beginner's glossary
Bear
Describing someone as bearish does not mean they are large and hairy, but that they have a cautious and conservative outlook, and are more inclined to be pessimistic. A bear market is characterised by falling share prices and poor returns. Bear times are bad times
Bear squeeze
Not a hug from a grizzly, but a slight rise in share prices after they have fallen sharply as traders who have been short selling buy back their positions
Bull market
Share prices are consistently rising. Think “bull in a china shop” – excited, but potentially dangerous
Bear market
Share prices are consistently falling. Think bear with a sore head – just sort of grumpy
Dead cat bounce
When a share rallies after a large fall, before dropping to new lows – just as a cat that falls from a height bounces on the ground when it lands, even though it is dead
Catching a falling knife
Buying more shares as the prices slump, in the belief that they may soon rebound. Likely to have the same effect on your wallet as actually catching a falling knife will have on your hand
Correction
A misleading term – it sounds minor, but it actually means quite a steep fall in the price of shares
Credit crunch
With all this free publicity it could become the name of a biscuit snack. But it refers to the seizure in the money markets caused by the fallout from US sub-prime mortgage customers defaulting on their loan payments. Big banks refused to lend each other money and while some banks hoarded their cash, others were left exposed without enough cash in their pocket. Think Northern Rock
Going long
Buying shares in the belief that the price will increase, producing a profit. A bit like buying a Hermès handbag in the hope that it will become a classic commanding a much higher price at auction. This doesn’t always work
Growth recession
Not male pattern baldness, but very slow economic growth, which can have a similar effect on consumers as a recession
Hyperinflation
When prices go up faster than people can spend their money. If you leave a wheelbarrow of cash in the street, someone steals only the wheelbarrow
Hedging
Taking two positions that will offset each other if prices change and so limiting financial risk. In roulette, the ultimate hedge bet is putting your money on red and black – but you are bound to lose half your money. Hedge fund managers are cleverer than that
Negative equity
Owing more on your home than it is actually worth. Lots of people who took out mortgages for 100 per cent or more of the value of their properties are in danger of this, especially when house prices fall
Short selling
When traders sell shares they don’t yet own as they believe prices will fall and they can buy them back at a lower price. Like selling your laptop to your mate for £1,000. Before you take it round, it breaks. You buy another in a shop for £800 and give it to your mate, making £200
Stagflation
Not a beast the Royal Family hunts, but a coalescence of stagnation and inflation – a period of slow growth with high inflation
Sub-prime mortgages
Home loans granted to people with troubled credit histories. Those who have missed a few credit card payments are classed as “light” sub-prime, while others who have become bankrupt in the past or who have court judgments against their name for nonpayments of debts are “heavy” sub-prime
Wind up
It means something else to humorists, and Jeremy Beadle. In the money world, it means when a company ceases activity with a view to shutting down. It can also refer to ending a pension scheme, or a relationship. If you want to dump someone, “I’d like to wind things up with you” should do it
http://business.timesonline.co.uk/tol/business/economics/article3234671.ece
Bear
Describing someone as bearish does not mean they are large and hairy, but that they have a cautious and conservative outlook, and are more inclined to be pessimistic. A bear market is characterised by falling share prices and poor returns. Bear times are bad times
Bear squeeze
Not a hug from a grizzly, but a slight rise in share prices after they have fallen sharply as traders who have been short selling buy back their positions
Bull market
Share prices are consistently rising. Think “bull in a china shop” – excited, but potentially dangerous
Bear market
Share prices are consistently falling. Think bear with a sore head – just sort of grumpy
Dead cat bounce
When a share rallies after a large fall, before dropping to new lows – just as a cat that falls from a height bounces on the ground when it lands, even though it is dead
Catching a falling knife
Buying more shares as the prices slump, in the belief that they may soon rebound. Likely to have the same effect on your wallet as actually catching a falling knife will have on your hand
Correction
A misleading term – it sounds minor, but it actually means quite a steep fall in the price of shares
Credit crunch
With all this free publicity it could become the name of a biscuit snack. But it refers to the seizure in the money markets caused by the fallout from US sub-prime mortgage customers defaulting on their loan payments. Big banks refused to lend each other money and while some banks hoarded their cash, others were left exposed without enough cash in their pocket. Think Northern Rock
Going long
Buying shares in the belief that the price will increase, producing a profit. A bit like buying a Hermès handbag in the hope that it will become a classic commanding a much higher price at auction. This doesn’t always work
Growth recession
Not male pattern baldness, but very slow economic growth, which can have a similar effect on consumers as a recession
Hyperinflation
When prices go up faster than people can spend their money. If you leave a wheelbarrow of cash in the street, someone steals only the wheelbarrow
Hedging
Taking two positions that will offset each other if prices change and so limiting financial risk. In roulette, the ultimate hedge bet is putting your money on red and black – but you are bound to lose half your money. Hedge fund managers are cleverer than that
Negative equity
Owing more on your home than it is actually worth. Lots of people who took out mortgages for 100 per cent or more of the value of their properties are in danger of this, especially when house prices fall
Short selling
When traders sell shares they don’t yet own as they believe prices will fall and they can buy them back at a lower price. Like selling your laptop to your mate for £1,000. Before you take it round, it breaks. You buy another in a shop for £800 and give it to your mate, making £200
Stagflation
Not a beast the Royal Family hunts, but a coalescence of stagnation and inflation – a period of slow growth with high inflation
Sub-prime mortgages
Home loans granted to people with troubled credit histories. Those who have missed a few credit card payments are classed as “light” sub-prime, while others who have become bankrupt in the past or who have court judgments against their name for nonpayments of debts are “heavy” sub-prime
Wind up
It means something else to humorists, and Jeremy Beadle. In the money world, it means when a company ceases activity with a view to shutting down. It can also refer to ending a pension scheme, or a relationship. If you want to dump someone, “I’d like to wind things up with you” should do it
http://business.timesonline.co.uk/tol/business/economics/article3234671.ece
Iceland exposed: How a whole nation went down the toilet
From The Times
October 1, 2009
Iceland exposed: How a whole nation went down the toilet
A year ago this month, Iceland went bankrupt. We explain how it went from being the world’s happiest nation to one with a bleak future
Roger Boyes
Along a narrow strip between downtown Reykjavik and the northern coastline lies a jumble of half-built high-rise buildings that was to be the new Manhattan of the north. By Spring this year, the place had become an urban graveyard. Someone has scrawled "CAPITALISM R.I.P." on the side of one of the buildings. Squatters have moved in, converting an abandoned house into a cosy café.
The Reykjavikers cheerfully welcomed the presence of some kind of life to this ghost town. The developers, however, did not approve. So, just after Easter, the riot police were sent in with a chainsaw to hack through barricaded doors and pepper spray to disable the young squatters. The clean-up was nasty, brutal and short: it was the official end of Niceland.
The Icelandic sense of live-and-let-live was the first casualty of the meltdown. For centuries, island society had functioned on family lines. Yes, there were feuds and friction between family members, but there was tolerance too. The financial collapse, though, brought a rawness to everyday life.
While the Nordic rules still applied, no one was hustled out of the office on the day that the banks went under; no one stuffed the clutter of their desks into a cardboard box. But by November, dismissal letters were in the mail. Unemployment rose from under 2 per cent in September 2008 to 10 per cent by the spring of 2009.
Although for a decade or so Iceland had imagined itself to be at the centre of the prosperous world, the crash propelled it back into the remote North Atlantic. Its pride was hurt. Icelanders were conscious that they had been steered incompetently and corruptly into the abyss. Yet the political class showed no remorse. David Oddsson — the head of the central bank, who as prime minister had presided over the privatisation of Iceland’s state-owned banks — was quick to blame the magnate Jon Asgeir and the oligarchs; Jon Asgeir blamed both the US for letting Lehman collapse and Oddsson for not responding intelligently; the Icelandic Government blamed the British Government.
“There is no culture of ministerial responsibility here,” says a senior official. “The prime minister will say, ‘I didn’t order this, I didn’t cause that, so why should I step down?’ And since the prime minister says that, so do the ministers and department chiefs.” As a result, no one has an interest in discovering why mistakes were made. The main threads of Icelandic rule were too intertwined, matted together: remove any one of these components — say, by an ill-judged confession of incompetence — and the whole edifice was likely to collapse.
The smallness of the society increased the risks of mismanagement: the humiliation of national bankruptcy, the speed with which the middle class was impoverished, the heaviness of personal debt, the almost instant flip from being the world’s happiest nation to being a place that could offer no future to its young. So Iceland became not only the first country to go broke, but also the first in this global financial crisis to chase its government out of power.
Soon, as living standards began to fall and people took to the streets, an uprising gathered force. It became known as the kitchen revolution because demonstrators used wooden spoons to bang pots and pans to drown out the proceedings of Parliament.
These protests had plenty of pathos, above all, the singing of the rather dirge-like national anthem. Mainly, though, this was an ironic revolt. Fake banknotes bearing the image of David Oddsson’s head were distributed, free of course, since he was widely seen as having betrayed the krona.
In December, Gurri, one of Iceland’s many self-proclaimed witches. led protesters toward the central bank and entered the building, carrying a life-size effigy of David Oddsson. Repelled by police, the short blonde witch, dressed of course in black, started to spank her effigy —“You’ve been a bad boy!” — pronounced a spell, then stuffed it in a garbage bag.
Until this moment, Iceland’s protest movement was an expression of hurt and an inchoate demand for change. Its ironic undertone was in part because many in the middle class, now being squeezed between higher mortgage debt and lower real wages, were half-aware that they had allowed the political class to get away with their incompetence and bad deals. Now they were demanding that the same class be changed, yet no party was completely untarnished by the years of easy credit.
On October 24 the Government formally asked the IMF for help, both to send a signal to other nations and to stabilise the currency. There was no rush to help: Britain and the Netherlands were adamant that there should be no IMF package until they secured guarantees from Reykjavik to compensate Icesave depositors. Geir Haarde, the Prime Minister, eventually agreed because he had no choice: without the IMF loan of $2.1 billion, Iceland was finished. On November 16, Iceland announced that it would comply with the EU Deposit Guarantee Scheme’s directive guaranteeing compensation for up to €20,877 [£19,000] for each savings account.
The horse-trading showed the Icelanders that their Government had no choices and could not in any rational sense be described as a government any more. More than 50,000 people had their savings wiped out. The Salvation Army hostel began to fill up with families unable to make ends meet.
Car loans became like some obscure punishment from hell. Taken out in foreign currencies, the loan had to be paid back in a krona whose value was shrivelling by the day. The only way out of the squeeze was to take out a newspaper advert offering thousands of dollars to anyone willing to take on the car and its bulging debt. “The Range Rover and other SUVs have gone through an incredible transformation,” a sociologist tells me. “First they were luxuries, then they were necessities — and you can see the point, you really need off-road vehicles in Iceland, it’s a rugged place — and now they have become burdens.” In the two months after the meltdown, Icelanders had been in shock, and the shock had atomised the island. The traditional solidarity of Christmas and the long holiday mutated into political solidarity — and contempt for the seemingly guilty silence of the political class. When the demonstrations began in the new year, the tone was different. The aim was clear: to bring down the Government. Now, for the first time, the politicians began to understand what was at stake. They were not being barracked by communist agitators but were being brought to account by a nation.
Those in power thought they were being confronted by lynch justice and allowed the riot police almost a free hand to defend the institutions of state. Those demonstrating outside began to sniff every hint of weakness. There were many such pointers. Politicians were buckling under ill health. The Foreign Minister Ingibjorg Solrun Gisladottir, head of the Social Democrats, had been absent for most of the crisis because she was being treated for a brain tumour; President Ólafur Grimsson underwent heart surgery; and Haarde announced that he had cancer of the oesophagus. The demonstrators saw weakness politically too, of course. Iceland looked rudderless, with the Parliament coming back from its Christmas holidays on January 22, after what might seem to have been an unusually long break in the middle of a world crisis.
That day Haarde addressed [Parliament] in his first detailed account of what the Government had been doing since the October meltdown. It did not seem like much. Measures had been introduced, he said, to ease the pain of those tumbling into debt. Housing funds were to go easy on loan defaulters, child allowance was to be paid every month instead of every quarter, the unemployed were to be encouraged to study, employers nudged into offering part-time work instead of firing staff. Haarde stretched it out into a catalogue of 15 points, but it amounted to a wish list.
None of this pleased or satisfied the protesters. The rallies grew and grew. The protesters banged tom-toms and lit effigies of politicians until late in the night. There were no more vague demands for apologies. “What do you want to happen next, after they’ve gone?” I asked the people in the crowd that January, and did not get a coherent reply. Some wanted a return to “fairness”; the more radical were so enraged that they went so far as to demand a kind of Nuremberg trial, with Haarde, Oddsson and the oligarchs jailed on charges of defrauding the nation.
“This economic crisis has hit us with the force of a war,” said the novelist Einar Mar Gudmundsson. “It will cost us more than a war, not just in lost wealth, but in people — we will lose a generation, maybe two, to migration.” By January, having just had his cancer diagnosis, Haarde realised that he could no longer convince the nation that he was indispensable to its resurrection.
It was time to go. On January 23, a Friday and the end of a long, noisy week of public protests, Haarde announced early elections and said that, for medical reasons, he would not be running. That was not exactly the triumphant defenestration that the protesters had been hoping for. The announcement of his illness — he left the country within days for treatment in Amsterdam — confused the protest movement and the country.
“The first political casualty of the global crisis!” was the headline in Britain, but in Iceland it did not seem like that. “There was just a kind of emptiness,” recalled Magnus, an economics student. But the crumbling of the establishment had begun.
The interim government, intended to steer Iceland toward the election, was to be a coalition of Social Democrats and the Left Greens, led by the dour Johanna Sigurdardottir. Johanna, nicknamed Saint Johanna by Icelanders, was different. She was from the left of the Social Democrats, and had been pushed aside in the contest for the party leadership in 1996 (leading her to declare: “My time will come”). During election campaigns she would go to the huge dockside warehouse that housed Reykjavik’s flea market. Next to the dried-fish stands, a scruffy café, much favoured by the down-and-out, is warm, cheap, and only three minutes’ walk from the Salvation Army hostel. Johanna would sit there and listen to their complaints and those of anyone else ready to draw up a chair.
Johanna was not only the island’s first female prime minister, but also the first openly gay national leader in the world. Her relationship, in an officially registered union with the journalist and children’s book writer Jonina Leosdottir was well-known to Icelanders but attracted little curiosity. With only one gay bar on the island, Icelanders do not stay in the closet long. But to non-Icelanders Johanna’s sexuality seemed important, a sign of a more fundamental shift in attitudes. Half of her Cabinet were women — not unusual in Nordic societies — and more significant, the heads of new versions of two of the banks were women: Elin Sigfusdottir at New Landsbanki and Birna Einarsdottir at New Glitnir. Their brief was to create domestic-deposit bases, make a go of shaping a conventional, customer-oriented bank and allow the formerly glamorous and now ruined international departments to sit in a kind of toxic-waste disposal unit.
The only Icelandic investment company to emerge from the crisis relatively unscathed was Audur Capital, set up by two women, Halla Tomasdottir and Kristin Petursdottir, to cater to female investors. “Our ground rule was simple,” said Halla Tomasdottir. “We didn’t invest in anything we couldn’t understand.” In a sense the supposedly new orientation toward women echoes the Viking tradition, when the men would disappear out to sea for weeks on end, leaving women to run the households.
The Icelandic approach to dealing with the crisis, essentially to let the women clean up after the party, is part of a broader feeling, though, that the Age of Testosterone may be coming to an end in the financial sector. Blaming the crisis on endocrinology is of course absurdly reductionist.
At the heart of Ms Sigurdardottir’s shift for Iceland was not her feminism but a basic egalitarianism. Iceland had for centuries been a society without large income differences, that treasured literacy, socialised health care and equal access to nature and its resources. Indeed, when David Oddsson took over the prime ministership in the early 1990s, Iceland bore a strong resemblance to a socialist society.
Johanna Sigurdardottir put egalitarianism back on the agenda; her promotion of women was not supposed to right some ancient wrong, a discriminatory imbalance, but rather ease the way back toward a society that treasured solidarity. Women understood Johanna’s aims better than men and confirmed her in power in the general election on April 22. By that time, after only a few months in government, Johanna had convinced society that it had to reach deep into itself and fish out special Icelandic virtues: modesty, hard work, a rugged respect for each other.
That was not enough, however, to dispel the anger, the sense of betrayal. On election day, protesters broke into the villa of Bjorgolfur Thor Bjoergolfsson in Frikirkjuvegur, Free Church Street. Thor had bought the house from the city council years earlier. The villa had belonged to his great-grandfather, who had founded one of the country’s most influential trading dynasties. Since Thor was ensconced in Holland Park, London, the protesters were able to climb on to the front balcony of the house, hang some life-size Viking dolls from the balustrade, and hang a banner declaring: “We were never elected to any office, yet we ruled everything”. The sentiment was shared by the voters, who elected the Social Democrat and the Left Green parties with a huge majority.
Seven months after the meltdown, Iceland was still a seething, frustrated, unhappy nation. A friend of mine encountered a normally mild old woman as she left city hall after casting her vote. “What were these people thinking when they bled their own country dry?” the woman said. “They will never be able to show their faces in this country again, nor will their children, or their children’s children.”
Gurri, the blonde witch, could not have produced a better curse.
Meltdown Iceland by Roger Boyes is published by Bloomsbury on October 10 at £12.99. To order it for £11.69, including p&p, call 0845 2712134 or visit timesonline.co.uk/booksfirst
The way the crash happened
September 2008: Seven months after reports that Kaupthing, Iceland’s biggest bank, is seven times more likely to go into administration than a typical European one, the Icelandic Government introduces emergency legislation allowing it to nationalise Iceland’s third largest bank, Glitnir.
October 2008: Iceland takes control of Kaupthing, after Alistair Darling invokes anti-terrorism laws to freeze its UK assets. British institutions and individuals scramble to recover their savings (local authorities alone had deposited £900 million into Icelandic banks). The BBC business editor Robert Peston writes on his blog that Kaupthing has “the worst case of financial BO I’ve encountered”.
November 2008: The IMF approves a $2.1 billion (£1.4 billion) loan to Iceland. Its inflation soars to 17.1 per cent.
January 2009: Protesters surround Prime Minister Geir Haarde’s car and pelt it with eggs. He resigns.
February 2009: Iceland’s Government tries to sell its embassy residences for a total of £25 million in an attempt to raise capital for the cash-strapped country.
April 2009: A centre-left coalition lead by the interim PM Johanna Sigurdardottir wins a majority of 34 out of 63 seats at the parliamentary elections.
June 2009: A consortium of four Icelandic banks buys West Ham United from Bjorgolfur Gudmundssonm, who lost a fortune when Landbanksi went into administration.
July 2009: Iceland applies for EU membership. Documents released by the Icelandic Government reveal that the British and Dutch authorities held a meeting in 2006 to consider what would happen if the Icelandic bank Landsbanki could not cover the deposits of British and Dutch savers.
August 2009: Iceland annual birth rate experiences a 3.5 per cent hike.
Sarah Haines
http://women.timesonline.co.uk/tol/life_and_style/women/the_way_we_live/article6855928.ece
October 1, 2009
Iceland exposed: How a whole nation went down the toilet
A year ago this month, Iceland went bankrupt. We explain how it went from being the world’s happiest nation to one with a bleak future
Roger Boyes
Along a narrow strip between downtown Reykjavik and the northern coastline lies a jumble of half-built high-rise buildings that was to be the new Manhattan of the north. By Spring this year, the place had become an urban graveyard. Someone has scrawled "CAPITALISM R.I.P." on the side of one of the buildings. Squatters have moved in, converting an abandoned house into a cosy café.
The Reykjavikers cheerfully welcomed the presence of some kind of life to this ghost town. The developers, however, did not approve. So, just after Easter, the riot police were sent in with a chainsaw to hack through barricaded doors and pepper spray to disable the young squatters. The clean-up was nasty, brutal and short: it was the official end of Niceland.
The Icelandic sense of live-and-let-live was the first casualty of the meltdown. For centuries, island society had functioned on family lines. Yes, there were feuds and friction between family members, but there was tolerance too. The financial collapse, though, brought a rawness to everyday life.
While the Nordic rules still applied, no one was hustled out of the office on the day that the banks went under; no one stuffed the clutter of their desks into a cardboard box. But by November, dismissal letters were in the mail. Unemployment rose from under 2 per cent in September 2008 to 10 per cent by the spring of 2009.
Although for a decade or so Iceland had imagined itself to be at the centre of the prosperous world, the crash propelled it back into the remote North Atlantic. Its pride was hurt. Icelanders were conscious that they had been steered incompetently and corruptly into the abyss. Yet the political class showed no remorse. David Oddsson — the head of the central bank, who as prime minister had presided over the privatisation of Iceland’s state-owned banks — was quick to blame the magnate Jon Asgeir and the oligarchs; Jon Asgeir blamed both the US for letting Lehman collapse and Oddsson for not responding intelligently; the Icelandic Government blamed the British Government.
“There is no culture of ministerial responsibility here,” says a senior official. “The prime minister will say, ‘I didn’t order this, I didn’t cause that, so why should I step down?’ And since the prime minister says that, so do the ministers and department chiefs.” As a result, no one has an interest in discovering why mistakes were made. The main threads of Icelandic rule were too intertwined, matted together: remove any one of these components — say, by an ill-judged confession of incompetence — and the whole edifice was likely to collapse.
The smallness of the society increased the risks of mismanagement: the humiliation of national bankruptcy, the speed with which the middle class was impoverished, the heaviness of personal debt, the almost instant flip from being the world’s happiest nation to being a place that could offer no future to its young. So Iceland became not only the first country to go broke, but also the first in this global financial crisis to chase its government out of power.
Soon, as living standards began to fall and people took to the streets, an uprising gathered force. It became known as the kitchen revolution because demonstrators used wooden spoons to bang pots and pans to drown out the proceedings of Parliament.
These protests had plenty of pathos, above all, the singing of the rather dirge-like national anthem. Mainly, though, this was an ironic revolt. Fake banknotes bearing the image of David Oddsson’s head were distributed, free of course, since he was widely seen as having betrayed the krona.
In December, Gurri, one of Iceland’s many self-proclaimed witches. led protesters toward the central bank and entered the building, carrying a life-size effigy of David Oddsson. Repelled by police, the short blonde witch, dressed of course in black, started to spank her effigy —“You’ve been a bad boy!” — pronounced a spell, then stuffed it in a garbage bag.
Until this moment, Iceland’s protest movement was an expression of hurt and an inchoate demand for change. Its ironic undertone was in part because many in the middle class, now being squeezed between higher mortgage debt and lower real wages, were half-aware that they had allowed the political class to get away with their incompetence and bad deals. Now they were demanding that the same class be changed, yet no party was completely untarnished by the years of easy credit.
On October 24 the Government formally asked the IMF for help, both to send a signal to other nations and to stabilise the currency. There was no rush to help: Britain and the Netherlands were adamant that there should be no IMF package until they secured guarantees from Reykjavik to compensate Icesave depositors. Geir Haarde, the Prime Minister, eventually agreed because he had no choice: without the IMF loan of $2.1 billion, Iceland was finished. On November 16, Iceland announced that it would comply with the EU Deposit Guarantee Scheme’s directive guaranteeing compensation for up to €20,877 [£19,000] for each savings account.
The horse-trading showed the Icelanders that their Government had no choices and could not in any rational sense be described as a government any more. More than 50,000 people had their savings wiped out. The Salvation Army hostel began to fill up with families unable to make ends meet.
Car loans became like some obscure punishment from hell. Taken out in foreign currencies, the loan had to be paid back in a krona whose value was shrivelling by the day. The only way out of the squeeze was to take out a newspaper advert offering thousands of dollars to anyone willing to take on the car and its bulging debt. “The Range Rover and other SUVs have gone through an incredible transformation,” a sociologist tells me. “First they were luxuries, then they were necessities — and you can see the point, you really need off-road vehicles in Iceland, it’s a rugged place — and now they have become burdens.” In the two months after the meltdown, Icelanders had been in shock, and the shock had atomised the island. The traditional solidarity of Christmas and the long holiday mutated into political solidarity — and contempt for the seemingly guilty silence of the political class. When the demonstrations began in the new year, the tone was different. The aim was clear: to bring down the Government. Now, for the first time, the politicians began to understand what was at stake. They were not being barracked by communist agitators but were being brought to account by a nation.
Those in power thought they were being confronted by lynch justice and allowed the riot police almost a free hand to defend the institutions of state. Those demonstrating outside began to sniff every hint of weakness. There were many such pointers. Politicians were buckling under ill health. The Foreign Minister Ingibjorg Solrun Gisladottir, head of the Social Democrats, had been absent for most of the crisis because she was being treated for a brain tumour; President Ólafur Grimsson underwent heart surgery; and Haarde announced that he had cancer of the oesophagus. The demonstrators saw weakness politically too, of course. Iceland looked rudderless, with the Parliament coming back from its Christmas holidays on January 22, after what might seem to have been an unusually long break in the middle of a world crisis.
That day Haarde addressed [Parliament] in his first detailed account of what the Government had been doing since the October meltdown. It did not seem like much. Measures had been introduced, he said, to ease the pain of those tumbling into debt. Housing funds were to go easy on loan defaulters, child allowance was to be paid every month instead of every quarter, the unemployed were to be encouraged to study, employers nudged into offering part-time work instead of firing staff. Haarde stretched it out into a catalogue of 15 points, but it amounted to a wish list.
None of this pleased or satisfied the protesters. The rallies grew and grew. The protesters banged tom-toms and lit effigies of politicians until late in the night. There were no more vague demands for apologies. “What do you want to happen next, after they’ve gone?” I asked the people in the crowd that January, and did not get a coherent reply. Some wanted a return to “fairness”; the more radical were so enraged that they went so far as to demand a kind of Nuremberg trial, with Haarde, Oddsson and the oligarchs jailed on charges of defrauding the nation.
“This economic crisis has hit us with the force of a war,” said the novelist Einar Mar Gudmundsson. “It will cost us more than a war, not just in lost wealth, but in people — we will lose a generation, maybe two, to migration.” By January, having just had his cancer diagnosis, Haarde realised that he could no longer convince the nation that he was indispensable to its resurrection.
It was time to go. On January 23, a Friday and the end of a long, noisy week of public protests, Haarde announced early elections and said that, for medical reasons, he would not be running. That was not exactly the triumphant defenestration that the protesters had been hoping for. The announcement of his illness — he left the country within days for treatment in Amsterdam — confused the protest movement and the country.
“The first political casualty of the global crisis!” was the headline in Britain, but in Iceland it did not seem like that. “There was just a kind of emptiness,” recalled Magnus, an economics student. But the crumbling of the establishment had begun.
The interim government, intended to steer Iceland toward the election, was to be a coalition of Social Democrats and the Left Greens, led by the dour Johanna Sigurdardottir. Johanna, nicknamed Saint Johanna by Icelanders, was different. She was from the left of the Social Democrats, and had been pushed aside in the contest for the party leadership in 1996 (leading her to declare: “My time will come”). During election campaigns she would go to the huge dockside warehouse that housed Reykjavik’s flea market. Next to the dried-fish stands, a scruffy café, much favoured by the down-and-out, is warm, cheap, and only three minutes’ walk from the Salvation Army hostel. Johanna would sit there and listen to their complaints and those of anyone else ready to draw up a chair.
Johanna was not only the island’s first female prime minister, but also the first openly gay national leader in the world. Her relationship, in an officially registered union with the journalist and children’s book writer Jonina Leosdottir was well-known to Icelanders but attracted little curiosity. With only one gay bar on the island, Icelanders do not stay in the closet long. But to non-Icelanders Johanna’s sexuality seemed important, a sign of a more fundamental shift in attitudes. Half of her Cabinet were women — not unusual in Nordic societies — and more significant, the heads of new versions of two of the banks were women: Elin Sigfusdottir at New Landsbanki and Birna Einarsdottir at New Glitnir. Their brief was to create domestic-deposit bases, make a go of shaping a conventional, customer-oriented bank and allow the formerly glamorous and now ruined international departments to sit in a kind of toxic-waste disposal unit.
The only Icelandic investment company to emerge from the crisis relatively unscathed was Audur Capital, set up by two women, Halla Tomasdottir and Kristin Petursdottir, to cater to female investors. “Our ground rule was simple,” said Halla Tomasdottir. “We didn’t invest in anything we couldn’t understand.” In a sense the supposedly new orientation toward women echoes the Viking tradition, when the men would disappear out to sea for weeks on end, leaving women to run the households.
The Icelandic approach to dealing with the crisis, essentially to let the women clean up after the party, is part of a broader feeling, though, that the Age of Testosterone may be coming to an end in the financial sector. Blaming the crisis on endocrinology is of course absurdly reductionist.
At the heart of Ms Sigurdardottir’s shift for Iceland was not her feminism but a basic egalitarianism. Iceland had for centuries been a society without large income differences, that treasured literacy, socialised health care and equal access to nature and its resources. Indeed, when David Oddsson took over the prime ministership in the early 1990s, Iceland bore a strong resemblance to a socialist society.
Johanna Sigurdardottir put egalitarianism back on the agenda; her promotion of women was not supposed to right some ancient wrong, a discriminatory imbalance, but rather ease the way back toward a society that treasured solidarity. Women understood Johanna’s aims better than men and confirmed her in power in the general election on April 22. By that time, after only a few months in government, Johanna had convinced society that it had to reach deep into itself and fish out special Icelandic virtues: modesty, hard work, a rugged respect for each other.
That was not enough, however, to dispel the anger, the sense of betrayal. On election day, protesters broke into the villa of Bjorgolfur Thor Bjoergolfsson in Frikirkjuvegur, Free Church Street. Thor had bought the house from the city council years earlier. The villa had belonged to his great-grandfather, who had founded one of the country’s most influential trading dynasties. Since Thor was ensconced in Holland Park, London, the protesters were able to climb on to the front balcony of the house, hang some life-size Viking dolls from the balustrade, and hang a banner declaring: “We were never elected to any office, yet we ruled everything”. The sentiment was shared by the voters, who elected the Social Democrat and the Left Green parties with a huge majority.
Seven months after the meltdown, Iceland was still a seething, frustrated, unhappy nation. A friend of mine encountered a normally mild old woman as she left city hall after casting her vote. “What were these people thinking when they bled their own country dry?” the woman said. “They will never be able to show their faces in this country again, nor will their children, or their children’s children.”
Gurri, the blonde witch, could not have produced a better curse.
Meltdown Iceland by Roger Boyes is published by Bloomsbury on October 10 at £12.99. To order it for £11.69, including p&p, call 0845 2712134 or visit timesonline.co.uk/booksfirst
The way the crash happened
September 2008: Seven months after reports that Kaupthing, Iceland’s biggest bank, is seven times more likely to go into administration than a typical European one, the Icelandic Government introduces emergency legislation allowing it to nationalise Iceland’s third largest bank, Glitnir.
October 2008: Iceland takes control of Kaupthing, after Alistair Darling invokes anti-terrorism laws to freeze its UK assets. British institutions and individuals scramble to recover their savings (local authorities alone had deposited £900 million into Icelandic banks). The BBC business editor Robert Peston writes on his blog that Kaupthing has “the worst case of financial BO I’ve encountered”.
November 2008: The IMF approves a $2.1 billion (£1.4 billion) loan to Iceland. Its inflation soars to 17.1 per cent.
January 2009: Protesters surround Prime Minister Geir Haarde’s car and pelt it with eggs. He resigns.
February 2009: Iceland’s Government tries to sell its embassy residences for a total of £25 million in an attempt to raise capital for the cash-strapped country.
April 2009: A centre-left coalition lead by the interim PM Johanna Sigurdardottir wins a majority of 34 out of 63 seats at the parliamentary elections.
June 2009: A consortium of four Icelandic banks buys West Ham United from Bjorgolfur Gudmundssonm, who lost a fortune when Landbanksi went into administration.
July 2009: Iceland applies for EU membership. Documents released by the Icelandic Government reveal that the British and Dutch authorities held a meeting in 2006 to consider what would happen if the Icelandic bank Landsbanki could not cover the deposits of British and Dutch savers.
August 2009: Iceland annual birth rate experiences a 3.5 per cent hike.
Sarah Haines
http://women.timesonline.co.uk/tol/life_and_style/women/the_way_we_live/article6855928.ece
Ten tips to survive a property downturn
February 25, 2008
Ten tips to survive a property downturn
It’s the news that every homeowner has been fearing – house prices are definitely falling.
Halifax says prices fell 2.4 per cent in May and are now down 3.8 per cent on a year ago. Last week Nationwide also reported that prices fell 2.5 per cent in May. Most experts expect there to be plenty more bad news to come.
But there is no need to panic. Falling house prices bring opportunities for buyers. There is also plenty that sellers can do to ease the pain. Here are ten tips to help you ride out the property downturn
TIPS FOR BUYERS
Falling prices are positive
As house prices have soared, more and more first-time buyers have been priced out of the market. A slowdown could change all that as more homes fall within the range of would-be homeowners.
A downturn is also good news for people who already own a property and would like to move to a bigger home or more expensive area. Trading up gets easier in a downturn because the gap between the cost of smaller and bigger properties narrows. Say your flat is on the market for £250,000 and you are trading up to a £400,000 house. Prices in your area fall 10 per cent meaning you take a £25,000 hit on your flat but the price of the house drops by £40,000 to £360,000. That’s a net gain of £15,000.
Don't count on big discounts
If you’re holding off buying, hoping that prices will plummet, prepare to be disappointed in London and the south east as property experts believe prices will remain resilient. Analysts also expect prices in Scotland to hold up as well.
However, it doesn’t hurt to haggle. There is so much bad news around that sellers are feeling nervous – experts say that you could easily knock 10 per cent or more off the asking price.
Rent to lock in profits
If you’re convinced the market in your area is going to fall further be prepared to move into rented accommodation and wait for the market to drop before buying back in. House prices need to fall by about 4 per cent to make it financially worthwhile to sell to rent, according to property analyst Knight Frank.
Do your homework
Find out how much similar properties have sold for by typing the postcode into the website Hometrack.co.uk or Upmystreet.com. But remember that these are backward looking: they tell you what homes sold for in the past not what they are selling for now. Propertyforecasts.co.uk, which estimates future price movements for the next five years, is also worth a look, although it costs £15 for a full report.
Get your finances in order
As sentiment has soured, fewer vendors are putting their properties on to the market so you must be ready to pounce when your dream home comes along. Talk to a mortgage broker when you start looking to find out how much you can borrow and what the best deals are. You improve your chances of having access to the best deals if you have a deposit of 20 per cent or more, don't need to borrow a high income multiple and have a spotless credit record. Several brokers such as L&C (www.lcplc.co.uk) and Charcol (www.charcol.co.uk) have useful calculators which estimate how much you will be able to borrow.
AND FOR SELLERS...
Price realistically
Putting your home on the market at the right price is key if you want to guarantee a quick sale. Get several valuations from estate agents and also take a look at the websites mentioned above – then set the price somewhere in the middle. As a rule of thumb, estate agents suggest you should ask for about 5 per cent more than you realistically expect to get. However, if you really need to sell fast, set an asking price slightly lower than your ideal from the off – it looks better than desperately slashing the price at a later date.
Flexibility pays
You’ll make yourself more attractive to potential buyers if you can move out fast – it also gives them less chance to back out of the deal. Consider moving into rented accommodation if you are offered a good price but have nowhere to move to.
Don't move, extend
If you’re moving because you need extra space, extending your existing home could be cheaper and less hassle. However, you need to make the right improvements at the right price. A loft conversion is the single most valuable alteration you can make to your home, according to a study by Nationwide. By adding 300 square feet of floor space made up of an extra bedroom and bathroom you can add over 20 per cent to the value of your property. Turn a two-bedroom house into a three-bed and you can increase its value by 12 per cent. But can you bear the builders and the mess?
Don’t be afraid to pull out
Just because you’ve hoisted a “For Sale” sign doesn’t mean that you can’t change your mind if you’re not seeing the interest you hoped. Ignore the hard sell from your estate agent. They’ll probably try to convince you that there are lots of interested buyers waiting in the wings – the chances are it’s the first time you’ve heard their voice in weeks.
If you don’t need to sell, stay calm
It’s a statement of the obvious but one that, in property obsessed Britain, we often forget: if you’re already on the ladder and not planning to sell in the near future it doesn’t matter if house prices drop. The chances are that by the time you need to sell prices will be back up again. Even if they’re not think of all those juicy gains you’ve made over recent years –house prices are up an average 59 per cent over the past five years, according to Halifax. A house that was worth £120,000 at the end of 2002 was worth nearly £200,000 in December. Think about all that “free” money and stop worrying.
http://timesbusiness.typepad.com/money_weblog/2008/02/ten-tips-to-sur.html
Ten tips to survive a property downturn
It’s the news that every homeowner has been fearing – house prices are definitely falling.
Halifax says prices fell 2.4 per cent in May and are now down 3.8 per cent on a year ago. Last week Nationwide also reported that prices fell 2.5 per cent in May. Most experts expect there to be plenty more bad news to come.
But there is no need to panic. Falling house prices bring opportunities for buyers. There is also plenty that sellers can do to ease the pain. Here are ten tips to help you ride out the property downturn
TIPS FOR BUYERS
Falling prices are positive
As house prices have soared, more and more first-time buyers have been priced out of the market. A slowdown could change all that as more homes fall within the range of would-be homeowners.
A downturn is also good news for people who already own a property and would like to move to a bigger home or more expensive area. Trading up gets easier in a downturn because the gap between the cost of smaller and bigger properties narrows. Say your flat is on the market for £250,000 and you are trading up to a £400,000 house. Prices in your area fall 10 per cent meaning you take a £25,000 hit on your flat but the price of the house drops by £40,000 to £360,000. That’s a net gain of £15,000.
Don't count on big discounts
If you’re holding off buying, hoping that prices will plummet, prepare to be disappointed in London and the south east as property experts believe prices will remain resilient. Analysts also expect prices in Scotland to hold up as well.
However, it doesn’t hurt to haggle. There is so much bad news around that sellers are feeling nervous – experts say that you could easily knock 10 per cent or more off the asking price.
Rent to lock in profits
If you’re convinced the market in your area is going to fall further be prepared to move into rented accommodation and wait for the market to drop before buying back in. House prices need to fall by about 4 per cent to make it financially worthwhile to sell to rent, according to property analyst Knight Frank.
Do your homework
Find out how much similar properties have sold for by typing the postcode into the website Hometrack.co.uk or Upmystreet.com. But remember that these are backward looking: they tell you what homes sold for in the past not what they are selling for now. Propertyforecasts.co.uk, which estimates future price movements for the next five years, is also worth a look, although it costs £15 for a full report.
Get your finances in order
As sentiment has soured, fewer vendors are putting their properties on to the market so you must be ready to pounce when your dream home comes along. Talk to a mortgage broker when you start looking to find out how much you can borrow and what the best deals are. You improve your chances of having access to the best deals if you have a deposit of 20 per cent or more, don't need to borrow a high income multiple and have a spotless credit record. Several brokers such as L&C (www.lcplc.co.uk) and Charcol (www.charcol.co.uk) have useful calculators which estimate how much you will be able to borrow.
AND FOR SELLERS...
Price realistically
Putting your home on the market at the right price is key if you want to guarantee a quick sale. Get several valuations from estate agents and also take a look at the websites mentioned above – then set the price somewhere in the middle. As a rule of thumb, estate agents suggest you should ask for about 5 per cent more than you realistically expect to get. However, if you really need to sell fast, set an asking price slightly lower than your ideal from the off – it looks better than desperately slashing the price at a later date.
Flexibility pays
You’ll make yourself more attractive to potential buyers if you can move out fast – it also gives them less chance to back out of the deal. Consider moving into rented accommodation if you are offered a good price but have nowhere to move to.
Don't move, extend
If you’re moving because you need extra space, extending your existing home could be cheaper and less hassle. However, you need to make the right improvements at the right price. A loft conversion is the single most valuable alteration you can make to your home, according to a study by Nationwide. By adding 300 square feet of floor space made up of an extra bedroom and bathroom you can add over 20 per cent to the value of your property. Turn a two-bedroom house into a three-bed and you can increase its value by 12 per cent. But can you bear the builders and the mess?
Don’t be afraid to pull out
Just because you’ve hoisted a “For Sale” sign doesn’t mean that you can’t change your mind if you’re not seeing the interest you hoped. Ignore the hard sell from your estate agent. They’ll probably try to convince you that there are lots of interested buyers waiting in the wings – the chances are it’s the first time you’ve heard their voice in weeks.
If you don’t need to sell, stay calm
It’s a statement of the obvious but one that, in property obsessed Britain, we often forget: if you’re already on the ladder and not planning to sell in the near future it doesn’t matter if house prices drop. The chances are that by the time you need to sell prices will be back up again. Even if they’re not think of all those juicy gains you’ve made over recent years –house prices are up an average 59 per cent over the past five years, according to Halifax. A house that was worth £120,000 at the end of 2002 was worth nearly £200,000 in December. Think about all that “free” money and stop worrying.
http://timesbusiness.typepad.com/money_weblog/2008/02/ten-tips-to-sur.html
Understanding housing property crashes
May 02, 2008
Are house prices heading for a 1990s-style crash?
At moments of crisis we turn to history to provide guidance to what lies ahead. With the housing market taking a turn for the worst, it is unsurprising that parallels are being drawn between the darkening conditions now and the last time price falls blighted the land in the early 1990s. We have taken a look at some of the key crash triggers then and now to assess what lies ahead for homeowners.
How bad was it in the early nineties?
House prices fell by 20 per cent between 1990 and 1993, according to the Nationwide building society, and 12 - 13 per cent on the Halifax and government measures. By 1995, they had dropped 30 per cent to 40 per cent in "real" or inflation adjusted terms.
Over the 1990-95 period 345,000 homes were repossessed and at least 2m households fell into negative equity, where the value of the property was worth less than their mortgage. It took until the late 1990s before the housing crisis came to an end.
How do conditions compare now?
Affordability
Then: In the late 1980s the ratio of house prices relative to income leapt from about 3.5 times to nearly five times in a number of years making it difficult for first time buyers to enter the market.
Now: House prices are at even higher levels relative to incomes. The average home now costs 5.66 times average earnings, according to Halifax, and in the south-east of England the ratio is as high as seven times.
Verdict: A high price-to-earnings ratio is one of the principal reasons why a growing number of economists believe house prices have much further to fall. David Blanchflower, a member of the Monetary Policy Committee(MPC), which sets interest rates, says that house prices may have to drop by as much as one third for house prices-to-earnings ratios to be restored to sustainable levels.
Interest rates
Then: Interest rates were close to 10 per cent for most of the 1980s and at the end of 1989 they jumped to a terrifying 14.875 per cent. Even though the economy went into recession in the early 1990s high inflation means that rates couldn't be cut dramatically. Inflation, as measured by the Retail Prices Index (RPI) reached a high of 10.9 per cent towards the end of 1990.
These high interest rates proved crippling for homeowners.Confidence only began to return after the RPI fell back to less than four per cent and interest rates were cut to just over six per cent in 1995.
Now: Even though inflation is a problem - the RPI is 3.8 per cent, which is higher than the Bank of England would like - prices are rising at a much slower pace giving the authorities much more room for manoeuvre. The MPC has cut rates three times since last December - from 5.75 per cent to five per cent.
Verdict: Interest rates are nowhere near the problem they were at the end of the 1980s which is why some commentators, such as Martin Ellis, chief economist at Halifax, thinks a 1990s-style crash is unlikely.
Mortgage rates
Then: A leap in mortgage rates at the end of the 1980s was one of the principal triggers for the house prices slump. In 1987 the average building society offered homeloans charging a rate of 10.3 per cent. By 1989 the typical rate had jumped to 14.4 per cent, adding about £200 to the monthly bill on a typical £70,000 home. That's the equivalent of about £360 a month, or £4,320 a year, in today's money.
Now: Mortgage rates for new borrowers have jumped significantly over the past year as the credit crisis has struck, creating a payment shock for more than a million people. Homeowners who took out a typical two-year fix of about 4.5 per cent in 2006 face a repayment shock of about £200 a month - £2,400 a year - on a £200,000 loan, assuming they take the average two-year fix of six per cent.
Although this is a smaller jump than in the 1990s many households are hurting, especially as higher mortgage repayments have been coupled with a jump in energy and food bills. People have more debt on credit cards and loans than in the 1990s.
Banks and building socieities have also made it more difficult for borrowers by tightening their lending criteria: for example, reserving their best deals for people with a 25 per cent deposit or the same amount of equity in their home.
Verdict: It's bad, but not for everyone. More than 5m borrowers with mortgages that follow the Bank of England base rate have benefited from a drop in payments since December.
The mortgage hikes have been sparked by the crisis that has hit the financial markets worldwide. The Bank of England, in its latest Financial Stability Review, suggests that the worst of the financial crisis, may be over. If so, homeloan rates could start to fall in the next few months. Borrowers will be praying it is right.
Unemployment
Then: As the UK's economy plunged into recession the unemployment rate leapt to nearly 3m, shattering confidence and meaning hundreds of thousands were suddenly unable to meet their mortgage bills.
Now: Unemployment is at its lowest since the 1970s. Latest figures put the number out of work at 843,000, although there have been some worrying signs that it is beginning to pick up.
Verdict: Fears of an economic downturn, and even a recession, mean that even though the unemployment rate is low there are concerns that the jobs market will deteriorate. A sudden jump in redundancies could shatter already frayed nerves. However, unless there is a big leap in jobless numbers the impact is likely to be only short term.
Housing tax
Then: The seeds of the downturn were sown when Nigel Lawson, chancellor of the exchequer, cut the amount of tax relief allowed on mortgages in his 1988 budget. He made a fatal mistake by announcing a five-month delay before the tax relief cut came into effect. People rushed to take advantage of the relief while it lasted, creating a borrowing frenzy and a house price bubble: prices nationally rose 34 per cent over the course of 1988 and in some parts of the south east they jumped by 50 per cent. When interest rates started to rise the bubble burst.
Now: Stamp duty remains a turnoff for buyers who are nervous about moving up the property ladder but there hasn't been a comparable tax trigger this time round.
Verdict: Chancellors have learnt from Lawson's mistake. Nowadays controversial decisions are introduced immediately
So what is in store?
A lot depends on whether the Bank of England is right and the worst of the credit crisis is over. If it is, mortgage rates start to fall and an economic downturn isn't severe price falls should be in single digits.
It it is wrong, and the crisis continues, confidence will continue to deteriorate and prices could continue to fall for years. Yolanda Barnes, residential research director at Savills, an estate agent, forecasts a 25 per cent decrease by the end of 2009 if the credit crunch continues.
http://timesbusiness.typepad.com/money_weblog/2008/05/are-house-price.html
The Ten Biggest Stock Market Crashes of All Time
April 14, 2008
The Ten Biggest Stock Market Crashes of All Time
Some investors might think they have had a rough ride on the stock market over the past seven or eight months. But the recent share price gyrations pale into insignificance when compared with the biggest stock market falls of all time.
10) Wall Street 1901-03: -46%
The market was spooked by the assassination of President McKinley in 1901, coupled with a severe drought later the same year.
9) Wall Street 1919-21: -46%
There were fears that the new automobile sector was becoming overheated and that car ownership had reached saturation point.
8) Wall Street 1906-07: -48%
Markets took fright after President Theodore Roosevelt had threatened to rein in the monopolies that flourished in various industrial sectors, notably railways.
7) Wall Street 1937-38: -49%
This share price fall was triggerd by an economic recession and doubts about the effectiveness of Franklin D Roosevelt's New Deal policy.
6) London 2000-2003: -52%
The UK took sixth place in the table with a 52 per cent market fall between 2000 and 2003 as investors suffered the consequences of the collapse of the technoogy bubble
5) Hong Kong 1997-98: -64%
The Hong Kong stock market’s heavy fall in 1997-1998 came as investors deserted emerging Asian shares, including a very overheated Hong Kong stock market
4) London 1973-74: -73%
Next came the UK stock market’s 73 per cent drop in 1973 and 1974. set against the backdrop of a dramatic rise in oil prices, the miners’ strike and the downfall of the Heath government.
3) Japan 1990-2003: -79%
In third place, with a 79 per cent decline, was the Japanese stock market, which suffered a protracted slide in price from 1990 to 2003 as a share and property price bubble burst and turned into a deflationary nightmare.
2) US Nasdaq 2000-2002: -82%
The second biggest collapse came from the technology-rich US Nasdaq index, which fell by 82 per cent following the bursting of the dot.com bubble in 2000
1) Wall Street 1929-32: -89%
The Wall Street Crash heads the list, with the US stock market falling by 89 per cent between 1929 and 1932. The bursting of the speculative bubble led to further selling as people who had borrowed money to buy shares had to cash them in in a hurry when their loans wre called in.
David Shwartz, the stock market historian, says: “The very big stock market crashes are invariably triggered by a series of different events which unfold one after the other. For example the biggest UK stock market slump in 1973-74 was started by the fear of stagflation, but was then fuelled by the dramatic rise in oil prices of late 1973, followed by the Miners’ strike and the downfall of the Heath government. One heavy blow is not enough to produce a market crash. It requires several different blows to bring a market to its knees.”
(This list only includes stock market crashes in industrialised economies.)
http://timesbusiness.typepad.com/money_weblog/2008/04/the-ten-biggest.html
The Ten Biggest Stock Market Crashes of All Time
Some investors might think they have had a rough ride on the stock market over the past seven or eight months. But the recent share price gyrations pale into insignificance when compared with the biggest stock market falls of all time.
10) Wall Street 1901-03: -46%
The market was spooked by the assassination of President McKinley in 1901, coupled with a severe drought later the same year.
9) Wall Street 1919-21: -46%
There were fears that the new automobile sector was becoming overheated and that car ownership had reached saturation point.
8) Wall Street 1906-07: -48%
Markets took fright after President Theodore Roosevelt had threatened to rein in the monopolies that flourished in various industrial sectors, notably railways.
7) Wall Street 1937-38: -49%
This share price fall was triggerd by an economic recession and doubts about the effectiveness of Franklin D Roosevelt's New Deal policy.
6) London 2000-2003: -52%
The UK took sixth place in the table with a 52 per cent market fall between 2000 and 2003 as investors suffered the consequences of the collapse of the technoogy bubble
5) Hong Kong 1997-98: -64%
The Hong Kong stock market’s heavy fall in 1997-1998 came as investors deserted emerging Asian shares, including a very overheated Hong Kong stock market
4) London 1973-74: -73%
Next came the UK stock market’s 73 per cent drop in 1973 and 1974. set against the backdrop of a dramatic rise in oil prices, the miners’ strike and the downfall of the Heath government.
3) Japan 1990-2003: -79%
In third place, with a 79 per cent decline, was the Japanese stock market, which suffered a protracted slide in price from 1990 to 2003 as a share and property price bubble burst and turned into a deflationary nightmare.
2) US Nasdaq 2000-2002: -82%
The second biggest collapse came from the technology-rich US Nasdaq index, which fell by 82 per cent following the bursting of the dot.com bubble in 2000
1) Wall Street 1929-32: -89%
The Wall Street Crash heads the list, with the US stock market falling by 89 per cent between 1929 and 1932. The bursting of the speculative bubble led to further selling as people who had borrowed money to buy shares had to cash them in in a hurry when their loans wre called in.
David Shwartz, the stock market historian, says: “The very big stock market crashes are invariably triggered by a series of different events which unfold one after the other. For example the biggest UK stock market slump in 1973-74 was started by the fear of stagflation, but was then fuelled by the dramatic rise in oil prices of late 1973, followed by the Miners’ strike and the downfall of the Heath government. One heavy blow is not enough to produce a market crash. It requires several different blows to bring a market to its knees.”
(This list only includes stock market crashes in industrialised economies.)
http://timesbusiness.typepad.com/money_weblog/2008/04/the-ten-biggest.html
Ten top investment tips from Dr Mark Mobius
June 30, 2009
Ten top investment tips from Dr Mark Mobius
Dr Mark Mobius is one of the most experienced fund managers in the industry.
He has been managing the Templeton Emerging Markets Investment Trust since its launch 20 years ago. In that time the value of an investment in the trust has multiplied more than eleven times.
Here Dr Mobius draws on his years of experience to offer ten investment tips to Money Central readers.
1. Keep an eye on value
Is a share selling for below its book value? What is the relationship between the earnings and the price?
2. Don’t follow the herd
Many of the most successful investors are contrarian investors. Buy when others are selling and sell when others are buying.
3. Be patient
Rome was not built in a day and companies take time to grow to their full potential.
4. Dripfeed your money into the market
No one knows exactly where markets are going so dripfeed your money into the market by making regular investments. That way you will average out the ups and downs of the market.
5. Examine your own situation and your appetite for risk
You should not go into equities if you are the type of person who is nervous every time you read a stock market report.
6. Diversify your portfolio
You must never put all your eggs in one basket unless you have a lot of time to watch that basket - and most of us don’t.
7. Don’t listen to your friends or neighbours when it comes to making investment decisions
Your own situation is different from everyone else’s so you should be making the decisions.
8. Don’t believe everything you read in newspapers, because things tend to be exaggerated
Don’t be swayed by headlines and look at what is going on behind the scenes.
9. Go into emerging markets because that is where the growth is
Emerging markets have consistently grown much faster than the developed countries in virtually every year since 1988.
10. Look at countries where populations are relatively young
Countries with young populations are going to be the most productive in future years.
http://timesbusiness.typepad.com/money_weblog/2009/06/mark-mobius-ten-top-investment-tips.html
Optimism drives markets ahead on crash anniversary
Jeremy Batstone-Carr, an equity strategist at Charles Stanley, said that he thought investors would be wise to bank profits now.
He believes that the recent rally has been built on profit expectations that cannot be met because of the prevailing economic conditions and that the market has also been supported by Government stimulus.
http://business.timesonline.co.uk/tol/business/markets/article6878719.ece
He believes that the recent rally has been built on profit expectations that cannot be met because of the prevailing economic conditions and that the market has also been supported by Government stimulus.
http://business.timesonline.co.uk/tol/business/markets/article6878719.ece
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