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About Euphorion

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  1. Today 805p. Kensington Mortgages The idea of moving out of first into second mortgages is bonkers. Sub-prime borrowers are facing less than 2% wage increases and 7% real inflation. They ain't a good bet. So sub-prime lenders, no matter how fancy their actuarial stats get, are the same. Furthermore, to move from first mortgages where you pick up the crumbs that the big banks don't want is fundamentally different from entering the door-stop loan-shark market. There's much worse to come. I wouldn't buy Kensington at 500p. There are no barriers-to-entry in this market and the relaxation of credit standards in major banks has given Kensington an almighty shove into riskier and riskier lines of business. You can go into riskier stuff if the premiums are there: but they ain't. (Warren Buffett has moved into Extreme Risk markets for example but he ain't 'arf charging you.) Anyone who has been in the markets for 20 yrs + will tell you the same story. The young turks are a) writing new business with no regard to risk and accepting returns which assume no risk. Wrigglesworth is a middle-aged turk. He's also wrong. In property, in whatever form, you make serious money betting against people who think TWO PAIR is a FULL HOUSE. But they always do. It's like being a primary school teacher. How many cards are the same ? Duh two. So what do you have ? A Full House !!!! ok let's go back to basics and count the spots on the cards.... ah ha.. two pair !! but we thought it was a full house price...oooh dear... 2pearBTL is my new slogan. The surest sign of a Recession is when you think buying another firm is cheaper than expanding your own capacity. So rather than investing in new capacity, you buy old capacity you think you can improve on. That's about where we are at. There's nothing I want in the 'new capacity' range - it's just too expensive. Marginal Costs are at their highest ratio to Marginal Revenue for 40 years. But the current wave of acquiring 'old capacity' is no better. The MC/MR ratios are still rubbish....unless you are a private equity fund which gears up and exits. But this is the greater fool theory of capitalism, not true entrepreneurial capitalism. Well, the absence of entrepreneurial capitalism and the prevalence of greater fool capitalism sends out a huge BUYER BEWARE signal. Having put my head on the line on Kensington and the sub-primers, I'll also predict a collapse in the restaurant trade in Central London - another clear sign of recession. Why ? Because as it currently stands, there's no old or new lease, no old or new business, you can buy that will generate the profit/capital outlay ratio you require. This means, in effect, you buy a greasy spoon cafe for 400k and make perhaps 50k a year (12.5% having: cleaned toilets, paid staff, paid accountant, complied Health & Safety,..........the list is endless...........) Now let's supoose you're a great chef and up the revenue... but this isn't going to you , on an accountancy basis it should be allocated to the overpayment you made in the first place.... There are thousands of these fleas jumping all over dogs all over the British economy.
  2. The only thing you should ever want desperately is your partner or the happiness of your children. The first has a large sexual element in it which you will lose control over as you get older, the second you will lose control over as they get older. It's downhill all the way I'm afraid. But wife and children admire you for moral probity, in varying degrees, as you get older. They think you are a has-been but cannot bring themselves to judge yoiu as a w*nker. But it does mean if you want to protect your wife and children, you should not go in at 499k.
  3. Wait. 499k is an awful lot of money for a terrace. A 0.25% cut saved this market last year, a 0.25% rise will kill it this year. What gets thrown upstairs can just as easily be kicked downstairs. At about 600 GBP per 100k gearing, you are paying approx. 3000 GBP pcm (and 2,250 GBP in opportunity cost.) There are fancier places to be in the world at those prices. I bought four houses of almost exactly the same construction (in the admittedly not so great area of the Meadows in Nottingham for an average price of 28.5k in 1998.) Sold them all at over 100k+. The Meadows in Nottingham is certainly not as good as West St. Stratford-upon-Avon but at 28.5k they're worth a punt, at 100k + take the money off the table, at 499k avoid. Having said that, what do I know ? I put in a bid on a property in Ashbourne, Derbyshire at 200k (a pretty village, not poor or full of idiots) and was outbid at 340k. Well, what can I say? I saw a couple of hotels in Venice that I valued on a cashflow /profitability basis at no more than 3m euro. On sale 7/8m. Half a million is a lot for a terrace in only a locally or nationally glamorous place.
  4. Complete nonsense. 1. Why are the buyers of 2nd homes more culpable than the sellers ? The sellers in these villages couldn't give a stuff about their neighbours' children either. 2. Why is it worse to buy a 2nd home rather than a 2nd Mars bar (which a starving boy in Africa could well do with) or a 2nd cup of Starbucks or anything else for that matter. It's philosophical nonsense to suggest 2nd homes are ethically evil and the 2nd round at the bar isn't.
  5. In Holbein's Lais from Corinth, a fragment of the picture shows a beauteous blond gold-braided girl in low-cut vermillion dress with golden sleeves, hand-outstretched, with a dozen gold coins on the table adjacent to her hand. There's a lot of gold flying about but what is she doing ? Is she an up-market blip-blip checkout girl ? A hooker demanding more ? A money-changer ? A beggar ? A poker-player ? In Venice two weeks ago looking at hotels. Saw two smallish hotels at 8m and 7m euros each. The usual palaver. Two sets of books. One for the tax man and one for the buyers. (Smart people keep three sets of books - one for tax, one for punter, one for themselves.) As far as I could work out they were making 300-400k euro net or under 5%. It simply doesn't make sense. The arbitrage between investing (passive income) and working (activity based income) is so small as to be not worth the candle. With such small arbitrage the incentive to "hold" or to acquire must be predicated on the assumption of permanent inflation or future rises in asset prices. The hotel game is slightly different to the residential. Marginal improvements magnify gains (the same is true of restaurants) which they don't really do in residential. I also see that the shop I was offered at 7k a year in Coventry Street, London W1 in 1996 (and turned down) is now back on the market at 63k p.a. I thought at the time a flagship for my little hotel group in London at running costs of about 20k was bordering on vanity; on costs of 100k it's bonkers. Despite my losses on gold over the last two weeks, I'm sticking with the girl from Corinth. As Wordsworth says, the poet is like Hannibal crossing the Alps. You should either tell Venetians to stuff their hotels or capture them in battle. In an internet cafe last week in London. Sitting next to me was a BTL girl and her mortgage 'consultant' who were attempting to lift a restriction in the terms and conditions of the mortgage. It was pitiful. There's a guy earning no more than 20k pa advising a girl earning no more than 20k how to buy an asset valued at 200k. To even think that such people can compete with Capital is folly. The only equalisation against the inequalities of capital is brains or graft. My works manager informs me that Brazilian harems in Spain are 50 quid an hour. So if my Venetian hotelier gets his 8m, invests at 5% he's on 300k sterling pa or 5000 plus per week. That's 100 beautiful Brazilians per week for the rest of your life. Sod Big Brother, I've outdone Jacop Casanova, says inn-owner. Such are the wonders of arbitrage. What is the point of work when pleasure is so cheap ? Was also in Tin Pan Alley (Denmark Street W1) and saw that most unskilled jobs were 5-6 quid an hour. Memento mori. What is the point of life when it's frittered away on drudgery ?
  6. more worthless paper for glitter at 546 oh the exquisite pleasure of losing money like running on a rainy day
  7. It started off as what used to be called the "Chamberlain Ransom" - in 1885 in Birmingham, Joseph Chamberlain gave a speech in which he asked "What ransom will property pay for the security which it enjoys ?" - in effect the rich would be allowed to keep their goodies if they agreed to a mini-welfare state. This Welfare State blossomed under the Liberal government before the the First World War, mushroomed under the Labour government just after the Second World War, and now withers on the vine. The Great Dread was that this welfare society would alter people's behaviour and change their attitudes to personal responsibility, most notably in the fields of work, family care, savings etc. Do-gooders howled in protest that the welfare state would never do that. But it did. The "benefits trap" undermines work, families throw off their elderly onto the "state" and savings have been destroyed by "means testing". But it gets even worse. Expectations have now been raised to such levels that there is even a website called www.housepricecrash.co.uk where people can clamour for a right to own their own home. So in addition to the lorryloads of benefits, we now ask the government to give us our own house. And before you all protest that you don't want the government to give you a home...I'm afraid you do. Most of you want the government to intervene and stop HPI in some form or another and act against private property. But if you allow a welfare system (and government printing presses to work overtime to pay for it) to finance property ownership, HPI is unavoidable. In the case of the woman above, the tax credits pay her mortgage. The return of the Chamberlain Ransom in bizarre form. The propertied classes get to keep their wealth by conceding a safetynet to the poor.... and this safetynet can now be used to become...... one of the propertied class!!!
  8. But don't you feel the warm-glow of generosity as she spends.... £11.99 per month tv licence £276.10 per month mortgage £115.00 per month Black Horse loan 2 years left £127.10 per month car hp Yes car credit 3 years left £124.30 per month Halifax loan 4 years left £78.84 per month hfc loan 2 years left £24.84 per month car insurance £35 per month dell computer 1 year left £17.50 per month AOL £10.00 per week electric on meter £10 per month Gas on meter £44.54 per month life insurance for mortgage £21.00 per month Sky £11.00 per week bus fair for kids school £50.00 per week shopping £10.00 per week petrol £10.00 per month phone with scottish gas £14.00 per 2 weeks coal (not needed in summer) £12.00 per month Capital one (minimum payment on £340) £45.00 per month catalogue £96.00 per month council tax Back in the autumn of 1975, Robert Bacon and Walter Eltis, two Oxford economists, wrote a series of articles for the Sunday Times on 'Declining Britain' arguing that the public sector was crushing the economy and there were too few real producers generating sufficient income to support it. With Gordon Brown's ridiculous public sector spending splurge on employment and even more ridiculous subsidies through tax credits, the position is even worse today than in 1975. So what do they do ? Take on a shedload of government debt to finance present commitments and import a shedload of immigrants to finance future commitments (the so-called how-to-pay-the-pensions-argument). No worries there then. To solve the problem of government debt, we'll just borrow a teeny-weeny bit more (as the Fat Man said in Monty Python's Meaning of Life just before he exploded). To solve the problem of immigrants also needing pensions later, we'll import just a just a teeny-weeny bit more (as the Fat Man said just before the whole country exploded). There's an army of people out there like that woman who are being subsidised by the state (which steals the money from you and suns itself in self-righteous humbug) to live way beyond their means. There's another army of people out there of the newly-arrived-with-no-capital whose health care, education, housing, and pensions must also be subsidised. Would the last merchant left please turn off the light ?
  9. I view some of the anti-BTL anti free-market posters on here with horror. I wouldn't say BTL people are my favourite people (they are dull, don't speak Latin, Ancient Greek, Aramaic or Coptic). But they are just the same as people who buy bananas or boats or buckets or Big Ben. So they deserve to be treated with the same amount of respect as any merchant (who provides the taxes which finance the public sector which vilifies the merchant). Merchants are moral in spite of themselves, whether they like it or not. They can't help being good guys. Most people cannot get their head round the concept of the merchant who in reality is morally superior to socialist planners. They just hate the concept. The idea that a merchant in pursuit of personal profit should spin off benefits (albeit unintentionally) to the public far greater than the resentful public sector worker is ever going to do from his or her position of feudal abuse over the poor, is simply a cross to a vampire to civil servants. Adam Smith gives an excellent desciption of human nature in his Theory of Moral Sentiments (1759): We may believe of many men, that their talents are superior to thoser of Caesar and Alexander; and that in the same situations they would perform still greater actions.In the meantime, however, we do not behold them with that astonishment and admiration with which those two heroes have been regarded in all ages and nations. The calm judgments of the mind may approve of them more, but they want the splendour of great actions to dazzle and transport it. The superiority of virtues over talents has not, even upon those who acknowledge that superiority, the same effect with the superiority ogf achievements." Theory of Moral Sentiments, p. 116. Now what is interesting about this is how property seems to have an effect on us like dictators whereas other investments bore us silly. Go into any pub and tell someone you have ten houses and they will sleep with you because property has the property to dazzle , daze, transfix and strike us dumb. Tell them you have 2 million pounds of shares and they will walk away disbelieving you. What does that tell us about property ? That our attachment to it is completely irrational ? All investors knows there is a ton of money to be made in irrational markets. The million or rather multi-million dollar question is where is the turning-point of irrationality v reason ?
  10. Posting this in a more obscure section of HPC to avoid the jihadis. An important element of whether we are in boom or crash (rather than boring kboom) is determined by a definition of what property actually is. I'm not sure we need a rehashing of Grotius, Locke, Hume, Smith, Burke, Marx, Lenin etc so unlike the BTL jihadis, intelligent investors should avoid showing off (myself included). Rather than close down discussion with detailed analysis, I'll refrain from detailed comment and let free discussion develop. As a starting point, however, I want to ask is property a good or a service ? Certain capital goods have seen marked deflation over the years, certain services rabid and rapid inflation*. Which is it ? A number of important economic consequences follow from the correct definition. If property is a good, then why isn't it declining ? Why is it inflating worldwide ? The simple answer is interest rates of course but if the holding cost of property is appreciating at services rate, all theory says this should impact on price. (And it certainly supports a sell-to-rent argument.) If property is a service, why hasn't the service-linked-inflation-element led to a decline in capital good price ? In short, as the running or maintenance costs skyrocket, why hasn't the capital cost declined to take this into account ? In addition, our use of services is relatively inelastic, our uses of goods relatively elastic, resulting in a decline in disposable income (not even counting the 500,000 Indian and Chinese engineers who will be eroding Western salaries in the near future), so there is an argument that the income multiples for gearing should contract and not extend (not counting lack of provision for pensions which should also lead to contraction). This is a complicated subject so I'll let members contribute. But the BTL Jihadis who rant "the BTLers have hoovered up all the smarties, take them out and shoot them" just bore me silly. In short, I am asking two questions: what is property ? and 2ndly if disposable incomes decline, account for the paradox of increasing multiples - a mirror of macro business engaged in greater risk-for-lower returns ? * it's cheaper to chuck your kettle away than get it repaired , it's cheaper to sleep with your plumber than employ him etc
  11. I think it's an error to confuse Kensington with a Debt Collection agency. Debt Collectors specialising in voluntary insolvency agreements are certainly flavour of the month. But their income stream is not as sound as analysts think. Kensington doesn't generate its profits from fees linked to debt but from issuing debt itself - this is fundamentally different and on an exponentially higher level of risk. They are completely different.
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