Monday, 31 March 2008
Friday, 28 March 2008
Sorry but couldn't resist about talking of the Kanerva "Water Gate"...nothing to do with housing but maybe more with househol(ds) ...
"Foreign Minister Ilkka Kanerva announced on Friday that he does not intend to resign and he rejected rumours of a reshuffle of Conservative cabinet ministers."
"Earlier in the day he declined to comment on the latest development in a scandal involving hundreds of cell phone text messages he sent to an exotic dancer."
"On Thursday, the Helsinki District Court rejected a motion by Johanna Tukiainen to stop the planned publication of a series of mobile telephone text messages that she received from Kanerva."
I don't get it..Kanerva sent some sms to Johanna (Let's call her Joe), Joe gave those messages to the "paper" "hymy" that made a decision to publish it. But then Joe decide that she won't (maybe after an another sms from Kanerva?)...So why on earth the Helsinki District Court rejected that, after all Joe is the sole owner of the smssss (200 of them)???
Right, I'm not a particular fan of Kanerva, but I don't like when one man is dragged that way, "humiliation", this is what the Helsinki District court decide to stamp and honour...that's non sense.
You will say as well what would have been the reaction if the court would have blocked the decision to publish those sms: Would it emerge as some corruption tentative, politicians pressure on law maker?? now you wonder if the decision was about the sms or about the fact it was a showcase of indepedance of the justice?
At the end, this should not be allowed to my opinion. There is a freedom of press but I think the limit are being tested here...
In that sense, they are right to predict that inflation will go down next year as Europe might see a recession in 2009. How deep it is going to be?, it all depends...
interest rates will come down maybe after the summer or later in the year as the global economy ex-U.S. start to contract... U.S. has already entered a recession and will probably know one that will last longer than the last two (1991, 2001).
After all credit will not go any more for funding real estate but instead redirected to business for improving productivity in time to prepare the mass retirements that will start to hit Europe in 2010-2015...
Thursday, 27 March 2008
"Problems that emerged with the new online banking system of Sampo Bank on Tuesday were not limited to breaks in service and incorrect or missing information on money transfers and bank balances"
"The glitches, that continued on Wednesday, were prompted by changes enacted at Sampo aimed at integrating its operations with the Danish Danske Bank, which bought Sampo last year. "
"One customer in the Uusimaa (Helsinki) region noticed on Wednesday that his monthly housing loan payment had been deducted from his account twice. "
Humm...looks like Danske bank is in need of fresh cash...since they are trying to get twice the money from that poor customer...well he will get it back after few days...hopefully with interest...since this time it's the customer that lent money to the bank...
Nethertheless , the question you migh ask is : do we still have major Finnish bank in Finland? Nordea is Swedish, Sampo is now Danish...now the second question would be : Do we then need Financial Watchdog and a Central banker like Erkki Liikanen? Well hard to say since they have no control of foreign banks... Welcome to the financial "wild wild west", where Erkki is driving the main car without wheel...or it's as well like Tarja Halonen being president but without the power or like the U.S. financial system without corrupt Paulson ...
Wednesday, 26 March 2008
It's about Deflation and its consequences. I have put an unusually big extract from the speech as it is really worth to read.
Although I would like to highlight few points and correlate them with todays actions and situation.
"even greater burden on households and firms that had accumulated substantial debt before the onset of the deflation"
"We may never know for sure whether the Federal Reserve's rescue of Bear Stearns
averted a seizure of the $516 trillion derivatives system, the ultimate
Chernobyl for global finance.
Bear Stearns had total positions of $13.4 trillion. This is greater than the US national income, or equal to a quarter of world GDP - at least in "notional" terms "
"If the Fed had not stepped in, we would have had pandemonium," said James Melcher, president of the New York hedge fund Balestra Capital.
No wonder you see some institutions or investors buying 2 year US Bond yielding 1.75%...people are parking their money in the safest possible place: government bond... at least for a period of 2 years...
Looks like more and more are thinking that chairman Ben Bernanke will not succeed in rescuing the financial system. Europe will come to the rescue most probably at the end of the year after the U.K. Spain housing market join the deflationnary party...
"So, is deflation a threat to the economic health of the United States? Not to leave you in suspense, I believe that the chance of significant deflation in the United States in the foreseeable future is extremely small, for two principal reasons."
Tuesday, 25 March 2008
Monday, 17 March 2008
"The monthly salary of lawmakers with more than a dozen years service behind them is to rise to 6,300 euros from the current 5,950 euros, while the speaker is to receive 10,800 euros, an increase of 600 euros a month. "
"The announcement came after the Labour Court found a 24-hour strike earlier this week illegal."
Friday, 14 March 2008
"Mr X, a former head of Helsinki Water, sat in the dock of Helsinki district court on Thursday and was charged with accepting bribes and abusing a position of authority."
"The indictment says Mr X accepted free labour and building supplies for his house and a summer residence from four companies three years ago."
"The prosecutor said Mr X also used Helsinki Water workers on his building sites and charged building supplies to his employer."
Corruption is creeping, greed as well. Usually it's not the middle class that will try to cheat the system even if their purchasing and wealth is low, but instead it's the high ranking officials or rich (through bribes, position abuse and tax tricks or evasion)...
Now if the situation is so bad today with regard to housing price and rent, it's simply because it profits official in municipalities, some insurance companies that heavily invested during the housing slump of the early 90's and the authorities that are simply not directly concerned by the problem... Yes you will hear the government complaining about rising cost (metro, library,rail) but at the end it's the tax payer who will be paying the bill..
Yesterday I posted an article showing that some authorities have started some investigation on trying to explain why some cost are very elevated...let's see how far they can go into dismantling this corruptive system that only profit few and threaten to destabilize the Finnish society...
- Money Laundering
"Finland is taking steps to more effectively deal with terrorism and money laundering used to finance terrorist activities."
"The government is to present Parliament with new legislation to prevent money laundering that can be more widely applied than present law."
Great news... I mean we all know that's nothing to do with terrorism but instead a start of a crackdown on tax evasion and corruption. (that the way politics work by the way you play with images, at least the American citizens were tricked by the Republican that way..but they learn the lesson the hard way and will show it during November election)
Indeed lots of dirty money need to be recycle in the system and usually one way is to "wash it" is investment in real estate, art etc.. We have seen that in London and Paris...
See eira flats (see link) ...
Well for some it could just be a representation of PI :
"pi represents the number you get when you divide the distance around a circle (its circumference) by the distance across (the diameter). "
For Household it's more about ...inflation, "3 point something..."
- in January we had 3.8%
- in February we are at 3.7%
What next? 3.9%, 3.1% ?? it's all depending on the circle...or let's call it bubble...housing bubble in particular, when it implodes we will see the true value of inflation...
Do you wan to try being in wheel of the central bank and monitor interest rates against inflation, money growth , unemployment and production then why not trying this link : Central Bank Simulation(click on the Monetary policy game)
Thursday, 13 March 2008
Everything is rising and rising fast except your purchasing power that is being eroded due to a ramping inflation...
Now the questions are :
1- Will competition between companies push price down? depends... if there is a cartel or price fixing then indeed not...the poor will get poor and the rich behind the schemes get richer, greedy and loose most probably the key to paradise...but the rich don't care as long as they manage to make the gap between them and the majority of citizen as big as possible...in1789 in France the "Aristocrat" managed to get it as big as possible...then it ended up in a revolution...don't forget the average citizen is not as dumb as you might think...In todays world, the "aristocrat" are politicians and CEO, not all are corrupt by the definition but are living well beyond the average citizen that they represent...they should remember that...
2- Will a slowing U.S. , Europe, U.K. push commodities down? depends..if the speculation continue and if monetary policy mistakes are made in emerging market then indeed you will have to wait a bit longer until the bubble deflate or implode...
3-Inflation will concern oil and food prices but not Salaries as it was the case in the late 80's or 90's ... then if salaries rise a little it depends on how fast the inflation grows...higher it gets and lower your purchasing power become... The ECB will act ..but unfortunately with Germany and France in mind the biggest economies in Europe , the other one will most probably adjust abruptly..
and finally :
4- If you have gold teeth it's about time to sell...if you have a car of type SUV like a "hummer", the car will represent few days work for fueling it, so get rid of it... at some point it might be cheaper to buy anything from American online store, especially if the Euro continue to be on free fall (oops forgot that the government is in the middle through the custom tax or "protectionist tax" of 20%...let's wait for the euro to strengthen another 20% ..at 1.90 euro) ... Hey Wall mart when are you gonna implant in Finland and push prices lower, we need some help on that...
"The Authority is looking into the lack of competitive pricing when it comes to construction, materials, and use of land. However, Juhani Jokinen, the director of the Competition Authority, says that so far there is no evidence of any kind of cartel in place."
Tuesday, 11 March 2008
"European Central Bank council member Axel Weber said he doesn't see any leeway to lower borrowing costs after oil prices jumped to a record."
"The surge in oil prices is a major concern and I don't think it leaves us any room for a loosening of our monetary policy,"" Weber, who is also president of Germany's Bundesbank, said at a press conference in Frankfurt today.
The ECB last week kept its key rate at 4 percent.
So after all it looks like the ECB is serious about inflation. Some people think that we are going to head in a period similar to the 70's where inflation is raging but interest rates stays low thus "inflation is paying your housing loan": that's a total non-sense.
let me expand that :
1- Monetary policy maker are independent. I'm talking about Developed country i.e Europe, Australia, Canada, and U.S for example. Some other Central banks, i.e from emerging market will make and are making policy mistakes as their analysis is being pressurized by political and economical forces i.e China where inflation is raging at 9% and deposit rate is at 4% ....
2- They will allow interest rates to go higher than their limit ONLY if seen as being a short term phenomenon OTHERWISE they will act and increase interest rates especially if they see wage growth threatening price stability.
3- In the 70's monetary policy failed because they didn't understood it in full extent and were not fully independent. Now after years of study, confidence in central bankers in developed countries has been very strong and this is reflected in the long term borrowing cost rate (10 years german Bund rate for example)
4- If inflation grow rapidly through wage growth then the ECB will act as central banks did in the late 80's and 90's by aggressively increasing interest rates with the condition that the economy is re accelerating. As we know there is no wage growth if the economy enters into a recession thus allowing central banks to ease as shown in the U.S or U.K.
5- Now it seems that we are in the perfect storm: Food and Oil shock. If thess shocks don't resolve by themselves by for example slowing economies around the world, then it will certainly trigger second round effects (salary wage growth). The ECB will act otherwise as salary rises, company become uncompetitive and delocalization re accelerate...the Euro will be soaring thus pushing away from Europe any manufacturing company... the nightmare that the ECB want to avoid.
YESTERDAY: Eliot Spitzer, the "incorruptible", As U.S. attorney general, Spitzer took cases relating to corporate white collar crime, securities fraud, internet fraud and environmental protection. He most notably pursued cases against companies involved in computer chip price fixing, investment bank stock price inflation, the 2003 mutual fund scandal.
New York Governor Eliot Spitzer told his aides that he was involved in a prostitution ring, the New York Times reported. See link
Reports say he will announce his resignation at 1530 GMT (12 March 2008) in New York.
2-Ilkka Kanerva (Nat. Coalition Party)
Kanerva is a member of the Finnish National Coalition Party. He is a master of Political Science from the University of Turku. He has been in the Finnish Parliament since 1975.
Kanerva is the Chairman-in-Office of the Organization for Security and Co-operation in Europe for 2008
The latest controversy over claims that Finnish Minister for Foreign Affairs Ilkka Kanerva (Nat. Coalition Party) had bombarded a young woman dancer, an "erotic dancer", with SMS messages (200 mobile phone text message) has left the party’s chairman, Minister of Finance Jyrki Katainen (Nat. Coalition Party) "perplexed". see link
Matti Vanhanen and Jyrki Katainen back him up...maybe they are involved too: Vodka, Women and Cigars...?
3-Nicolas Sarkozy (UMP)
Nicolas Sarkozy is the current President of France and ex officio Co-Prince of Andorra, elected on 6 May 2007 after defeating Socialist Party contender Ségolène Royal during the second round of the 2007 election. Before his presidency, he was leader of the Union for a Popular Movement (UMP) right wing party.
There's been further controversy in France after President Nicolas Sarkozy insulted a member of the public at an agricultural show last weekend.
You should always shake him his hand...otherwise he will swear at you...
"Jarmo Korhonen, the outspoken party secretary of Finland's Centre party, was quoted as saying by Maaseudun Tulevaisuus on Monday that the total cost of rail investment plans in Espoo, Helsinki and Vantaa, at about two billion euros, was greater than what was realistically available for the entire country."
"Mr Korhonen told the rural newspaper that the total cash available for railway investments in the current legislative period for the entire country was 1.4 to 1.6 billion euros, adding the sum should be spent evenly across the country."
"There is no need to heat further the overheated economy of southern Finland. The costs of construction have spun out of control in southern Finland, partly because prices are being swollen by too many simultaneous projects," Mr Korhonen told Maaseudun Tulevaisuus.
At least now some start to talk it up, people start to recognize the problem...it's a first step. Indeed we have an overheated economy (in the South), with housing price going out of crontrol with rent spiraling higher and poor getting poor due to a ramping inflation...
The ECB can't do anything as some economy such as Spain, Italy, Greece, Ireland are on the brink of collpase... Italy seems, day after day, to be better off outside Europe...after all if the situation doesn't improve there is a chance that finally we will see the first break in the European foundation...maybe Italy will take back its Lira and devaluate it in order to be competitive especially against the German Competitive Machine ...
Monday, 10 March 2008
Trichet Answer : I have already said - anticipating your remark - that our 320 million fellow citizens are asking us to be faithful to our mandate. It seems to me that a number of observers, including market participants, often forget that we have a mandate, and that this mandate is clear.
"Commercial property -- pricey by regional standards -- could suffer too since a slower economy will undermine corporate demand for space and drag on rental growth."
"Consumer confidence is at its lowest level since Spain's last housing crisis, in the early 1990s, according to Eurostat and Bank of Spain data."
Friday, 7 March 2008
If the U.S. fall into a recession and a bad one, it will bring down the whole global financial system thus like a domino spreading the recession to one country after another...
Then of course the ECB won't have any choice then cutting rate aggressively. The moment of truth will be sometime around the summer, to check whether or not the U.S. rate cuts and fiscal stimulus are working and stabilizing the economy.
"City of Helsinki plans to revamp entire South Harbour area"
"In order to bring the old city centre back to life, the City of Helsinki intends to revamp the South Harbour area completely."
"According to a plan commissioned by the City, the old Olympia Terminal, the adjoining terminal areas, and the adjacent large parking area would all be covered with a green deck. "
”The redevelopment of the area will cost a huge sum of money, but the plan is feasible, as it will give the City more land that can be developed and sold”, estimated Mikael Nordqvist, the head of the Helsinki Real Estate Department.
Most probably it's a rescue plan or bail out to construction company that have heavily invested in constructing very high price apartment in the eira zone.
Housing is unaffordable, rent inflation start their spiraling trend upward and then...the government through the city of Helsinki is building unnecessary site that will require vast amout of money... Are they living in another planet? Pluton? or are they completely unaware of the problems?
Wednesday, 5 March 2008
"Several other instant credit companies have complied with our instructions not to issue text message credit at night. After all, one does not conclude credit card contracts in the middle of the night either," Anja Peltonen of the watchdog told the Finnish News Agency (STT).
What don't they force all those predatory lenders from providing instant credit. I'm not sure what good things they bring to the society as a whole as they target the weakest : the youngest...
"The agency underlined that borrowers must be offered a chance to study terms and conditions before accepting credit and that referring customers to an internet site was not enough."
This was already highlighted in a previous article "eSubprime: Living beyond your mean" , this article was mainly showing the watchdog inactivity of handling such reckless lending.
They should go further and dismantle as well the financial engineering system put in place by construction company and real estate agent to bring to consumers and future households affordability traps :
Now even some web site (oikotie - YIT) are warning the consumer that the price shown is not the reality but one should be careful in calculating what they will have to pay i.e Myyntihinta vs Velaton myyntihinta and any short term fixed rate that reset to higher rate....
|Velaton myyntihinta||331 200,00€|
And here is the warning:
"Huomaathan, että uudiskohteiden tiedoissa olevat tiedot asumismenoista (rahoitus- ja hoitovastike, vesimaksut, jne.) ovat arvioita, jotka perustuvat tämän hetkiseen parhaaseen tietoon. Ilmoittaja pidättää oikeuden muuttaa tietoja."
Tuesday, 4 March 2008
The Mortgage Society of Finland (Hypo) said in a statement Tuesday that the number of unsold houses and flats in the country had risen to 1,500, adding said properties were beyond reach of even top earners.
1,500? They must have forgotten another zero or two : I would say most probably around 15,000 to 150,000 of unsold dwellings for the whole country and it's growing fast...
"Hypo blasted builders for neglecting the needs of a broad range of customers and urged the companies to build more affordable housing."
"It is of course nice to build those expensive and lavishly equipped dwellings," it added.
Right, So in order to bring affordability, the solution is to build low standard house...and avoid doing the right structural reforms?? (land planning and monopoly break down) . Housing cost will come down in the years if not months ahead no doubt about it so it's not an issue. Hypo is again shouting facts and proposing nonsense solutions...
"Hypo said it was possible but not probable for Finnish house prices to start falling later this year."
They will fall no doubt about it, the question is by how much? it all depends how long the market is not allowed to go to its natural equilibrium. who are the actors to blame in this disequilibrium?
1- The government : Providing subsidies in a market that didn't need it. It just shifted tax payer money to the wrong resources. In particular the housing minister has been almost an inexistant actor... where is he? and most important what is he doing?
2- The Municipalities : In making land planning and availability a speculation game...
Monday, 3 March 2008
"Tuomas Rothovius of the agency said that although the ratio had risen, it was moderate when compared with other industrial countries'."