TCD Prof: NAMA a gamble too far, even for these chumps

[cd27]

Double or quits anyone? Not only will NAMA own a massive amount of property, it will literally own your ass,

http://www.irishtimes.com/newspaper/...251852071.html

"In reviewing this valuation approach it is worth noting that while the banks lent out in excess of €90 billion (three years’ tax revenues) current values of these loans, as evidenced by court proceedings and bond buybacks, is that they are worth less than half of this. But instead of paying €40 billion the Government has made it clear time and time again that it will overpay. Closer to €70 billion is likely to be transferred to the banks. The Government is handing over the equivalent of one year’s tax revenue to the stock and bond holders of the banks, as to pay true value would result in the wiping out of the equity and bond capital. Nama assets cannot by definition cover the cost of this borrowing – they are toxic loans of which less than half are generating any cash whatsoever. Thus, the eventual burden will fall on the taxpayer and this decision is covered by the fig leaf of section 58. In essence the valuation philosophy of section 58 rests on a twin set of assumptions: that we are at or near the trough of the property market; and that the market will rebound over the life of Nama, indicated at seven years."

[Sailor]

Double or quits anyone? Not only will NAMA own a massive amount of property, it will literally own your ass,

Country's future mortgaged on sloppy, confused legislation - The Irish Times - Sat, Aug 01, 2009

"In reviewing this valuation approach it is worth noting that while the banks lent out in excess of €90 billion (three years’ tax revenues) current values of these loans, as evidenced by court proceedings and bond buybacks, is that they are worth less than half of this. But instead of paying €40 billion the Government has made it clear time and time again that it will overpay. Closer to €70 billion is likely to be transferred to the banks. The Government is handing over the equivalent of one year’s tax revenue to the stock and bond holders of the banks, as to pay true value would result in the wiping out of the equity and bond capital. Nama assets cannot by definition cover the cost of this borrowing – they are toxic loans of which less than half are generating any cash whatsoever. Thus, the eventual burden will fall on the taxpayer and this decision is covered by the fig leaf of section 58. In essence the valuation philosophy of section 58 rests on a twin set of assumptions: that we are at or near the trough of the property market; and that the market will rebound over the life of Nama, indicated at seven years."

If you value the loans at 40 billion then the banks go bust, unless you pour a fortune into them in recapitalisation - in other words nationalisation. But these assets will be worth more than 40 billion at some future date, and more than 90 billion at some later date again. Does anybody seriously believe that in 20 or 30 years from now these assets will not be worth hundreds of billions? The increase in property and land values over the long term is not going to come to a halt.

[mr_anderson]

If you value the loans at 40 billion then the banks go bust, unless you pour a fortune into them in recapitalisation - in other words nationalisation. But these assets will be worth more than 40 billion at some future date, and more than 90 billion at some later date again. Does anybody seriously believe that in 20 or 30 years from now these assets will not be worth hundreds of billions? The increase in property and land values over the long term is not going to come to a halt.

Ohhh yea ???

[COLOR=black]The Japanese asset price bubble was an [/COLOR][COLOR=black]economic bubble[/COLOR][COLOR=black] in [/COLOR][COLOR=black]Japan[/COLOR][COLOR=black] from 1986 to 1990, in which [/COLOR][COLOR=black]real estate[/COLOR][COLOR=black] and [/COLOR][COLOR=black]stock[/COLOR][COLOR=black] prices greatly inflated.[1] The bubble's collapse lasted for more than a decade with stock prices bottoming in 2003, until hitting an even lower low amidst the [/COLOR][COLOR=black]current global crisis[/COLOR][COLOR=black] in 2008.[/COLOR]

Japanese asset price bubble - Wikipedia, the free encyclopedia

Ahhh but I suppose Japan is different, not being a 1st world economy and all that ...

[cd27]

If you value the loans at 40 billion then the banks go bust, unless you pour a fortune into them in recapitalisation - in other words nationalisation. But these assets will be worth more than 40 billion at some future date, and more than 90 billion at some later date again. Does anybody seriously believe that in 20 or 30 years from now these assets will not be worth hundreds of billions? The increase in property and land values over the long term is not going to come to a halt.

even if you believe that in 20 - 30 years the values will be 90bn (totally retarded unless inflation does it) that means you get a return of 0% per annum for 30 years, I think I'll put my money in an interest bearing account at 3% pa thanks very much.

nationalisation is the least expensive option

[Sailor]

Ohhh yea ???

[COLOR=black]The Japanese asset price bubble was an [/COLOR][COLOR=black]economic bubble[/COLOR][COLOR=black] in [/COLOR][COLOR=black]Japan[/COLOR][COLOR=black] from 1986 to 1990, in which [/COLOR][COLOR=black]real estate[/COLOR][COLOR=black] and [/COLOR][COLOR=black]stock[/COLOR][COLOR=black] prices greatly inflated.[1] The bubble's collapse lasted for more than a decade with stock prices bottoming in 2003, until hitting an even lower low amidst the [/COLOR][COLOR=black]current global crisis[/COLOR][COLOR=black] in 2008.[/COLOR]

Japanese asset price bubble - Wikipedia, the free encyclopedia

Ahhh but I suppose Japan is different, not being a 1st world economy and all that ...

So, in 50 years from now, the value of the assets will still be less than 90 billion?

[mr_anderson]

So, in 50 years from now, the value of the assets will still be less than 90 billion?

The point is you cannot assume everything will turn out alright in the end.

From the same article ...

Prices were highest in Tokyo's [COLOR=#0066cc]Ginza[/COLOR] district in 1989, with choice properties fetching over 100 million yen (approximately $1 million US dollars) per square meter ($93,000 per square foot). Prices were only marginally less in other large business districts of Tokyo. By 2004, prime "A" property in Tokyo's financial districts had slumped to less than 1 percent of its peak, and Tokyo's residential homes were less than a tenth of their peak,

[Sailor]

The point is you cannot assume everything will turn out alright in the end.

From the same article ...

Prices were highest in Tokyo's [COLOR=#0066cc]Ginza[/COLOR] district in 1989, with choice properties fetching over 100 million yen (approximately $1 million US dollars) per square meter ($93,000 per square foot). Prices were only marginally less in other large business districts of Tokyo. By 2004, prime "A" property in Tokyo's financial districts had slumped to less than 1 percent of its peak, and Tokyo's residential homes were less than a tenth of their peak,

So, you´re saying the properties will not be worth 90 billion in 50 years from now?

[corelli]

Closed. There are plenty of NAMA threads already. This is the second thread started with an article published by an academic in the field.