Good Old Fergus!

cells

mwpt wrote: »

That isn't what happens though. In example one, perhaps one of those investors was a street sweeper, meaning your street remains nice and clean. Perhaps one invented the little truck the street sweeper drives. Perhaps another is a fisherman. Perhaps another invented zip lock freezer bags. Whatever. The point is, their money came from productive means for which consumers were happy to pay, and they use it directly to invest in something else to make a return.

In the second example, with the bank in the middle, there was probably only one person involved and one lot of £7.5k, from the street sweeper. Due to the miracle of fractional reserve banking, the bank creates more money supply and lends to the property investor.

We bring forward future consumption. This isn't a bad thing in itself, but again, in my opinion, has gone too far in the BTL sector.

Again, I am not anti-BTL, I am anti the current system which I think has gone too far and incentivises or even mandates that you use debt. There are probably areas where the yield makes no sense without using leveraged finance along with the tax breaks doing so incurs. IMO that should never be the case. It should be the case where it is better to employ productive capital from investors if you can. If we can shift the BTL sector toward something approaching that then I wouldn't have much to say about it.

you are wrong about banking you let the crash wishers cloud your judgement. every pound of credit borrowed has a corresponding depositor

here is a link to the annual report of lloyds banking group
http://www.lloydsbankinggroup.com/globalassets/documents/investors/2015/2015_lbg_annual_report_v3.pdf
Who are you going to believe the annual report of a bank or a website called hpc.co.uk?

Notice how they have £418 billion in deposits and £455 billion in loans and advances to customers. They note thier 'loan to deposit ratio' of 109%. This is above 100% because some other banks will be below 100% (eg HSBC shows $1,315B in deposits and $920B in laons)


So it really is the case that I put forward, not the silly idea that the banks magic up 10x their deposits. The confusion arises as the silly crash wishers dont understand that the government regulators requires the bank to have a certain amount of its own money on its book so as to cover a potential loss on making net bad loans beyond normal costing for that. For lloyds they say their common equity tier 1 ratio is 12.8%. the silly crash wishers think this 12.8% means the bank is lending out 7.8x its deposits NO the bank lends out only as much as it has in deposit the 12.8%/7.8x is just a ratio of how much of its own money it has to back its business up when the !!!! hit the fan


so now that you know its example 1 with your street sweeper car inventor that you said would have been ok, let see if you chance your mind

wotsthat

Graham_Devon wrote: »

Very convenient that you have missed out the fact that he was months behind on mortgage payments before getting a speical deal with the mortgage company (as the mortgage company also had a problem if Fergus went down).

This is what I mean by people seemingly wanting to back these guys up. Only half the story is ever given in order to make them out to be far more successful than maybe they are (or might have been).

Story I read said he was £350k in arrears. Fergus said he paid by post and a postal strike meant it was late arriving. Probably half the story on both sides but £350k looks like a single mortgage payment for a 1000 property portfolio on IO.

I don't see anyone backing him up to be honest. I'm just surprised people try to play down his wealth. He's a knob, got lucky but simple back of fag packet maths would indicate he's fabulously wealthy. If he's got no money then he's been spending well.

chucknorris

cells wrote: »

maybe its a problem of hindsight investment

im sure if property doubles in the next 25 years the same crash wishers will cry that landlords made a bomb out of nothing but lazy stupid risk free skill-less signing of a mortgage paper.

but today, they themselves wont put a penny into property or property stocks because its too risky

I think that is certainly at least part of it, when I first invested over 25 years ago, I do remember that I felt that I was sticking my neck out, which was very different to subsequent property investments that I/we made years later (from a much more solid position). I think people tend to forget that even back then there were risks, I remember one night just before the UK left the ERM in 1992, my mortgage rates looked like they were going to be about 18% (I think that they did reach 15%), my entire salary was going to be soaked up by only one week's interest rate rises. Although I was quite certain that it wasn't sustainable, and that we would have to leave the ERM, I did wonder if the chancellor would act stubbornly, and do nothing until after I had ran into difficulty.

chucknorris

Graham_Devon wrote: »

Very convenient that you have missed out the fact that he was months behind on mortgage payments before getting a speical deal with the mortgage company (as the mortgage company also had a problem if Fergus went down).

This is what I mean by people seemingly wanting to back these guys up. Only half the story is ever given in order to make them out to be far more successful than maybe they are (or might have been).

If you search my posting history Graham you will see that I not only don't 'back' Fergus, I actually dislike him because of the way that he treated his tenants. But just because I dislike him, it doesn't change the facts, I don't post to an agenda, I post the way that I see things.

What are you talking about? I was talking about his current wealth (as stated in my post), not his wealth back in 2009, did you read all of my post before you responded?

mwpt

cells wrote: »

you are wrong about banking you let the crash wishers cloud your judgement. every pound of credit borrowed has a corresponding depositor

here is a link to the annual report of lloyds banking group
http://www.lloydsbankinggroup.com/globalassets/documents/investors/2015/2015_lbg_annual_report_v3.pdf
Who are you going to believe the annual report of a bank or a website called hpc.co.uk?

Notice how they have £418 billion in deposits and £455 billion in loans and advances to customers. They note thier 'loan to deposit ratio' of 109%. This is above 100% because some other banks will be below 100% (eg HSBC shows $1,315B in deposits and $920B in laons)


So it really is the case that I put forward, not the silly idea that the banks magic up 10x their deposits. The confusion arises as the silly crash wishers dont understand that the government regulators requires the bank to have a certain amount of its own money on its book so as to cover a potential loss on making net bad loans beyond normal costing for that. For lloyds they say their common equity tier 1 ratio is 12.8%. the silly crash wishers think this 12.8% means the bank is lending out 7.8x its deposits NO the bank lends out only as much as it has in deposit the 12.8%/7.8x is just a ratio of how much of its own money it has to back its business up when the !!!! hit the fan


so now that you know its example 1 with your street sweeper car inventor that you said would have been ok, let see if you chance your mind

Yes, I had got myself confused slightly. I will give this some thought but admit that you make a compelling point.

I want to note however, that there is the caveat that depositors are not seeing the risk returns that the borrowers are due to various central bank monetary measures.

wotsthat

mwpt wrote: »

I want to note however, that there is the caveat that depositors are not seeing the risk returns that the borrowers are due to various central bank monetary measures.

What risk? Not a single depositor lost a single penny as a result of lending to over-leveraged chancers like Mr. Wilson.

mwpt

wotsthat wrote: »

What risk? Not a single depositor lost a single penny as a result of lending to over-leveraged chancers like Mr. Wilson.

Depositors have lost billions in returns from interest rates being suppressed in order to make borrowers secure.

cells

wotsthat wrote: »

What risk? Not a single depositor lost a single penny as a result of lending to over-leveraged chancers like Mr. Wilson.

More importantly a depositor has a choice. They can put their £200,000 into buying a property (or property shares) and earn 5% return OR they can put it into a bank with no risk who will lend it to someone who will put it into Property and will be willing to take all the risk

A BTL purchaser is an asset manager who effectively makes a deal with the depositor. In theory you could do it directly. A borrower and depositor make a contract where the depositor hands over £200,000 in return for 25 years of interest at an agreed price. They also agree that the borrower will put up £100,000 of his own money and he will take the first hit and also his own home will take the hit before the deposits £200,000 is at risk. There is no magic money. Its two people who worked hard and raised £300,000 between them investing that capital in a way they hope will give them a real return for their old age. Of course borrowers and lenders(depositors) don't go around finding each other and signing personal contracts instead we have banks which male the process quicker and easier but in theory the banks are just middle men in this process. It applies to people buying their own home too not just BTL

cells

mwpt wrote: »

Depositors have lost billions in returns from interest rates being suppressed in order to make borrowers secure.

No they haven't. They have every opportunity to withdraw their funds practically with no notice in most cases and invest directly in something. If they don't and keep their money in a bank they agree that whatever they are getting (even if its 0%) is value foroney for them.

There is no god given right for a depositor to get 5% on their saving or whatever percent you want to imagine

You should see how silly your argument is as you can keep making it all the way back to 20% interest rates.

wotsthat

mwpt wrote: »

Depositors have lost billions in returns from interest rates being suppressed in order to make borrowers secure.

I find it difficult to get upset when I hear about a fall in risk free reward.

I'm paying 2.29% for my mortgage which I'm delighted about. What do you think is an acceptable totally risk free reward for the depositor on the other side of that debt?

I don't 'do' cash but hold a small cash ISA with my lender at 1.2% and, also with them, put £500 per month in a regular saver at 5% which following the tax changes is also tax free.

As you ponder this think about some of the reasons you dislike BTL and ask yourself if sitting on a deposit requires hard graft, is a productive endeavour or makes a contribution to society.

The trouble with the debt is bad attitude is the world is viewed in a binary black and white.