What is truth?

Archive for January, 2011

Broadband update from Wicklow

Since Last Thursday I am without broadband apparently it was fixed on Saturday evening next door  but Eircon were still telling me (their answering service that is) there were aware of a fault in my area and that they were fixing it.

In any case I hope to be back on line perhaps later on in the afternoon tomorrow.

What chance have got when services like this are the norm .The broadband sucks and is expensive and promises from Labour are just that promises that will be broken !

Senator point-blank refuses to provide details of alleged NAMA wrong-doing in Seanad debate


BY NAMAWINELAKE   http://wp.me/pNlCf-ZG

I must say that for myself, I am beginning to seriously doubt Senator Mark Daly’s claims of wrong-doing at NAMA, something covered extensively on here last week (part 1 detailed the interview on the Pat Kenny show and part 2 examined the issues) following claims made by the Senator reported in the press and which formed the basis of a 20-minute interview on the Pat Kenny radio show. Over the weekend, the Senator was present in the Seanad for the debate on the Finance Bill and again raised his claims that NAMA was selling property below value and not following its own code of practice.
The reason I doubt the Senator’s claims is that he was challenged on at least three occasions to provide details of the transaction. Three times –  by Minister for Finance, Brian Lenihan who was present in the Seanad to guide the vital Bill on its way and by senators David Norris and Jerry Buttimer. Yet Senator Daly demurred and made the laughable claim that  he was not a Garda and that he hadn’t evidence of “wrong-doing”, just bad commercial practice. He said he would provide details of the alleged transactions to NAMA but didn’t explain why he hadn’t already done this (though he plainly had time for self-promotion last week including a 20-minute stint on the Pat Kenny show). It is beyond me why he did not respond to the challenges and provide details of the transactions under privilege. It seems that with the dissolution of the Oireachtas tomorrow that the opportunity to provide details using privilege might have passed.
Below is the transcript of the exchange in the Seanad, it ends abruptly and the Senator did not speak again, but as you can see he made the allegations again and refused point-blank to divulge details to the Seanad under privilege which could then be verified. You can draw your own conclusions – personally I think it is irresponsible for those in positions of authority (even if they might be out on their ears in 30 days) to make claims which undermine trust in public institutions and then refuse to pursue the claims. Senator Mark Daly is a 34-year old Fianna Fail senator who was an auctioneer “in a former life”.
Senator Mark Daly: As Senator Leyden said, we should make declarations about this and I, as an auctioneer, was involved in selling section 23 properties.
Senator Shane Ross: Shame.
Senator Mark Daly: I felt at the time that some of these tax exemption sections were quite good, such as the section dealing with nursing homes, but the holiday home exemptions went on for too long. Senator Ross is right about that. They should have been closed off in many areas.
In my home town there were a number of planned developments and we were lucky they did not go ahead. If, however, the section was taken out, people who rented out a business such as a shop using section 23 relief to shelter the income from the shop would now be in a situation where the rent from the shop would no longer be sheltered and they would have to use what was left from the after tax income from the shop to pay off the section 23 mortgage because none of the section 23 properties would provide any income, not even enough to pay off management fees. We would then be left with a situation, especially for section 23 holiday homes, where the estates would not be managed properly because there was no income and they would deteriorate.
I agree with the thrust of the recommendation but it is a shame the Labour Party did not allow for more time, perhaps three months. The idea is good and the Minister is looking at the situation. I raised concerns previously about the selling off of these estates. There was a case in Kenmare where the auctioneers were involved in a fire sale. The Irish Examiner property supplement published a headline reading “Fire sale in Kenmare”. The auctioneers were telling their friends they should buy these because they are bargains. Auctioneers are supposed to achieve the maximum price, not sell bargains. The loans were held by Anglo Irish Bank – the taxpayer – which told the receiver to maximise the value of the properties, who then told the auctioneer to sell the property and the auctioneer told his friends they were bargains. They were selling them below the market rate. We told those auctioneers they were selling below the market rate, that we had sold six similar properties in the last six months and we estimated that the price being asked would cost the taxpayer €1 million.
Senator Paddy Burke: How does Senator Daly know the market value?
Senator Mark Daly: If that loss were extended to cover other fire sales in similar properties, including section 23 properties, the cost to the taxpayer would be in the hundreds of millions, if not billions, of euro. If section 23 relief is withdrawn unilaterally, there will be a double crash.
I raised a related point during the week that NAMA was not following the legislative provisions in the selling of properties under its control. It is not even following the code of conduct for State bodies. When it comes to the sale of section 23 properties and other properties by liquidators, we need transparency. Legislation provides for that but NAMA, in the case of numerous properties being sold on its behalf by the banks, is not following the provisions laid down. People have come to me disgusted that the guys who had borrowed the money originally are buying back their own debt for 50% or 75% less, knowing well that the properties were undervalued. I will speak against my profession in this regard. The valuers undervalued the property initially, because most of their valuations were desktop valuations. They undervalued it and the banks took a haircut of 40%. In the case I came across the original loan was €12 million and the haircut was €6 million, while the actual value of the property was €9 million. The developer went back and arranged for a buddy to buy the property at the haircut price of €6 million and sold it on for €9 million, costing the taxpayer.
An Cathaoirleach: We will be debating this until 12.30 with the way Senators are making speeches.
Minister for Finance (Deputy Brian Lenihan): The Senator should supply the details of that transaction to NAMA.
Senator Mark Daly: I will.
Deputy Brian Lenihan: The Senator has not done so to date.
Senator Mark Daly: I have not. I am not an investigator, but NAMA is not following the code of conduct. It says it does do not have to. Transparency is the key factor in this matter, but NAMA is not following the code of conduct.
Deputy Brian Lenihan: The Senator is under privilege in this House, but he should provide whatever information he has.
Senators:  Hear, hear.
Senator David Norris: The Senator is a public representative. He should name and shame.
Senator Jerry Buttimer: The Senator should give the Minister the information.
Senator Mark Daly: As I am not a member of the Garda, I cannot do that. When I have information of wrongdoing, I will put it before somebody.
Deputy Brian Lenihan: The Senator has not suggested wrongdoing, just bad commercial practice.
An Cathaoirleach: We are on recommendation No. 1. The Senator has made his point well.
Senator Mark Daly: NAMA has turned around and said it does not have to follow the code of conduct for the sale of State assets. I maintain these are State assets because we provided the money. NAMA owes us the money. I do not care whether NAMA follows the code or not, but there is no transparency and there are bad practices going on. I do not want to be doing a post mortem here in a year’s time when it has cost the taxpayer hundreds of millions of euro.
Deputy Brian Lenihan: We would all agree with that, so please give me the information
And that’s where this exchange ended. The transcript and context is available from the Oireachtas website here.

namawinelake http://wp.me/pNlCf-ZG

PwC & Anglo Irish Bank

sent in to-day

Dear Sir, Mr.McGarry, in his last column, quoted Feargal O’Rourke, head of PricewaterhouseCooper’s tax and legal division in Dublin. Mr.O’Rourke opined on the recovery of the Irish economy. I don’t think Mr.O’Rourke, or anyone at PwC, is in a position to comment on anything to do with the Irish economy. They lost that right when they failed to honour their legal and moral obligation as auditors of Anglo Irish. What were they doing during all those annual audits? How could they not have seen and subsequently reported the shady accounting practised by Anglo? Was it insuportcompetence or collusion? Either way, I hold PwC responsible for dereliction of duty and negligence in its performance. Since Anglo was the catalyst and voracious black hole in our financial debacle, I can’t understand how PwC has not been held to account for their part in Irelands financial meltdown. Sincerely, Paul Maher, Castle Street, Roscrea, Co.Tipperary


As a citizen going up as an independent in Wicklow. I can assure you I will  support any measure to bring to justice  any and all who were involved with the Anglo meltdown  and I am just as concerned as yourself. I would hope these people would be removed from all government contracts  until their time at Anglo can be  investigated in Full and any losses incurred by the Irish taxpayers will have to be paid back in full.

Received today 02.03.2011

according to Mr.Feargal O Rourke

Feargal O’Rourke says:

This has just been brought to my attention. There is a major factual error is this post.
PwC neither is, or never was, auditors to Anglo Irish Bank. I hope you will make the appropriate correction

“Ireland could have defaulted two years ago”

Ireland “officially” entered recession over two years ago – September 2008. In the interim period, the country and its citizenry have witnessed one of the most spectacular collapses in modern history. While a series of bailout packages have been introduced over the last two years, it is instructive to see what has been gained, if anything, by such emergency measures.

Two years ago, one of the first early warnings that the bailout funds would not be beneficial occurred on this site. Canny warned that the bailouts would not be effective and could very well exacerbate the very problems to be solved.

Two years later the costs of banking rescues have spiraled, and large public sector borrowing has left the country’s finances in tatters. External debt now runs at 1,305% of Ireland’s GDP, which represents some $535,000 per person. These figures make it the second-most indebted country in the world. With the effectiveness of the past bailouts and loans increasingly scrutinized, one may ask why we keep continuing to throw good after seemingly bad.

At the same time, one may also ask what bailout, if any Ireland has just received. €85 billion is not small change. It is also not without its own costs. The terms of the bailout loans impose a 5.8% rate on this sum of money. Some observers, note it would have to be a strange definition of the word “bailout” to think that making a loan at an interest rate that the distressed Celtic borrower was incurring not even 3 months prior amounts to easing Ireland’s difficulties.

Indeed, some of the more astute point out that this loan actually increases the chances that Ireland will eventually default. This seemingly low interest rate of 5.8% is almost assuredly above the growth rate that one can expect to occur in Ireland’s immediate future. As Ireland’s debt service payments rise faster than their ability to pay, odds (and probably the market’s money) are on Ireland facing increasing difficulties servicing this debt. To conceptualize the fractional problem at hand – Ireland’s odds of default are analogous to a fraction where the numerator (the debt service of 5.8%) rises significantly faster than the denominator (GNP, or ability to repay this loan, perhaps 1-2% maximum). Ireland’s schooling system is still sufficiently effective, I believe, that most school-aged children can read this bailout as a recipe for disaster.

All of this could have been avoided by pursuing the traditional method for dealing with insolvencies – bankruptcy. Ireland could have defaulted two years ago, exited the Eurozone, and tried to rebuild from its evidently collapsed financial and social model. Instead, years of bailouts have prolonged the pain, and worsened the imbalances now all too apparent in the economy. Nobody likes to take their lumps, but getting the inevitable out of the way early allows for an entrepreneurial learning process – the errors of the past are identified, and an unsustainable situation is avoided for the future.

In the comment section to Canny’s 2008 article, one skeptical observer comments: “There were two countries in dire straits at the time the guarantee was brought in, ourselves and Iceland. One government intervened in the market, one didn’t. Which country would you rather be living in right now?” Two years provide an enormous amount of insight to this question.

Two years ago the UK got upset when Iceland decided to let its banking sector default on its obligations (of course, only after it was nationalized – better too late to realize it than never). Icelandic banking debt was 12 times its GDP, an impossible sum for such a small country to repay. Ireland, in contrast, decided to “save” its banking sector by taking on massive public debts. The Fianna Fail party has been willing to stake its reelection on propping up such an unsustainable system with ever-increasing debt levels.

By the end of 2008, Iceland’s entire banking system was decimated and its stock market had fallen more than 95% from its all-time highs of just one year earlier. By allowing its currency, the krona, to devalue (60% again the euro) the government was forced to take austerity measures that other European countries talk loosely about, but lack the moral strength and courage to enact. The decline in the exchange rate opened Icelandic exporters to increasing cost advantages as the crisis worsened.

Ireland, by being tied to the euro and not enacting meaningful fiscal cuts, continued shouldering ever higher amounts of public sector debt. Banking imbalances worsened and innocent Irish citizens – powerless to stop the rush to the abyss – stood helplessly by as Ireland’s downward spiral intensified.

What a difference two years make. While Ireland’s GDP continues to freefall, Iceland’s has stabilized and is showing signs of growth. Real wages have been negative in Ireland since the middle of 2008. After falling sharply over 2008, Icelandic wages have recovered and started showing positive signs of growth in the middle of this year. Inflation in Iceland is also stabilizing, as the devalued krona allows for increased exports and growth in the economy. By taking its lumps early, and severely, Iceland has been able to quickly regain its composure and start the trek back to prosperity. Lord only knows how long Irish people will wait for a similar result.

This is not to say that it is too late for Ireland to following the Icelandic path. A default and exit from the Eurozone and a return to the punt would involve some painful short-term adjustments. It would also allow for two significant beneficial results. First, as trust in the Irish sovereign debt market is negatively affected by such a default the Taoiseach would finally be forced to make austerity cuts that are more than mere lip-service to cutting expenses. Public sector debt would be largely eliminated, and the culprit deficit would be curtailed through the difficulties inherent in borrowing after a default – the Irish government would have to learn to live responsibly within its means. Second, an exit from the Eurozone would allow an exchange rate revaluation (or more correctly, devaluation) which would allow a stagnant economy a chance to recover. If one thinks that relying on IMF/EU/ECB et al. bailout funds (and there ensuing regulations and demands on the Irish citizenry) are more preferable to enticing a business-fueled recovery, I invite you to welcome the European technocrats with open arms. If I had to bet which horse to back in this recovery – the Irish businessperson or a Brussels-based bureaucrat – I think it is clear who offers a sounder plan for recovery.

And so, to revisit the mocking question: “Which country would you want to be living in right now?” I leave that to the Irish people still searching for safe footing as their once proud economy continues falling from grace.



27/01/2011: Retail sales for December 2010

27/01/2011: Retail sales for December 2010

Posted by Dr. Constantin Gurdgiev

Retail sales stats are in. Given the weather conditions in December, the Budget 2011 pillaging the pockets of consumers, remaining uncertainty in the economy, and tanking consumer confidence (see here) it was not surprising to see the end results for the sales in December 2010.

Per CSO: “The volume of retail sales (i.e. excluding price effects) decreased by 3.1% in December 2010 when compared with December 2009 and there was a monthly decrease of 1.1%.” Worse than that: ex-Motor Trades, the volume of retail sales fell by 3.6% yoy in December 2010, and 2.5%mom.

  • Motor Trades (-8.0%)
  • Fuel (-21.7%)
  • Furniture and Lighting (-21.5)
  • Bars (-9.9%)

were “amongst the ten categories that showed year-on-year decreases in the volume of retail of retail sales this month”.

The value of retail sales has suffered even more than the volumes (and remember – it’s the value, not the volume that supports jobs in the sector) contracting by 4.1% yoy in December 2010 and falling 0.9% mom. Ex-Motor Trades annual decrease was 3.3% in the value and a monthly decrease of 1.3%.

Further per CSO: “Provisional estimates are now available for the final quarter of 2010… the volume of retail sales decreased by 0.6% year on year in Q4, with the value decreasing by 2.1%. If Motor Trades are excluded the volume of retail sales decreased by 1.8% year on year in the final quarter of 2010 and the value of retail sales decreased by 2.4%.”

Let’s add to that the following observation: since 2007 through the end of 2010 Irish retail sales fell 23.3% in value and 18.6% in volume.

Weather effects, that undoubtedly contributed to the declines in retail activity in December should not give us comfort going into 2011. The trends in both RSI and Consumer Confidence are less than encouraging. But one does need to take into perspective that, for example, a massive decline in fuel (due to transport disruptions during the snow periods) and declines in ‘Other’ categories – mobiles, toys, jewelery etc – and clothing, footware & textiles clearly inidcate the disruptive nature of December weather.


An excellent report and a must read for every candidate in the upcoming election
a lot of promises will be broken and a new budget cannot be ruled out after the next government takes office  and the it wont be nice !

Dow Theory Update and Values

 by Tim W Wood CPA on Fri, 28 Jan 2011

At present, we have a Dow theory non-confirmation in place that began in mid-January. According to Dow theory, we must operate under the assumption that the previously established trend is still intact until it is reversed with a move above or below the previous secondary high or low point. In this case, a downside trend reversal would require a move below the previous secondary low point. Until such time, the primary trend change that occurred in conjunction with the March 2009 low still remains intact. Now, as for non-confirmations, they serve as warnings of a possible trend change. Non-confirmations do not mean that a trend change is inevitable, because it is possible that the non-confirmation can be corrected. It is also possible that the previous secondary high or low point will not be penetrated. The current non-confirmation can be seen on the chart below. If this non-confirmation is not corrected then I know from my trend quantification work that there are statistical guides that can be used to help us gauge the meaning of this non-confirmation as well as the expected outcome. I will cover that all in the research letters and updates if it continues to develop. For now, this is a warning that must simply be watched and measured against the statistical and other implications. Don’t confuse non-confirmations to automatically be a “sell signal” because in accordance with Dow theory, that is a misconception. There is much more to the story that just a non-confirmation. Rather, it is a process in which statistical and other structural evidence must be understood, weighed and considered.


In the last post here on January 14th I talked about bull and bear market relationships. In that post I explained some of the big picture reasons that the rally out of the March 2009 low must still be viewed as a longer-term bear market rally. One of the items that I did not cover there was value. Value is another historical marker of secular bear markets. Historically, the dividend yield will be roughly equal to the price earnings ratio at secular bear market bottoms. I have used the S&P data here because I did not have this data as far back on the Industrials. At the 1932 bear market bottom the yield was 10.50% and the P/E was just under 10. At the 1942 bear market bottom the yield was 8.71% and the P/E was 7.3. At the next great bear market bottom in 1974 the yield was 5.9% and with a P/E of 7.24. If we take this same reading at the 1982 low the yield was 6.2% and the P/E was 6.9. For the record, these P/E ratios are based on Generally Accepted Accounting Principles and not the bogus George Orwellian methods of today. At the 2009 low, the P/E was 26 with a dividend yield of 3.2, which is hardly at par. Therefore, based on this historical measure, there is also no indication that the 2009 low marked the bear market bottom. It is for this reason along with the historical bull and bear market relationship issues covered in the last post here that I continue to believe the rally out of the March 2009 low is a longer-term bear market rally much like was seen between 1966 and 1974. I have also included a chart of that period below.


I told my subscribers before the anticipated rally out of the 2009 low even began that it would be a rally of a higher degree and that the longer it lasted the more dangerous it would become. What I meant was, the longer this rally lasts, the more convinced people will become that the bear market bottom has been seen. In looking at this chart of the 1966 to 1974 period above, don’t you think that it would have been pretty convincing that the worst was over as the market moved up during the 26 month rally into the 1968 high? As is the case now, it was the Dow theory phasing, bull and bear market relationships and values that warned of the pending phase II decline that finally did follow and that carried the market down to another new bear market low. But, then came the rally separating phase II from phase III. In this case it was a 32 month rally. Stop and think about it. After another leg down into the 1970 low don’t you think it would have been an even harder sell to convince people that the low had not been seen? Yet, Dow theory phasing, bull and bear market relationships and values warned that the bottom had not been seen and once again they proved correct. In January 1973 the Industrials turned back down and plunged to yet another new bear market low in December of 1974. It was then, only weeks after that low was made, that Richard Russell was able to identify the bear market bottom and he did so because he understood Dow theory. Based on the bull and bear market relationships, we should be operating within a little larger version of the 1966 to 1974 bear market period. I realize that this is probably a hard concept for most to understand. But, if we stand back and look at the historical relationships we see that this bear market has likely not run its course. I have found specific DNA Markers that have occurred at all major tops since 1896 and it is these markers that can be used to identify the top of this counter-trend bear market advance. I sincerely hope that people are listening and that they understand the context in which this rally is unfolding.

source: http://www.financialsense.com/contributors/tim-wood/dow-theory-update-and-values

Affordability and Irish residential property

 Affordability and Irish residential property
namawinelake | January 28, 2011 at 3:20 pm | Categories: Irish Property | URL: http://wp.me/pNlCf-Zq

There are two surveys out this week that, on first glance, paint a contradictory picture of prices of residential property in the State. This morning saw the publication of the long-running EBS/DKM survey on affordability (with press release here) which concluded that we are today spending a smaller proportion of our net income on new property purchases than any time previously (at least since 1988). And earlier in the week, we had the latest Demographia International Housing Affordability Survey for Q3, 2010 which ranked Ireland (Dublin) as “seriously unaffordable”. So what are we, more affordable than ever or seriously unaffordable?
The DKM study examines the percentage of net income (that is income after tax and statutory deductions) that is needed to fund a new property purchase. They concluded that the amount now needed by an average First Time Buyer (FTB) couple each month to fund a 90% mortgage paying 3.87% interest over 25 years buying a property for €159,500 “has more than halved to monthly repayments of €639 or 12.6% of a couple’s net income”  12.6% average monthly income at €639 infers net €60,857 annual income. This is for a FTB couple. Although there may be some tax variations between couples, a net annual income of €60,857 (that is after tax, PRSI and Universal Social Charge) would infer gross annual income of €82,000. (using the PwC tax calculator for 2011). DKM don’t show the “affordability” over the past few decades but they do confirm that at the peak of the property boom in late 2006 the equivalent monthly % needed to fund a new purchase was 26.4% and DKM claims that the present % is lower than any time in the past 25 years including previous lows of 13.8% in Q1, 1995 and 13.4% in Q2, 1988.
The Demographia survey examines the median house price divided by gross
annual median household income. Anything below 3.0 indicates affordability, 3-4 indicates moderate unaffordability, 4-5 serious unaffordability and above 5 severely unaffordable. Ireland (Dublin) was at 4.8, that is the average house price divided by the annual gross salary was 4.8. Where does the magic number 3.0 come from as the borderline between affordability and unaffordability? From pre-1990s experience of what folk back then paid. Is that a decent measure today of affordability? That’s a difficult question. The report states “Ireland: Housing in Ireland was moderately unaffordable with a Median Multiple of 4.0. Housing was generally affordable in Ireland as late as the middle 1990s. Dublin was the least affordable market with a Median Multiple of 4.8 and along with Cork (4.1) was seriously unaffordable. Three of Ireland’s five markets were moderately unaffordable, Waterford (3.2), Galway (3.6) and Limerick (4.0). Ireland had no severely unaffordable markets and had no affordable markets.”
So what are we, affordable or unaffordable? Both it seems. Demographia believe that a return to long term multiples of three times gross median income is “correct” whereas DKM examine proportions of income over a period of time for new purchases and conclude we are today at a low-point.
Of course, none of this really helps purchasers in a market where prices are still apparently declining according to the latest Permanent TSB/ERSRI house price series with declines accelerating in Q4, 2010. Affordability might be less a consideration than availability of credit or views on prices in the short term or wider economic considerations such as weak growth, increased taxation, reduced state spending and interest rate.

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