23/6/2013: On Dealing with Mortgages Arrears: Adverts v Process

A reply to @cbolgerr regarding the issue of contacting your bank when experiencing financial pressure in relation to mortgages:

In simple term (omitting some considerations), prior to the crisis people were mis-sold mortgages by the banks. Many mortgages were mis-sold on the basis of poor risk pricing by the banks - the job that the banks are paid to do. There was so much mis-selling that the problem of unsustainable mortgages is now structural.

People who mis-sold them these mortgages are still in the banks and are now the same people working on 'resolving' the problems. There were no involuntary layoffs of banking staff and there was no clearing of the banks lending officers or risk management staff on a systemic basis to match the problems in the lending markets. Hence, these staff members are still there. And accepting that they have no new lending to do, these are now the staff working on resolving the mortgages problems. As such, they have neither ability, nor credibility, nor incentives, nor compassion to do anything to repair the damage they have done.

In this environment, and provided the information and power asymmetries awarded to the banks by the Government & Regulator at the expense of mortgagees, the only thing that mortgagees should do is, simultaneously:
1) continue contributing to servicing their mortgages to the extent feasible,
2) prepare as much relevant financial information as possible in order to be able to file FSS,
3) identify an independent, properly regulated and knowledgeable/experienced representation for their case,
4) treat any engagement with the bank as potentially hostile and detrimental to them.

Their first step should be to seek independent advice and representation in the process. Unfortunately, the PIP system put forward by the state is itself at risk of being biased in favour of the banks. Still, it is better than following through on the banks advertising and contacting them before securing independent representation.

There are very few practitioners who have any relevant experience in dealing with the banks. And fewer still willing to help with advice before securing large payments from the homeowners. Care must be given to how the banks and the PIP system are approached.

Key issue, however, is that any mortgage holder under stress should continue engaging with servicing the loan to establish 'good will'. The banks are not required to establish any 'good will' toward borrowers, so the system in inherently unfair and asymmetric, but that is the reality of the fundamentally unjust legal framework established by the government and, for now - until challenged and changed - it has to be obeyed. 

22/6/2013: Weekend Reading Links: Part 3 of 3

This is the third and the last post of my regular weekly feature of the Weekend Reading Links On Arts, Sciences and Zero Economics (see the first post here: http://trueeconomics.blogspot.ie/2013/06/2162013-weekend-reading-links-part-1.html and the second one here: http://trueeconomics.blogspot.ie/2013/06/2262013-weekend-reading-links-part-2-of.html).

Just awesome, tireless in its brilliance and time-invested poignance, the encounter that took decades to shape and seconds to execute. If it were a performance, it qualifies for an Oscar : http://zengarage.com.au/2013/03/marina-abramovic-and-ulay/  h/t to @sherqui for reminding us about it. One question, though, how on earth could have followed Ulay to that chair?!.

Chile's Pezo von Ellrichshausen Architectshas finished Solo Pezo property - part of the Solo Houses project in Matarraña, south of Barcelona: http://www.solo-houses.com/en/solohouses/page/houses/solo-pezo

Solo Pezo is a concrete structure lifted to the landscape's natural ceiling of tree-tops on a monolithic square platform. Views and light are maximized. There is a deep pool in the roofless central space as a visual tension point between sky and earth. Good slidshow of images is here: http://www.wallpaper.com/architecture/the-first-of-12-solo-houses-is-completed-in-spain/6578#82798

As a lecturer myself, I know that students are not only canvases for us to shape (actually, they are not that at all, but the traditional teacher-student nexus implies transmission of value to the recipient of it, hence the hierarchical implicit structure) but they are also a source of inspiration. Here's a sample - a MICA retrospective:

http://www.mica.edu/Browse_Art/2012_Commencement_Exhibition.html?page=1

Brilliant works across the space. Enjoy!

Moscow Art Fair 2013 is coming up http://www.art-moscow.ru/en in September and, unless plans change, I will miss it this year (Irish trade mission is not being planned for that time, so I will not have an excuse to travel...) Here are some pics from 2011 show http://www.art-moscow.ru/2274.html. I love this one from 2008:

And more links from 2011 show http://www.itsliquid.com/art-moscow-2011.html. 2012 show images: http://www.art-moscow.ru/2512.html gotta love the irony:

And on these two humorous/sarcastic notes, have a fabulous weekend.

22/6/2013: Weekend Reading Links: Part 2 of 3

The second post (of three) of my regular weekly feature of the Weekend Reading Links On Arts, Sciences and Zero Economics (see the first post here: http://trueeconomics.blogspot.ie/2013/06/2162013-weekend-reading-links-part-1.html):

Some interesting long-exposure photos: http://likes.com/misc/amazing-longexposure-pics-of-star-trails?v=eyJjbGlja19pZCI6IDExNzI1NDE3MDMsICJwb3N0X2lkIjogMjUxMTQ1OTZ9 These remind me of the dynamics of Hurst's spin paintings series and a circular geometry with fractal qualities of Frantisek Kupka.


Some stunning architecture next:

http://www.designboom.com/architecture/tatiana-bilbao-studio-visit-interview/
That 'gabriel orozco house', roca blanca, mexico, 2008 project evokes Casa Malaparte. my favourite house in all of the world... well, one of the most favourite ones, because it has to compete with Neutra(s) and Mies Van Der Rohe(s) and so on...

Same forceful linear projection into the landscape, same blending into the physical geometry of the landscape and same play on contrast of height and angularity:

Where science meets art: Images of Cosmographic Maps Chart Galaxies and Superclusters in Local Universe
http://www.wired.com/wiredscience/2013/06/cosmography-maps/?cid=co8792474 via @wiredscience and @adamspacemann
I love the term 'local universe'...  Awesome maps show you galaxies and cosmic clusters... and wonkishly clinical 'flow' map... of the 'local universe'

Back on Earth, 'local universes' are moving, again...
http://www.sciencedaily.com/releases/2013/06/130617104614.htm
Just as G8 announced bringing closer (via trade) North America and Europe, so in geology the process of driving Europe closer to the USofA et al is on... so non-economic quote of the day is "This break-up and reformation of supercontinents has happened at least three times, over more than four billion years, on Earth. The Iberian subduction will gradually pull Iberia towards the United States over approximately 220 million years." I dare say, those visas one day will be done with and then Dublin Airport US immigration clearance desks will have to be abandoned.


http://www.urbannexusinitiative.com/ is hosting an exhibition on Liffey: A boulevard of rooms + corridors: http://www.urbannexusinitiative.com/May-2013(2689947).htm This really is worth much more than just few web pages, so let's hope the folks at Urban Nexus get their act together and produce a killer site with images, interaction etc...
As Joseph Brodsky noted:
"What do you love most of all?
Rivers and streets - the long things of life"
Liffey is a tortured river, defaced by modern and contemporary ugliness and decay in places, as well as by spots of rather banal old architecture too, yet highlighted by moments of beauty and by more recent city efforts to bring it to life. It is alive and it is stunningly beautiful as a counterpoint to and reaffirmation of what we, humans, have wrecked around it: good and bad. It is one of the three core natural attractors that create a physically visual pull of Dublin (the other two being Wicklow mountains and the Dublin Bay, the latter being equally defaced by our inability to stop abusing the commons of nature).


The third post of links for this weekend (I warned you I have many this time around) is coming up, so stay tuned.

21/6/2013: Weekend Reading Links: Part 1

The first post of my regular weekly feature of the Weekend Reading Links On Arts, Sciences and Zero Economics:


Let's hit science bit (ok, rather technology) first: IBM's famed Watson is getting into a museum: http://www.computerhistory.org/atchm/ibms-watson-jeopardy-computer-comes-to-chm/
I remember being at IBM when Watson played the Jeopardy rounds. It was amazing. I also recall working on Watson's capabilities and deployment in finance for deep risk pricing. As my memory tells me, the code for Watson's brilliance was written by a team from Ireland.


I know, I avoid dealing with economics here, so treat this as not a note about how art is a fantastic example of high value-added exports, but as a story about globalization of art's language and acquisition and exchange of knowledge: http://www.theartnewspaper.com/articles/Royal-Academy-in-talks-with-potential-Moscow-partner/29952


Art meets design: http://wordlesstech.com/2013/05/24/jaguar-inspired-artwork-unveiled/
I was supposed to speak about the economic dimensions of design (including industrial design) at http://birmingham-made-me.org/ this week, but had to withdraw for personal reasons. Really bummed!


An amazingly consistently thoughtful inversions of Jan Kriwol: http://wordlesstech.com/2013/05/14/unique-universe-by-innovative-polish/

A simple trick of inverting the focal point to create a juxtaposition between expectation and realization. Pure orthogonality works.


Is it art? Well, I am not sure. But it has meaning. It has its own language, its own semiotics, its own passions, beliefs etc. So is it art?
http://likes.com/misc/prison-tattoos-and-their-secret-meanings
I am not sure. But I do recall how much amazement I experienced when I first time looked at prison tattoos from the point of view of attempting to understand them. For years, seeing them on beaches around the USSR, I grew up on a steady diet of rejecting these expressions of personal lives as being vulgar, invalid, something to be permanently kept below my domain (all consisten positions of the Russian intelligentsia's conservativism in the face of both reality and modernity). And then, years later, there I was in a UCLA classroom of Professor Mascaro, reading about Russian prison tattoos and writing an essay on the link between liner logic and their compositions... Still remember that! And the strangely correlated across time and space St Pat's day when myself and Professor Mascaro were the only two people in a class, not wearing green... Many years fast forward, here I am in my Dublin kitchen posting about prison tattoos, remembering Professor Mascaro and wondering... is this art?..


A.A. Gill is a form of narrative that is art. And here he is with a thesis of America the Marvelous http://www.vanityfair.com/culture/2013/07/america-with-love-aa-gill-excerpt?mbid=social_twitter
Worth a read, as always.


I wrote before about light art, Dan Flavin (here) in particular. Here's James Turrell - another master of the medium - and he is http://www.guggenheim.org/new-york/exhibitions/on-view/james-turrell

Back in 1999 myself and MrsG had a joint entry at a group exhibition in Baltimore, using light as part of installation. The tile was Mutatis Mutandis, if I recall correctly, and it lived for about 5 minutes, subsequently knocking out lights in the entire multistory building in downtown Baltimore... the party went on... Turrell's work is striking enough to knock daylights out of your senses of space and dimension. If in NYC - a must see!

Guggenheim's show completes an unprecedented sequence of installations undertaken by Turrell that started with LA's LACMA, followed by Houston's MFA within a month and then onto NYC to Guggenheim - all across the impossible span of just 3 months. Impossible, because the entire installation of this retrospective requires rebuilding rooms, halls, spaces spanning 92,000 sq feet.

Here's an image from Houston:

Let me end this post on accidental art http://www.businessinsider.com/14-pictures-of-our-crowded-world-2013-6
The first image is fantastic. Absolutely, Gursky-like (link). As is number 9 and number 12 and 13. And number 7 is Missoni-like or better yet Morris Louis in gamma and linearity of the core movements. Yes, yes, Michael Wolf deals with density, especially in his Hong Kong series... that, perhaps, next week?

End of this post... stay tuned for the second part tomorrow and read...

21/6/2013: Irish Mortgages Arrears Q1 2013

At last, with a delay of some 4 weeks we have the Mortgages Arrears data for Ireland for Q1 2013. The delay was caused by (my sources tell me) a reporting glitch from one of the institutions. 

At any rate, the CBofI release of the data does not seem to fit any of the conspiracies theories bandied about, so let's assume that it was a glitch. That raises a question - what sort of a glitch can disrupt reporting of something as simple as arrears without having any effect whatsoever on any lender's other operations? I shall leave this question for you to ponder.

What do the figures tell us? As usual, my suggestion is - ignore the spin in the media, read CBofI own release, read https://www.mortgageholders.ie/ position (due tomorrow am) and let's focus on raw numbers here.

In Q1 2013, number of outstanding mortgages accounts relating to principal dwelling houses/residences (PDH) stood at 774,109, down on 792,096 in Q4 2012 - a decline of 2.27% q/q, but an increase of 1.3% y/y. With BTLs added, total number of residential mortgages in the country stood at 923,504 or 2.01% below Q4 2012 and 20.9% above Q2 2012 when reporting began. Much of changes in the total numbers of mortgages in recent quarters is accounted for by classification changes.

While the number of mortgages outstanding dropped by 2.27% for PDH, volumes of loans relating to mortgages decline by far smaller 0.79%.

So observation 1: exits remain based predominantly on pay downs of older vintage, smaller mortgages, leaving the remaining pool of mortgages more toxic.

Total number of accounts in arrears in relation to PDH stood at 142,118 in Q1 2013, down 1.2% from 143,851 accounts in Q4 2012, but up 15.6% y/y. Total outstanding amounts relating to PDH accounts in arrears was up 2.85% q/q at EUR25.485 billion (up 11.21% y/y) and underlying volumes of accumulated arrears rose to EUR1.932 billion (up 7.81% q/q and 39.87% y/y).

Observation 2: Marginal decrease in arrears-impacted mortgages accounts was associated with deeper deterioration in terms of the volumes of PDH mortgages impacted by arrears. The problem got slightly more concentrated and much more toxic.

Number of accounts in arrears in relation to BTL rose to 39,371 in Q1 2013, up 3.73% q/q and up 13.4% y/y. Total outstanding amounts relating to BTL accounts in arrears was up 2.84% q/q at EUR10.891 billion (up 10.94% y/y) and underlying volumes of accumulated arrears were at EUR1.178 billion (down 1.29% q/q and up 40.13% y/y). Note: y/y comparatives for BTLs are only referencing 9 months period since the end of Q2 2012 - the first period for which we have data available.

Observation 3: BTLs continued to tank across the board, although cumulated arrears amounts did decline q/q. Assuming there were no reclassifications, this suggests some write-offs by the banks of defaulted loans.

Total (PDH+BTL) number of accounts in arrears stood at 181.489 in Q1 2013, down 0.17% from 181,806 accounts in Q4 2012, but up 11.4% on Q2 2012 - the earliest for which we have data available for BTL. Total outstanding amounts relating to all mortgages accounts in arrears was up 2.85% q/q at EUR36.376 billion a rise of 9.02% on Q2 2012. However, the core number, relating to cumulated arrears has jumped significantly more than any other arrears-related parameter. This rose to EUR3.11 billion in Q1 2013 up 4.17% q/q and +33.83% on Q2 2012.

Observation 4: across all residential mortgages, the problem of arrears became slightly marginally more concentrated and significantly more toxic.

In Q1 2013, 185,263 PDH mortgages accounts were either at risk of default or defaulting (the category that includes, per my methodology, all mortgages in arrears, all repossessions and all mortgages that are restructured and currently are not in arrears), which is 0.81% down on Q4 2012 and +13.97% up on Q1 2012. At the same time, there were 52,991 BTL accounts at risk or defaulting, up 2.15% q/q and up 14.74% y/y. Which means that across all mortgages, the number of accounts at risk of default or defaulting declined marginally from 238,663 to 238, 254 between Q4 2012 and Q1 2013. The number was up 10.53% y/y.

At the end of Q1 2013, 20.1% of all PDH mortgages accounts were at risk of default or defaulting, up on 19.8% in Q4 2012. The percentage of BTL mortgages that were at risk of default or defaulting in Q1 2013 was 35.5%, up on 34.5% in Q4 2012. 

Among all residential mortgages in Ireland, in Q1 2013 25.8% were at risk of default or defaulting, up on 25.3% in Q4 2012. 9 months ago that percentage stood at 23.6%, implying a swing up of 2.2 percentage points in 9 months or an annualised rate of increase in the incidence of risk of default or defaulting of 2.94 percentage points.

Update:  Here is a link to IMHO statement on today's data: https://www.mortgageholders.ie/irelands-mortgage-crisis-is-blowing-out-of-control/

21/6/2013: Most Important Charts in the World, June 2013

Business Insider produced another set of charts, under the usual heading of "Most Important Charts in the World": http://www.businessinsider.com/most-important-charts-in-the-world-2013-6#

Obviously (shameless self-promotion alert) number 22 worth a look...
http://www.businessinsider.com/most-important-charts-in-the-world-2013-6#constantin-gurdgiev-trinity-college-dublin-its-going-to-take-a-long-time-to-pay-off-eurozone-debts-22

Here it is reproduced from my file:

You can click on the image to enlarge.

Note, the same relationship exists for Government debt or Household debt taken alone and the individual relationships are actually even stronger (adjR2 in the range of 43-44% against 38% for the combined debt relationship).

21/6/2013: Dukascopy TV interview

My interview with Dukascopy TV, Switzerland on Fed's FOMC and monetary policy dilemma, G8 and its implications for Europe and Ireland, and the Russian economy: http://www.dukascopy.com/tv/en#104517 and http://youtu.be/ir9701EHeOU

21/6/2013: McKinsey Economic conditions Survey for H2 2013

Couple of interesting charts from the McKinsey Survey on global economic conditions (see full set of results here: http://www.mckinsey.com/Insights/Economic_Studies/Economic_Conditions_Snapshot_June_2013_McKinsey_Global_Survey_results?cid=other-eml-alt-mip-mck-oth-1306)

So the percentage of those who are saying the global economy is performing substantially better at the end of Q2 2013 is 36%, which is down on 43% in Q1 2013, signalling deterioration in the conditions. Percent of those who see any improvement in the global economy is down from 79% to 75% q/q. In terms of expectations forward:

Things are not going all too well in expectations 6mo forward either. 41% of all respondents are upbeat in expecting an improvement in global growth of H2 2013. Now, keep in mind, most of the official forecasts factor in significant uplifts in economic conditions in H2 2013 to deliver on annual targets set for 2013 at the end of 2012. Let's take a look at regions where H2 expectations were the most optimistic on the official side: 49% Eurozone executives expect things to improve, Asia-Pacific (especially China) 38% and North America 32%. Hmmm... nowhere over 50%. Sample biases are probably working toward reporting firms having more robust expectations, as the survey covers larger companies, with bigger investment pipelines, usually consistent with upside to expectations.

For their own countries:

Better vs Same/Worse percentages:

• Asia-Pacific: 42% vs 59% in Q2 2012, against 38% vs 61% in Q1 2012. Own-country conditions confirm a 'no expansion' expectation in H2 2013
• Developing markets: 35% vs 64% in Q2 against 47% vs 53% in Q1. Own-country conditions confirm a 'no expansion' expectation in H2 2013
• Eurozone: 32% vs 68% in Q2 against 34% vs 66% in Q1. Own-country conditions confirm a 'no expansion' expectation in H2 2013
• India: 45% vs 55% in Q2 against 60% vs 40% in Q1. Own-country conditions confirm a 'no expansion' expectation in H2 2013
• North America: 54% vs 46% in Q2 against 43% vs 57% in Q1. Own-country conditions confirm a 'expansion' expectation in H2 2013

So of all regions, with exception of North America, own-executives signal no gains in growth in Q3-Q4 that is assumed ex ante in the official forecasts... time to go 'hmmmm...'

21/6/2013: Europe's Capacity Deficit Illustrated

Want an example of Europe's 'capacity deficit' I mention here: http://trueeconomics.blogspot.ie/2013/06/1962013-european-federalism-and-emu.html

Look no further than the latest set of quotes fired off by ECFIN E-news letter:

Let's take them through reading.

Mr Rehn says that 'Banking Union is not about bailing banks'. Of course he is right - the EU has bailed out the banks before it conceived the EBU. However, one major objective of the EBU is about systematising future bailouts of the banks, in theory - to restrict taxpayers' expected liabilities in such bailouts, and to regulate future depositors' liabilities. And EBU is - according to the EU Commission and the ECB - a necessary element of the sovereign-banks 'break' that includes ESM. Now, ESM is about bailing out the banks.

Is EBU 'about getting a banking system that serves the real economy'? Well, nothing in the EBU proposals so far has much to do with the 'real economy' in a positive sense of serving it. At least nothing that requires an EBU and cannot be done absent EBU. Deposits insurance? Doesn't need an EBU. Joint supervision and regulation? Hardly much to do with the real economy, unless one is to make a claim that the two are fail-proof way of ensuring that a new crisis won't happen. In fact, when it comes to the real economy, the EBU is a part of the policy instruments package that includes depositors  bail-ins, mechanism for sovereign liabilities imposition and fiscal harmonisation - these are about the real economy, but there is little in terms of 'support' here. More like 'limiting damage' by 'spreading the cost'. Reality check: UK has an EBU equivalent, US and Japan have one... all had banking crises that cost their real economies dearly...

So Mr Rehn is just plain propagandising, right? Well, sort of - the EBU is a necessary, but not a sufficient condition for the survival of the Euro. If you accept the thesis that Euro's survival is the 'service' that real economy needs, then you have 1/2 of Rehn's equation there.

Onto Mr Lamy who says that Europeans need something new to drive their attention away from the bad things that are old. Contemplating the past is disuniting the peoples of Europe. Giving them something new to desire (may be a promise of a new iPad for everyone would work?) will shift them to work toward the future, presumably forgetting and forgiving the past and the present. How did the Soviet leaders not think this one up? 'We promise you this better future because we screwed up your past and present' school of politics...

Ireland's Taoiseach is honestly thinking that EBU is necessary to give credibility to European leaders because they promised EBU. Neither the concept of 'do we need A in the first place', nor the irony of his party pre-election promises not being delivered on strike Mr Kenny as being a touch testing. And then there's 'following through on decisions is the very least our citizens expect and demand'. Not really. Citizens demand that political leaders (a) adopt right decisions, then (b) implement right decisions. Having not established that EBU is right fails both (a) and (b).

But the most priceless bit of Mr Kenny's statement is that he believes that something is crucial because it is a credibility test. Mr Kenny's logic here is risking a resemblance to a schoolboy's logic who, in fear of hearing 'Chicken! Chicken!' from a schoolyard bullies heads off to carrying out a silly and dangerous deed, lest his 'credibility' be challenged.

This, per the EU's powerful, is 'leadership' at the time of a crisis?..

20/6/2013: Real Price of Gold (and fiat currency by implication)

Price of Gold since 1791 in constant 2012 USD:

http://visualizingeconomics.com/blog/2013/6/4/the-real-price-of-gold-since-1791

Click on chart to open

And a data set for gold prices since 1257: http://measuringworth.com/gold/#

You can't really make a data set for any fiat currency since 1257, cause none really exist anymore... though you can make sets of numismatic values of some. So risk-adjusted value of gold is X>0 over any time horizon. Risk-adjusted value of any fiat currency over much of the historical time horizon is X~0. That is, of course, if unlike Keynes you do believe that the long-run matters...

20/6/2013: Heroes of our times and earnings...

Latest data on (annual) earnings, to highlight the vast gains in Irish 'competitiveness'

And the heroic folks who earned a 4.2% (second highest) earnings premium are... well... see below:

http://www.cso.ie/en/media/csoie/releasespublications/documents/earnings/2012/earnlabcosts2012.pdf has more on the same...

20/6/2013: China Volcano Blowing Up at Last?

Good title to a research note, as I tell my students in MSc in Finance, does the following things:

1. Captures attention of the reader for the right reason
2. Conveys enough information for the reader to continue reading, but not enough to end up with a feeling that all that needs to be known is already expressed in the title
3. 'Sells' the story without over-exaggeration
4. Commits the story to memory.

Today's 'good title' award is for the folks from Markit, for the note titled "Perfect Storm" - a simple, run of the mill account of the day when Asian CDS markets got bashed on China's end of things:

And while on China, excellent article in the FT today on Chinese steel giant Wisco: http://www.ft.com/intl/cms/s/0/fa98c4e2-d830-11e2-9495-00144feab7de.html

Read and weep... China has managed to perfectly waste a USD586 billion stimulus from 2008. That's a lot of burning of cash, if you ask me.

Here's mid-day CDS wideners by order of magnitude:

And here's yesterday's:

That's 40bps in two days. Whacking-cracking... 

On June 6th, China's CDS were at 91.61 with CPD of 7.71%. Chinatastic...

And with that China is heading for a classic sugar crunch just as the punch run out. Over the last three weeks, China's interbank loans rates jumped from about 3% to over 7%, having hit last week 9.6%.

Someone, dial Bank of Japan, quickly!