Decisions

Even people who do not use illicit drugs or get shot in the head have to contend with the
reality that some of the decisions cooked up by the brain’s frontal lobes may lead them astray. A specific site within the prefrontal cortex, the ventromedial prefrontal cortex (VMPFC) is, in fact, among the suspects in the colossal global economic implosion that has recently rocked the globe.

The VMPFC turns out to be a central location for what economists call “money illusion.” The illusion occurs when people ignore obvious information about the distorting effects of inflation on a purchase and, in an irrational leap, decide that the thing is worth much more than it really is. Money illusion may convince prospective buyers that a house is always a great investment because of the misbegotten perception that prices inexorably rise. Robert J. Shiller, a professor of economics at Yale University, contends that the faulty logic of money illusion contributed to the housing bubble: “Since people are likely to remember the price they paid for their house from many years ago but remember few other prices from then, they have the mistaken impression that home prices have gone up more than other prices, giving a mistakenly exaggerated impression of the investment potential of houses.”

The illumination of a spot behind the forehead responsible for a misconception about money marks just one example of the increasing sophistication of a line of research that has already revealed brain centers involved with the more primal investor motivations of fear (the amyg­dala) and greed (the nucleus accumbens, perhaps, not surprisingly, a locus of sexual desire as well). A high-tech fusing of neuroimaging with behavioral psychology and economics has begun to provide clues to how individuals, and, aggregated on a larger scale, whole economies may run off track. Together these disciplines attempt to discover why an economic system, built with nominal safeguards against collapse, can experience near-catastrophic breakdowns. Some of this research is already being adopted as a guide to action by the Obama administration as it tries to stabilize banks and the housing sector.

Scientific American

Sarasota-Nama-Quay

That Kelly, one of Ireland's most prolific and successful real estate developers, would be in financial straits seemed implausible five years ago.

Then, his investment team spent $60 million to buy the former Quay, a largely derelict office and entertainment complex at Tamiami Trail and Fruitville Road. In its place, Kelly planned the 1.5 million-square-foot Bayside.

With it, Kelly brought a far-flung vision that would have connected Bayside with neighboring properties, including the 266-room Ritz-Carlton Sarasota hotel and the 40-acre, city-owned Cultural District. The development also fueled expectations that Sarasota would fulfill its cosmopolitan destiny.

That vision grew in 2006, when Kelly bought the last of the 48-unit El Vernona condo complex next to the Quay for roughly $20 million -- a tract that doubled the Bayside land. He even made a stab at buying the Ritz-Carlton, but balked when the price rose well above $120 million.

At the time, Bayside was but one of many grandiose projects Kelly's Dublin-based Redquartz Development Ltd. had completed or planned.

Herald Tribune

Bubbles

Not so long ago the only place that you would see or hear the word bubble was on blogs.
Now every politican, radio presenter and all the MSM can't shut up about bubbles.
Jesus wept, I don't want to hear this word again for the rest of my life.

Chica-Nama-go

So what could find itself in the Nama pot?

Windy City SPIRE

Almost three years ago, Shelbourne Developments struck a deal to build one of the tallest buildings in the world, the Chicago Spire. Construction of the $1.2bn (€950m) tower -- expected to reach 610 metres -- began in summer 2007.

When the ambitious plans were announced in 2006, the company said the tower would be "the tallest free-standing structure in North America and Europe, surpassing the Sears Tower in Chicago and the CN Tower in Toronto, Canada". However, the credit crunch has stopped the tower in its tracks. Construction of the tower, which was initially due to be finished by late 2010, has been on hold since late last year "until the market improves", according to a spokeswoman for Shelbourne. The spokeswoman said the tower is still going ahead and that 40 per cent of the apartments have been sold.

However, the latest pictures -- which show that the tower is currently little more than a hole in the ground -- are unlikely to be much comfort to Anglo Irish Bank, the key backers of the project. Shelbourne paid about $64m (€51m) for the Spire site about three years ago -- and this paper understands that most of this money came from Anglo. Neither Anglo nor Shelbourne would say whether Shelbourne has paid Anglo back its loans for the Chicago Spire. As this project is only a couple of years old, chances are Anglo hasn't got its money back -- and that the Spire could make it into the mix of properties that loans heading Nama's way are secured on.

Sindo

Du-Nama-i

Ba-Nama-Rama

Once the star economy of the European Union, Ireland has experienced a dramatic reversal of fortune as the government struggles with a bleed in public finances and rising unemployment, a situation compounded by a fragile banking system overextended with bad loans to property developers.

"International investors do realize that Ireland is not going to default and will not be allowed to default," said Bloxham Stockbrokers chief economist Alan McQuaid. "As such, it's hard to see Ireland having much difficulty selling government bonds over the remainder of 2009."

Ireland has generated €14.3 billion of government bonds so far this year out of a target of €25 billion. The NTMA has said it will probably issue a third syndicated bond later this year, as well as continuing to hold its regular monthly bond auctions.

Ireland's 2009 debt-to-gross domestic product ratio is expected to hit 59%, up from 43% -- low by European standards -- but some observers believe that ratio will rise to over 100% once the government issues bonds to Irish banks as part of the National Asset Management Agency, or NAMA.

The Irish government announced last month that it is setting up NAMA, or the "bad bank," to take potential exposure of €80 billion to €90 billion in bad debt off banks' books. It will be the first real test of an industrywide, government-sponsored "bad bank" in the euro zone.

Economists say Ireland's export performance and fiscal position will reap the benefits of any upturn in the U.S. and U.K. economies, given the importance of these two Group of Seven leading industrial nations to Ireland's trade performance, though most observers agree it will take many years to get out of the red.

The NTMA is the asset and liability management arm of the government. Its main role is that of borrowing for the government and managing the national debt, but its remit has been expanded greatly to management of the National Pensions Reserve Fund and the forthcoming "bad bank."

Ireland's national debt at the end of May was €61 billion.

Wall Street Journal

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What a difference 2 year's make

The smart, ballsy guys are buying up property right now
If you're smart and you have balls and you're dealing with the right buyer you can knock 10 per cent or more off the price of a house these days. And that could well be a house that has already been reduced in price by 10 per cent or more in the last six months. Because while the big picture suggests a 3 per cent drop, the big picture is made up of lots of little pictures and you don't knock 3 per cent off the price of your house if you can't sell it. Individual house prices fall in substantial chunks.

John D Rockefeller famously said that the way to make money is to buy when blood is running in the streets. Buying into a boom is kind of a mug's game, and, as we know, anyone can do it. The really smart and ballsy guys are the guys who are buying when no one else is. The guys who made real money on property in Ireland were the ones who bought property before everyone else, when it was unfashionable. They were in a minority. Most people who bought property bought it recently, in a seller's market, for top dollar. Which makes no sense when you think about it. When you think about it, it makes sense to buy property now. Though of course some people say it always makes sense to buy property. There is no such thing as a good or a bad time to buy. It's always a good time to buy.

July 29 2007

Hurley and his banker cronies have ruined this country. Fire him now

AS A homeowner, in massive negative equity, who knows a lot of other homeowners who are in massive negative equity, I want to know why John Hurley, Governor of the Central Bank of Ireland, has a job. I want to know who the fuck John Hurley thinks he is. He and his Central Bank cronies have made a complete balls of this country. I want John Hurley fired.

John Hurley announced last week that the kind of dramatic and devastating property price falls that we have seen in Ireland over the last year or two were "inevitable". He also said that he expects further falls in house prices this year. "It's anybody's guess where house prices will go in the future," he says.

You can almost picture him throwing his arms up in the air with an idiotic Fr Dougal smile on his face, as if none of it was anything to do with him.

Most extraordinarily, Hurley said, "I think there are key issues in relation to valuation which must be faced in the coming months and that's very important to ensure the success of Nama."

Sindo

Who is smart and Ballsy now Brendan??
A paid Hack who believed his own hype, and was clearly caught with his pant's down.
Shit head's like this are as much to blame for this as Seanie Fitz.
Journalism in this country does not exist because prick's like this are paid by advertisement revenue and they dare not report the truth.

Stairway to nowhere

The bailout debate

It’s not exactly an international incident, but there’s some trans-Atlantic friction developing over the handling of the financial bailout.

Ben Bernanke, the chairman of the United States Federal Reserve, said Wednesday that he “respectfully disagreed” with Angela Merkel, the German chancellor, about her recent criticism of efforts by the Fed and other central banks to stabilize Wall Street and the banking system.

“The U.S. and the global economies, including Germany, have faced an extraordinary combination of a financial crisis not seen since the Great Depression, plus a very serious downturn,” Mr. Bernanke told lawmakers Wednesday morning at a House Budget Committee hearing, after being asked to respond to the chancellor’s remarks. “In that context, I think that strong action on both the fiscal and monetary sides is justified.”

In a speech in Berlin on Tuesday, Ms. Merkel, normally quite diplomatic on such matters, broke character and forcefully denounced the decisions taken by the Fed and other central banks during the crisis, saying their aggressive actions could backfire.

“I view with great skepticism the powers of the Fed, for example, and also how, within Europe, the Bank of England has carved out its own small line,” Ms. Merkel said. “We must return together to an independent central-bank policy and to a policy of reason, otherwise we will be in exactly the same situation in 10 years’ time.”

Asked about this, Mr. Bernanke had no apologies for the Fed’s extraordinary efforts to rescue the nation’s financial system, which include a $1 trillion program intended to jump-start the credit markets.

“I am comfortable with the policy action the Federal Reserve has taken,” Mr. Bernanke said Wednesday. “We are comfortable we can exit from those policies at the appropriate time without inflationary consequences.”

Ms. Merkel, part of the conservative Christian Democratic Union, says she disagrees with the easy monetary policies instituted by the Fed and the Bank of England and thinks that they should be reversed.

New York Times