Sunday 13 March 2016

The Big Short on my life and those of others

The patterns I see
When it comes to financial matters, I have always said my father is a brilliant accountant, but it did not come down through the genes. Successful as he was in his profession which he still practices on behalf of the Anglican diocese in which he resides, only one of my siblings took a career path that had any financial component.
However, I somehow have an affinity for noticing patterns, things that align and things that seem to be out of place, unfortunately, I have never exploited that knowledge to the full as over time I have watched things that were once an inkling become an industry where if I had been more driven by my deepest premonitions, I would have been one of the pioneers. No regrets.
In March 2000, I travelled to Munich for an interview with the now defunct Compaq Inc., I decided to spend a week there and during my visit I met with a futures trader who was heavily leveraged in stocks. My reading of the situation then was things were about to collapse, simply because I noticed a pattern.
My advice to him was to reduce his exposure, he looked at me with incredulity, within weeks the bubble burst and the rest is history.
As it touched me
I have a more personal story about how I was affected by the markets, just less than a decade later. I bought my apartment in Amsterdam 2001, having given my estate agent 6 weeks to complete the deal to pick up my keys on the 1st of November 2001.
It was a 105m2, 7th-floor apartment with large windows overlooking two old Amsterdam harbours, a wonderful place by any standards. My mortgage was at inception the same as paid for rent in another part of Amsterdam for about 18 months.
The trajectory as it then was, whilst the housing market seemed overheated, the interest rates were going down, and this happened progressively every two years until about 45% was shaved off my mortgage in 6 years.
That other marker
Meanwhile, there was an underlying current that should have sent alarm bells ringing that I ignored until it was too late. My mortgage was undergirded by a life insurance policy that I paid a hefty sum to every year and in the mortgage term of 25 years, it was supposed to have accumulated enough to pay off my mortgage.
Each year, accounting for administration costs and much else, nothing was being compounded into the policy, rather, I was seeing less of what I put in that I had to ask for a review of the conditions of my mortgage to ensure I had not been defrauded.
Everyone who had worked on my mortgage had already walked away with their commissions as the signs of a financial crisis appeared on the horizon with the sub-prime mortgage defaults in the United States.
The tsunami I could not outrun
I could not ignore what was happening, yet I felt like there was an earthquake somewhere far away and the water was receding from the beach in anticipation of a tsunami I could not escape, it was scary.
As so I wrote in August 2007:
Then casually in October 2007:
The tsunami had already come in and swept me away from my apparent comfort zone, a revision of my biennial fixed term mortgage saw a rise of 50 basis points, some consequent outgoings of about €550 a month in addition to what I was already paying.
No particular fault of ours, only the banks shoring up their books having messed up and gotten bailed out, with none of the people in charge of this debacle going to jail for anything, if any even got to be questioned for their atrocity.
Swept away
By then, it had become a case of Fixing Capitalist Errors with Socialist Favours which I wrote in December 2007.
Within two years of that, I was diagnosed with cancer, got treated, recovered, but the markets had dealt a blow to our livelihoods, the job markets also began to introduce unfavourable filters to eliminate foreigners from consideration where we once freely had access.
In the end, I sold my apartment at a loss after 10 and a half wonderful years, though barely covered by the insurance and eventually returned home to the UK to rebuild my life.
The Big Short
Earlier today, I went to watch The Big Short which is described as a biographical comedy-drama, and whilst I will agree it is biographical and it is a drama, it was no comedy when we look at the disaster it caused in millions of lives whilst those who found out what was wrong with the system walked away laughing to the bank.
At worst, the banks have been fined billions by the regulatory bodies, but there have been no major indictments, the legislative framework that was to help avoid a similar collapse of the banking system has been watered down and the banks have more or less returned to their brand of casino banking with new banksters slinging guns of dubious provenance as products of the highest quality.
We’re back on that merry-go-round of atrocity for which the generality of the populace has been made to pay dearly for in austerity and worse, whilst the politicians and the banks waltz away in illicit copulation.
Yet, in understanding this rotten and corrupt enterprise a bit more, history is probably going to repeat itself worse than before and the criminals will once again walk free.
Woe betide them.

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