US house prices: you thought we had a problem? 
Reading my US professional body's reports of conference proceedings I was struck by a piece from Robert Schiller, author of the book 'Irrational Exuberance' about the stockmarket bubble at the end of the 90's. Speaking at a presentation in New York in February, he contrasted the bubble correction in stocks with the new irrational exuberance in the US housing market.
Prof Schiller doesn't use the term bubble lightly. He is always hungry for a long historical context of relevant data. Not finding it for house prices, he created an index, going back to 1890. It appears comparable in principle with the Nationwide index for UK prices since 1957 that I frequently refer to.
Both indices have jumped by about 50% in real terms since 1997. But there is a striking difference. There was no steady real growth trend in the US to compare with the 2% trend in the UK and no big cycles like we experienced. Was the anomaly the flat real price between 1945 and 1997 or the dramatic rise since? Schiller opts for the latter, pointing to easier access to land that suppressed real growth before, easier access to credit that sparked the boom and wildly unrealistic expectations that then fed it.
admin on 09.29.06 @ 05:21 PM GMT [">more..]
Commissions: you're going to have to help yourself
The FSA understands perfectly well that the commission-based model for selling long-term savings products to the public is deeply flawed. In a recent speech to industry leaders, Chairman Sir Callum McCarthy spelt it out. The regulator’s powers do not extend to forcing changes in the business model. It has tried incentives to change, such as the ‘Keyfacts’ disclosures and the ‘Menu’ IFAs have to use, but these have had no impact on bias - exactly as precicted in my original article on commissions. It has a principles-based ‘Treating Customers Fairly’ regime, but this too has limited powers to deal with so subtle a problem. If you have any doubts about the harm commissions do, read what Sir Callum had to say at Gleneagles this month. If you’re looking for signs of robust action to promote regime change: read it to see that they simply are not there.
If you want advice characterised by intellectual and financial independence, you have to be willing to write the cheque and your adviser confident enough to live by asking for cheques. If commissions are available that would otherwise go to waste, take them - but they are icing on the cake, not the basis on which you pay. When you get this distinction, you will be able to help yourself better.
admin on 09.29.06 @ 02:56 PM GMT [">link]
Kids’ stuff
Mainly for professionals 
Showing off
