I DO Know what a tracker mortgage is

Mike 1972

Thing is over the last few months Im probably the only person still struggling to figure out exactly what a "bondholder" is or what this big clamor to "burn them" is all about.

And call me a bleeding heart but all this talk sounds a tad draconian and reminiscent of the inquisition or the witch trials. Maybe it would be more appropriate to let them gently simmer over a low gas flame Followed by an intensive spraying with the finest fresh urine and served up with generous helpings of Atari jaguar ?

Samich

tl;dr

Deus Ex Machina

I wish with all my heart and soul that that stupid ad was never made.

cocoshovel

I don't understand APR.

im invisible

cocoshovel wrote: »

I don't understand APR.

i dont understand AER

Frank Black

I don't know what an Atari jaguar is.

Slydice

From what I gather, a bunch of people took tracker mortgages towards the end of the boom.

I reckon they took them out because of the ad where the people on the dublin bus admitted they didn't know what a tracker mortgage is.

Now, it looks like being on a tracker is actually saving lots of people from a certain amount of misery that they could have ended up in if they were in a variable rate mortgage.

wow... one little ad which seems to have made a difference to so many.

bnt

If you don't know what a bondholder is, it's a good idea to reserve judgment, then.

A "bondholder" is just someone (person or company) who lent the government money, and expected to make some more money in the process. A "bond" is simply the way government debt is packaged as an investment vehicle i.e. investing in a Treasury Bond = parking spare money somewhere it should be safe while earning a little interest. You can do it too, if you want: through a broker (see here) or at the post office in the form of State Savings.

It used to be the most safe, boring, low-yield investment around: you wouldn't make much, but your money was as safe as houses. Like houses, treasury bonds have become less safe in recent years, so the interest rate ("bond yield") has gone up, and investors currently think gold is a safer investment. Which, if you've watched the gold price over the last few years, is a slightly alarming thing to have to say ... :eek:

PS: I forgot to mention that some bondholders are "secured", meaning that they're guaranteed to get their money back but make less interest. That's a lot like money deposited in the bank, which is guaranteed by the government. The "unsecured" bondholders make more interest, but have the added risk of getting a "haircut" i.e. not getting (all) their money back - which can be compared to investing on the stock market, where there are no guarantees of coming out ahead.

So, you may think: "if they were getting rewarded for taking that extra risk, what's the harm in burning them? They made a risky investment, they should expect to lose sometimes." The harm comes the next time the government wants to borrow money: they'll have trouble finding anyone to take a risk on them, unless they promise to pay much more interest on their bonds than before.

westendgirlie

<p>Bnt, if the interest rate has gone up won't you get a better return on your monies?</p>

And thank you for explaining bond. Hadn't the foggiest before

bnt

westendgirlie wrote: »

<p>Bnt, if the interest rate has gone up won't you get a better return on your monies?</p>

Correct. Have a look at that State Savings site: they're offering a 50% return on a 10 year National Solidarity Bond, most of it tax-free. That translates to just over 4% p.a. (because of compound interest). That's really good compared to what these kinds of govt. schemes used to pay in "the old days". But: the higher rate reflects the higher risk involved: will you get your money back after 10 years? Will it be worth anything? Will hyperinflation turn your Golden Egg in to a Creme Egg?

Wheelnut

Then there are the "Bondholders" who are fat cats with loads of money creaming interest from little people and who,it is commonly agreed, should be "burned." Then it transpires that bondholders are insurance companies and pension funds so "burning" them amounts to "shooting yourself in the foot". The small man can't win, that's how the system works!

Yakult

What is a bank? Anyway relation to ****?

Frank Black

Yakult wrote: »

What is a bank? Anyway relation to ****?

A **** bank is the portion of your brain which is purely dedicated to storing images of hot girls you've seen in real life or on tv. This 'bank' of images can be accessed at anytime, and is particularly useful during periods of 'solo pleasure'.

Cookie_Monster

im invisible wrote: »

i dont understand AER

I don't understand why AER has replaced APR for no apparent reason

corktina

i don't understand

Absurdum

Cookie_Monster wrote: »

I don't understand why AER has replaced APR for no apparent reason

Apr Lingus was even more confusing for the tourists.

Frank Black

corktina wrote: »

i don't understand

You're born, you live, you die.

At some point you may get a tracker mortgage.

bnt

Wheelnut wrote: »

Then there are the "Bondholders" who are fat cats with loads of money creaming interest from little people and who,it is commonly agreed, should be "burned." Then it transpires that bondholders are insurance companies and pension funds so "burning" them amounts to "shooting yourself in the foot". The small man can't win, that's how the system works!

Yep - and good luck trying to separate the two. It used to be that only people with money to burn were "investors", but that changed in the 80s. In the UK, financial markets were deregulated in the Big Bang of October 1986, bringing all kinds of players on to the markets who would never have gone there in the past. In the USA, you had the rise of the 401(k) plans, which tied pensions to the markets through mutual funds etc. There are similar schemes in Ireland: at work I was asked how my pension contributions should be allocated, with different levels of exposure to the markets.

But the point I was making earlier still stands: investors can choose the level of risk, and greedy investors always want the highest return, forgetting that such investments carry the highest risk. Not all bonds are the "unsecured", high risk, high return type. I was no exception - I sometimes chose the high return option on my pension contributions. I didn't do that every time, though.

I still say that the main argument against "burning" bondholders has nothing to do with morality, or fairness, or anything like that: it would be justified if that was all there was to it. But Ireland is currently a beggar for inward investment, and beggars can't be choosers ...

Cookie_Monster wrote: »

I don't understand why AER has replaced APR for no apparent reason

Best I can tell: APR calculations include costs, while AER doesn't. So AER might give a slightly optimistic picture of how much you'll make on an investment. In the case of the State Savings scheme I mentioned before, there are no fixed costs to the investor, so they'd be the same. If you take the 4.14% AER and simply compound it over 10 years, you get exactly the 50% mentioned. (1 + 0.0414)^10 = 1.50

Mike 1972

Cookie_Monster wrote: »

I don't understand why AER has replaced APR for no apparent reason

Thought APR was for loans and AER for savings/investments ?

bnt wrote: »

A "bondholder" is just someone (person or company) who lent the government money, and expected to make some more money in the process..

So your granny with a few quid in the post office savings any bank, savings certificates or even prize bonds is one of these bondholders. And if you have a bit of an aul pension plan going you could be a bondholder yourself.

I somehow suspect there would be bit of an outcry if some populist gobdaw "commentator" suggested that we burn out grannies ? and I doubt the recent revival in the fashion for self-immolation we are seeing in far off lands is likely to become a big hit over here despite Berties infamous advice.

bnt wrote: »

It used to be the most safe, boring, low-yield investment around: you wouldn't make much, but your money was as safe as houses. .

(overlooking your rather unfortunate choice of metaphor)
So bailing out those who tried to make a quick buck by gambling on the property market and stashing the proceeds in some dodgy bank is fine and dandy but those who were a tad more responsible in their choice of investment merit being burned ?

So ity looks like the good doctor was not entirely right.

The standard of discussion RE: Economic issues on AH seemingly trumps the Irish media

corktina

black francis wrote: »

You're born, you live, you die.

At some point you may get a tracker mortgage.

yep but not in the next decade methinks... Actually I already have one and it breaks my heart that the AIB are making a loss on it...:(

billyhead

bnt wrote: »

Correct. Have a look at that State Savings site: they're offering a 50% return on a 10 year National Solidarity Bond, most of it tax-free. That translates to just over 4% p.a. (because of compound interest). That's really good compared to what these kinds of govt. schemes used to pay in "the old days". But: the higher rate reflects the higher risk involved: will you get your money back after 10 years? Will it be worth anything? Will hyperinflation turn your Golden Egg in to a Creme Egg?

I opened one of these a year ago on the presumption that they were guaranteed and you could not lose out on your onvestment. Was I mislead?

bnt

Mike 1972 wrote: »

So your granny with a few quid in the post office savings any bank, savings certificates or even prize bonds is one of these bondholders. And if you have a bit of an aul pension plan going you could be a bondholder yourself.

Yes - but probably a secured bondholder, not at risk of a haircut. I went in to that.

Mike 1972 wrote: »

(overlooking your rather unfortunate choice of metaphor)

Nothing unfortunate about it at all, if you read the next sentence. And the word "was" in the first sentence. Maybe I should have put a smiley on it ...