Written By: - Date published: 2:48 pm, July 24th, 2008 - 54 comments
Categories: economy -
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With the collapse of Hanover Finance, the 25th finance company to go under, Hanover co-owner Mark Hotchin has declared ‘the finance companies’ model is broken’. Here’s an illustration of that model:
I think they went wrong at step 1. Of course, as always, it’s the schmucks who lent Hotchin and Watson the money who lose out. Meanwhile, construction work on Hotchin’s $30 million mansion continues.
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Scoopit!
While the interest rates were low, 8% was better that 6.5% and most people can’t afford to buy a commercial property thats why they invest in the likes of Hanover or Goodman etc.
I see what you are getting at though and accept what you mean.
Brownie – don’t bother engaging. Travelerev is an idiot, her ‘facts’ are from videos she spends her whole day watching on youtube.
She is almost incapable of critical analysis, for example:
“It is a fact that another finance company just bit the dust”
Yeah. Except for how it’s not. It’s a possibility.
If you’re considering arguing the point I suggest you flip through the thread: ‘Taxing Choices‘ to get an idea of the rhetoric and quality of debate you’re going to have to endure.
“While the interest rates were low, 8% was better that 6.5% and most people can’t afford to buy a commercial property thats why they invest in the likes of Hanover or Goodman etc.”
True – and as long as the finance company’s lending is sound then it’s all good. I don’t mind commercial property lending as much, at least the risk is reasonable. Consumer goods lending – forget it.
Moderators,
While I don’t mind T-rex or anybody else for that matter calling me names or debating me vigorous in person or telling me I’m incapable of critical analysis to my face (they ar entitled to their opinion after all)but I draw the line at his comment telling people not to talk to me and calling me an idiot while doing so.
T-rex feeling threatened to the point of forbidding me to speak to him and then feeling entitled to interfere with my capabilities to express my opinions and reasons for doing so by calling me names and attempting to stop others from interacting with me based on their own opinions and reasons sets a dangerous precedent.
I do not tell other people to hate, kill or discriminate.
I only express at times unpopular opinions supported by links for other people to research so that they can form their own opinion.
It takes enormous effort and courage to express unpopular views and by telling other people not to engage with me he is bullying not only me but everybody else who has a different point of view from him into not expressing their opinions if they deviate from his.
I know for a fact for example that there are at least three others commenting here who feel that there are a lot of unanswered questions about the events of 911 yet none of them are forthcoming in what should be an open debate.
We are involved in a genocidalwar in Afghanistan as a result of these events and laws that limit our freedom have been introduced in its wake in this country.
The raids on environmentalists, “Anarchists” and on the Tuhoe in the Uruwera’s are examples of the application of that law that come to mind. By the way no terror charge stuck but you don’t read that in the mainstream news.
John Key’s position and connections in the international banking world need to be investigated and we need to know what the repercussions of those connections might be in case he gets elected. We need to question how and why and about what he is so secretive. We need to debate these issues freely in order for us to be able to decide if we should vote for him.
We need to ask questions and if strange and contradictory stuff pops up we need to bring it to the fore.
For example why was John Key meeting with Tame Iti in mid August in a remote Marae in the Uruwera’s only accompanied by to other Maori’s and only two months before the 15th of October raids if Tame Iti was allegedly involved in a plot to assassinate him?
If people want to challenge me on info like this than it does not behove T-rex to call me an idiot and to tell people with me not to engage with me. If he wants to partake in the discussion he should do so based on reason not on slander.
Telling other people not to talk to me and calling me an idiot to others is against all netiquette and as such I call upon you to take your responsibilities as moderators and help all your commentators to take part in these debates without fear of ridicule and bullying. Even, in fact especially, the ones who express unpopular opinions.
The killing of free speech starts after all when one person tells the other to stop expressing him or herself and more often than not it is those with unpopular opinions who get told first.
T & T. Can you two just cut it out? Just don’t converse, it’s not going anywhere, plenty of other people to talk directly to.
I no longer have any interest in conversing.
I’m just passing on to Brownie the advice that Bill Brown gave me several weeks ago and I wish I’d taken – what a waste of energy.
Travllerev is a complete hypocrite, as anyone who does a modicum of research can easily discover for themselves, and her reasoning is atrocious.
Bronwnie is free to do whatever s/he wants, as is everyone else. I’m just trying to give them the benefit of my UNBELIEVABLY frustrating experience.
Sorry Steve,
Not good enough, there is a principle at stake here. I do not tell people who to converse with,T-rex does.
You took on a responsibility when you started this blog and allowed for reasoned debate.
It is your job to make sure everybody who stays within the bounds you set is safe to comment even if the comments do not reflect popular views.
Allowing one person to tell others not to engage with someone on the grounds that that person is an “idiot” is allowing that person to take over the moderation of your blog. It means T-rex is setting the boundaries of your blog whereas I don’t and telling both of us to “cut it out” is reneging on your responsibility and allowing T-rex to set the boundaries of your blog.
If you think it is OK for T-rex to behave the way he does then you have just made it impossible for people like me and others who do not conform to T-rex’s opinion and who are capable and willing to stand up to him to engage here safely and with some form of protection against his anger and frustration.
I suggest you read this.
…crikey SP you have a hell of a lot of responsibilities! personally I don’t remember seeing any agreement to that effect though… as far as I am concerned (and I don’t mean this in a bad way) its a dictatorship here… what the Standard writers says goes… unless you are a conspiracy theorist then you will think its the CIA shutting down the debate so they can keep a strangle hold on the oil price…
[lprent: It is a dictatorship - private property uses that as its general operating principle. However the comment areas are reasonably open for you to have your say. However the same principles apply as a 'public' area like a restaurant or pub. You are expected to follow some basic rules listed in the Policy which are designed to make the comments area an interesting place and not a sleaze pool.
I don't like trolls, personal attacks, attacks on the posters and a number of other behaviors. Don't do them and you'll find me a benevolent dictator. Cross them and you'll find my bastard personality. In any case I can't see you having had problems with my alter personality.
You can argue with the writers with some facts at your disposal - you just can't attack them.]
Apparently the big black hole is Queenstown. In 2004 a travel writer form the Boston Globe called it over developed (“serving only as a warning to the perils of over development”) in 2008 a planning lawyer is telling a zoning change hearing that Queenstowns development potential has “only just begun”.
vto says:
“The owners and operators of these finance companies were generally prudent wise business folk who got caught up in things as much as anyone else. Don’t go looking to them personally for reimbursement – that shows huge naiveity and immaturity.” The limited liability company was created to allow people to take business risks without putting their personal position at risk. This creation, back in the 1700′s, is more responsible for the comfortable state of the mostly western nations who have made use of the limited liability company than almost anything else in subsequent history. But it obviously comes with a risk. One of those risks has just come to fruition.
If I can be brutal to all those caught – grow up.”
Lucky you told your parents
Hanover has been struggling since as far back as april. They released a one liner “in the current market conditions, we do expect some pressure for Hanover Finance”
That was in April. However, most people ignored it, Rod Oram told me that I was being stupid, Bernard Hickey told me that I was stupid, and Bruce Sheppard said that he agreed. Of course none of the dailies chose to do anything about it. Must be some pretty financially illiterate editors out there too.
The likes of Rod Petricevich, and others linked to the 87 crash should have been enough to warn people away from them. Allan Hawkins’ seems to be the major one that people are shying away from as he’s got the stigma of “being in prison” when conversely Cynotech seems to be doing rather well. http://www.cynotech.co.nz/2008_Mid_Year_Report.pdf
I find it both highly amusing, and ironic, that the majority of people who’ve lost their money with Finance Companies, are the self same people who lost money in the sharemarket crash of 87.
If those cashed up boomers had in fact increased NZ’s net worth and productivity by investing on the NZX over the past 5 years, the NZX would be sitting around 5000 points, and our companies would have had a boom time.
People would have made a $4000 gain on a $10,000 investment spread on selected companies. I know I have, but tis only on paper until I choose to sell some off.
I did make a $8000 gain toward the middle of last year, but not too worried as that’s the swings and roundabouts of the investment game.
Still, $4000 in 5 years… higher return than from finance companies which is in negative territory now.
Who says kiwis are financially illiterate? It doesn’t take much to not be so.
Off with their heads!!!!!!!!!!!!!.
“I do hope that at some stage, someone is held accountable, it is pretty clear that behind the scenes they are aware of the impending collapse of their finances ”
My 6cents….
Who has to be held accountable?! All the information was there in the various prospecti; its called capitalism; it is undertaken by consenting adults under the premise of Caveat Emptor “Buyer Beware”
Sometimes it fucks up and people get burnt that is why there is something called a “risk-premium” included in the interest rate which forms part of the difference over and above the base rate. As people have alluded too it is clear that the risk premium wasn’t high enough
But generally capitalism is pretty good and to quote Peep Show…
“Oh, and while we’re at it, there are systems for a reason in this world: interest rates, growth – if it wasn’t for the miracle of consumer capitalism you’d all be dying of rotten teeth at 42, it’s not a conspiracy, it’s just common sense, and a little pill with a chicken on it isn’t going to change that. Now: Fuck off!”
If people thought that the return justified the risk they invested; all those that are now pissing and moaning should be aware of this.
If you got suckered in by a Gordon Gecko type then you are an idiot…
The system isn’t going to change so perhaps the best way to prevent this happening again is mandatory financial literacy up until a certain age.
Pinko – I love that quote.
I agree with you except for the following:
1) The risk premium wasn’t high enough, and the fund managers should have been aware of this.
2) Caveat Emptor is fine, but relies on transparency. Otherwise it just comes down to trickery. You say “idiots”, but when the companies in question are hiring psychologists to create their marketing material, and the people falling for it have suffered the absence of financial education mentioned earlier it’s not exactly a fair contest. As mentioned in the video above, the names of the funds are totally misleading. If someone puts their money into the “First ranking ultra secure debenture enhanced leverage quantum awesomeness fund” they probably aren’t expecting it to be risky.
3) I’m not sure mandatory financial literacy will help that much. There will still be suckers, and their will still be theives. Less of them, maybe, and what would be REALLY great is if the increased financial literacy collapsed the ultra-high-risk (unemployed guy buying an impreza wrx fund) lending due to lack of demand.
We can dream.
I do think that one thing not often considered is the financial literacy of the lenders. Some of those useless hack finance companies in south auckland probably had little more idea than their investors over what they were doing. Setting up a company to lend out money is pretty simple. Risk analysis is somewhat trickier. However, given they DO assume the responsibility I think they should be obliged to have some fair fraction of their “fund management fee” put into escrow to secure the investors funds.
If they’re not making bad decisions it won’t matter, and if they are making bad decisions why should it only be their investors who lose out?
Whats happened to Bruce Shepard’s blog?
who cares?
Shareholders.
GP
it’s at businessday.co.nz
http://www.businessday.co.nz/blog/stirringthepot
Stupid Fairfacts moving to a non place and keeping that imposter Hickey on the main site~!