German residential market is booming due to extremely low interest rates and, respectively, very cheap mortgages. But if the rates grow, the market is going to crash! For instance, a current rate for 10 year mortgage without a downpayment is about 2%. A new rural house costs about €300000. A typical borrower can pay about €1000 monthly installment + €5000 extra redemption in the end of year. If the rate jumps to 4%, the house price will drop to €246303, i.e. 17.9% (this is just estimation, however, it is not implausible). And additionally the residual debt refinancing costs will increase by €31762 (this is a precise calculation).
Continue reading "Why German real estate market will likely crash"
As I read Oleg Barmin's book "Я помню всех, кто мне когда-то не перезвонил" (I remember everybody who once did not call me back) I saw a lot of parallel to Theodore Dreiser's Financier Frank Cowperwood (Charles Yerkes). Like Cowperwood (who being a teenager bought and re-sold a soap with profit), teeny Barmin bought a frozen fish, smoked it and re-sold with profit. In the age of 21 he built a flourishing car business ... and like Cowperwood was wiped by crisis and was imprisoned (however, only on remand). Like Cowperwood, he rose again (in florist business). Though Barmin had not (yet) built something like London Subway, he is only 35 and who knows, maybe we will see more parallels with Cowperwood...
In spite of such praising summary the post is going to be critical: we will concentrate on what Oleg missed from risk management point of view.
Continue reading "A Russian Frank Cowperwood: Oleg Barmin’s case from risk management point of view"
Summary: In our previous post we reviewed Wikifolio.com, a FinTech project that lets everybody build a proven track record. Today we review the performance of Einstein's portfolio "Platintrader 1000% Leidenschaft" and explain why his performance is a matter of trading mastership, not of just luck.
Continue reading "Einstein – a star trader on Wikifolio, who can beat the market"
Well, if you have no position, then likely yes (as usual, start gradually, with 1% or 2% of your trading capital). I bought today, unfortunately a little bit prematurely. If tomorrow the prices recoil, I will halve my position. But I don't regret the purchase, anyway, it is a good diversification for my stock portfolio.
Usually I warn against making conclusions from fiction books or films about financial markets. However, the Big Short gives some genuine lectures, at least between the lines.
Continue reading "Five lessons to learn from The Big Short (film)."
- Robo-advisors promise the risk profiling in a few easy steps, which is unrealistic both from mathematical and behavioral points of view.
- The "optimal" portfolios are usually based on Markowitz-like models, which are inapplicable in practice due to their extreme numerical sensitivity to the market parameters estimation errors.
- Robo-advisors lure investors with low management fees but minimizing fees and maximizing the wealth is not the same. Moreover, the compound costs are not so small in the long term.
- A positive side: Robo-advisers do not (yet) foist toxic financial products upon you.
Continue reading "Stripping down the robo-advisors: sparrow-brains inside"