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The last time I bought a new car I was staggered by the complexity of the finance deals. In the past, I've considered the ‘hire purchase’ deal, which is simply the larger the deposit, the lower the repayments. I then end up owning the vehicle outright. But during the last recession, in a bid to ignite sales, there was a new financial kid on the block. The Personal Contract Purchase, or PCP, looks like an incredibly attractive deal for both buyer and seller, and as always, if it looks too good to be true, it inevitably is. PCP appears as toxic as PCP, the drug Angel Dust. Indeed, this form of financing may well contain the seeds of the next financial implosion.
Private Contract Purchases are attractive because of the low monthly payments that are followed by a balloon payment at the end of the contract. In reality, you’re not purchasing the car, you are paying the depreciation in its value. The second-hand car market has been pretty stable over the years, and as such, finance houses have historically been able to calculate the Guaranteed Minimum Future Value (GMFV) with some certainty. A perfect win-win, it would seem. Cheap financing, plus the owner or dealership has the opportunity to obtain the car at below market value at the end of the contract. Fantastic! Well, fantastic as long as the market stays stable and the purchasers meet their obligations.
Of course, the rub is in the fact that the buyer can chose whether to keep the vehicle. (LiveSquawk – Continue Reading)
Ten years ago this month, the French bank BNP Paribas decided to limit investors’ access to the money they had deposited in three funds.
It was the first loud signal of the financial stress that would, a year later, send the global economy into a tailspin. Yet the massive economic and financial dislocations that would come to a boil in late 2008 and continue through early 2009 — which brought the world to the brink of a devastating multi-year depression — took policy makers in advanced economies completely by surprise. They had clearly not paid enough attention to the lessons of crises in the emerging world.
Anyone who has experienced or studied developing-country financial crises will be painfully aware of their defining features. For starters, as the late Rüdiger Dornbusch argued, financial crises can take a long time to develop, but once they erupt, they tend to spread rapidly, widely, violently, and (seemingly) indiscriminately.
In this process of cascading failures, overall financial conditions quickly flip from feast to famine. Private credit factories that seemed indestructible are brought to their knees, and central banks and governments are confronted with tough, inherently uncertain policy choices. Moreover, policy makers also have to account for the risk of a “sudden stop” to economic activity, which can devastate employment, trade, and investment. (MarketWatch – Continue Reading)
Stephen K. Bannon, the embattled chief strategist who helped President Trump win the 2016 election but clashed for months with other senior West Wing advisers, is leaving his post, a White House spokeswoman announced Friday.
“White House Chief of Staff John Kelly and Steve Bannon have mutually agreed today would be Steve’s last day,” the White House press secretary, Sarah Huckabee Sanders, said in a statement. “We are grateful for his service and wish him the best.”
Earlier on Friday, the president had told senior aides that he had decided to remove Mr. Bannon, according to two administration officials briefed on the discussion. But a person close to Mr. Bannon insisted that the parting of ways was his idea, and that he had submitted his resignation to the president on Aug. 7, to be announced at the start of this week. But the move was delayed after the racial unrest in Charlottesville, Va.
The loss of Mr. Bannon, the right-wing nationalist who helped propel some of Mr. Trump’s campaign promises into policy reality, raises the potential for the president to face criticism from the conservative news media base that supported him over the past year. (NY Times – Continue Reading)
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