Derivex

Hi All


ASIC asks almost everyone with even slightly obtuse claims to fess up, interest free home loans would therefore be an obvious target in the ASIC job description. In other words, its not a negative thing in my mind. One of my aggregators got a pasting and a nice "fine" a few years ago for claiming to be "independent", when in fact in ASIC's eyes this meant they shuould deal with ALL funders.

MIAA are doing what they are supposed to, represent members, that means providing a warning where they see fit. Again I dont think that is negative, just a procedural process. Derivex/IFHL not being an MIAA member isnt the most clever thing though not a fatal flaw, this should be easily fixed by Derivex or IFHL.

ta
rolf
 
Well, it seems we will all be able to afford million dollar mansions now, and build bigger homes due to interest free loans?

I dont think we can begin to fathom what this might to to the financial markets.


On the off chance that this idea may be real, and may work, wouldnt one of the big boys just take them over, and put and end to it? They definitely cannot afford to have these sort of ideas taking their profits. They would have a lot to lose.
 
Anybody that knows how to work a financial calculator will be able to confirm that the product does not work...future value and present value are two concepts in finance that are omnipresent...there is no way around them.

As for issuing bonds in the market to lock in their profit....total BS.
 
Nat,

Why not let ASIC come up with a verdict first.

I trust their expertise in analysing financial products significantly more than someone who's relying on a financial calculator.

Cheers,

Aceyducey
 
nat r said:
The whole 3 tier CMT step bond residual bond tranche amortising pass thru annuity convertible paired hedge arbitrage risk free claim is all bullsh!t.

Just beacuse you have access to a financial dictionary it does not mean you can defeat the laws of present and future value of a cash flow.

If you can really find capital for nothing. then good on you because you have just outsmarted every other company in the free world.


THe London InterBank Offered Rate (LIBOR)
is about 0.1875% for yen which is capital for almost nothing in my books.
However I tend to agree with you NAT R
 
monoply said:
I dont think we can begin to fathom what this might to to the financial markets.

On the off chance that this idea may be real, and may work, wouldnt one of the big boys just take them over, and put and end to it? They definitely cannot afford to have these sort of ideas taking their profits. They would have a lot to lose.
I had similar thoughts.
There was a tyre company a while ago (10-20 years ?) that produced the worlds first "eternal tyre". i.e it was puncture proof and never lost its tread. I don't think they ever sold a single tyre. The big boys saw to that.

Ad(ios)
 
Monoply & AdamN,

Yes, that could be the plan. Derivex might be simply seeking to prove that they can do it and then sell out to the highest bidder who would then acquire the IP and shut it down. The trouble may be that it probably won't take long for more clever Trevors to come along and find other ways of replicating the process and the whole problem arises again. I heard Trevor believes that Derivex has about a years head start on software development and does expect competition to emerge in time.

What could happen in the alternative is that the supply side may be shut down on them. Derivex will need to raise billions in funding to meet loan settlements across the geographies they talk about, particularly in the US and European markets. They say they have arranged initial funding of $500 million per month in Australia alone and just for home loans. Derivex would therefore have to be relying on institutional and other multi-national funds to flow across into their "AAA rated" bond structure. If those investing institutions decide (or are encouraged) that it is not in the wider interests of the markets and the time honoured pillars of international finance to take up those bonds then Trevor has a major problem on his hands.

Like Monoply said, "I dont think we can begin to fathom what this might to to the financial markets". Every Australian bank for starters will be saying to themselves, "if I can't compete with Derivex and continue lending money to borrowers at 6.5% then I can't afford to pay 5% on deposits". Each bank will progressively haemorrhage their loan books as they are refinanced to Derivex and will eventually fall over.

It is hard to understand how major bond arrangers seeking secure and stable returns for themselves and their clients will passively invest in volume in something that essentially undermines the whole concept of fractional banking and threatens the profitability and viability of every lending institution around the world. Central banks surely won't take long to assess what impact this all might have and take some form of action to mitigate the effect on the financial system.

IF Derivex WORKS, the effect will be seismic.

Have a good day :)
 
Ahh - but keep an eye out for the new tyres in prototype with flexible spokes, a flat belt on the outside (which lasts for a very long time and no air required....

Apparently the ride is still unacceptably rough over some surfaces, but as they deform unequally they are flexible to a variety of different performance needs without modification.

Cheers,

Aceyducey
 
Rolf,

I hate to point out the obvious but Derivex/IFHL is probably not going to be welcomed with open arms by the MIAA. The MIAA is largely funded by lenders who make money from loans that can't compete with what Derivex is offering so it gives rise to a fairly substantial conflict of interest.

The initial reaction of the MIAA has been predictable. Let's see what they do from here.

Cheers,
FL
 
"THe London InterBank Offered Rate (LIBOR)
is about 0.1875% for yen which is capital for almost nothing in my books."

...add the cost of a currency hedge and the true rate will be about 5.25%.


I'm sorry to have to bring reality to this discussion fellas but the banks operate under a very clear set of capital adequecy rules which are closely moniteried bythe RBA abd APRA. They can lend to each other or to govertments with a lower level of capital usage than they need to lend to a mum and dad mortgage borrower.

At the moment they can buy Australian Governement AAA rated debt at 5.30% and incur no capital charge OR they could 'copy' Derivex and lend to mr and mrs joe average at 0% and incur a massive capital charge ....I will let you decide which is the better deal for the banks !!!

I will say it again.....the Derivex story is pure fantasy and does not work.
 
Free Loader,

Your comments are a real concern. Our economy could be at risk if this pulls off the way it’s advertised.

If it is true then govt will step in to govern I think. You can’t have an economy where your houses are interest free.

What next car loans no interest, Harvey Norman no interest, Overdrafts no interest, Personal loans no interest, large scale developments no interest, cricky the country wouldn't have to pay interest on our overseas debt. just no more interest ever.

Is that sustainable? I don’t possess that education but logic tells me not.
 
Aceyducey said:
Ahh - but keep an eye out for the new tyres in prototype with flexible spokes, a flat belt on the outside (which lasts for a very long time and no air required....

Apparently the ride is still unacceptably rough over some surfaces, but as they deform unequally they are flexible to a variety of different performance needs without modification.

Cheers,

Aceyducey
Yeah I read about that. They call it a Tweel (tyre + wheel) :
http://www.smh.com.au/news/News/The-wheel-gets-reinvented/2005/01/13/1105582681778.html

Not sure about the aesthetics of it though. Looks like a car on bicycle wheels. Do they come with spokey dokeys ? :)

Ad(ios)
 
Mr Ed said:
Free Loader,

Your comments are a real concern. Our economy could be at risk if this pulls off the way it’s advertised.

If it is true then govt will step in to govern I think. You can’t have an economy where your houses are interest free.

What next car loans no interest, Harvey Norman no interest, Overdrafts no interest, Personal loans no interest, large scale developments no interest, cricky the country wouldn't have to pay interest on our overseas debt. just no more interest ever.

Is that sustainable? I don’t possess that education but logic tells me not.
I wouldn't be too concerned about this bringing on TEOTWAWKI (End of the world....) This is a brief window of opportunity which will be open only as long as it takes for the US dollar crisis (yes, there is one) to wash through the system. Nat tells us that it is unworkable and in normal times I would agree. We disagree about whether or not we are operating in normal times.

Warren Buffett, the greatest stock investor of all time, is now looking for non-US$ investments (including many tons of silver) and for the first time in his life! he is buying non-US currency. Note: There is no point in taking a defensive position against a fallind dollar and then hedging back to that dollar. Defeats the purpose. If this flies it will do so only as long as the mega-rich are wanting out of the USD.

All this truly In My Humble Opinion only.

Thommo
 
A Derivex home loan lasts for 20 years...the USD crisis may last for 12 mths...how do you cover the exchange risk for the remaining 19 years???

I will say it again...it odesn't nmatter where the other currencies or interest rates are ...the cost of the hedge will negate 99.98% of the so called aribitrage.
 
nat r said:
A Derivex home loan lasts for 20 years...the USD crisis may last for 12 mths...how do you cover the exchange risk for the remaining 19 years???

I will say it again...it odesn't nmatter where the other currencies or interest rates are ...the cost of the hedge will negate 99.98% of the so called aribitrage.
Nat, I believe it is time you declaired your interest. To quote the Bard "Methinks you doth protesteth too much."

ps The USD crisis will last till the end of the decade.
 
monoply said:
I dont think we can begin to fathom what this might to to the financial markets.
Great nick mono, ;)

I agree, and as I tried to convey in another thread that is happily tossing about all the "what if's" should Derivex check out; it is too early to call (although it sits on the rank of about 9.5 on the BS richter scale for me) and at this stage, the notion is as unfathomable as the effects it would have.

Cheers,

Jo
 
Rolf Latham said:
Hi Free Loader

Nah, the MIAA is funded largely by its members.

Ta

rolf
Hi Rolf,

You sure about that? Its funny how the recent MIAA newsletter features the prominent logos of major lenders (CBA, Citibank, Interstar, HLP) which all comes at a cost, while all the conferences they hold are sponsored heavily by the lenders.

There was also a press report about a year ago that said HLP paid something like $500,000 for gold membership of the MIAA. Ouch. And they didn't even start writing loans until a few months ago.

Methinks the MIAA marketing machine would have everyone believe they are 'by the members, for the members' but the big dollars go in there with a vested interest. Good luck to Derivex if they can get on board.

Cheers,
FL
 
Hi FL

You are entitled to your opinion. Perhaps you could contact Phil Naylor of the MIAA and ask him the question of "vested interest".

The MIAA will issue any such warning where they believe there is an issue of concern, especially in response to a media release by ASIC. For them to do anything else would be negligent on behalf of their members.

I dont seriously think any lenders see IFHL as a threat to their business at this point, indeed, as you have read yourself, many of them are dissmissing IFHL type products almost out of hand, seemingly without having done any reasearch. Ways of thinking, and what can and cant be done take time to change - "man can not run a four minute mile........."

In my opinion the MIAA will back any lender/broker that is a member, follows the code of conduct, and follows the rules of the land.

ta
rolf
 
Thommo said:
Nat tells us that it is unworkable and in normal times I would agree. We disagree about whether or not we are operating in normal times.
Of course, it is different this time. :rolleyes:

Thommo said:
... Note: There is no point in taking a defensive position against a fallind dollar and then hedging back to that dollar. Defeats the purpose. If this flies it will do so only as long as the mega-rich are wanting out of the USD.
You made a rather bold statement. What is the purpose of hedging in your humble opinion?

P.S. Nat R put it very sharply and correctly – “If you borrow in USD or Yen and don't hedge your currency risk you should be commited to the nearest mental institution. “
 
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