Posted by: nastylittletruths | May 3, 2008

The Love Of Money…

… is the root of all evil. I learnt that some time ago from one of my Internet “gurus” who had all good things to say about money and what it can do. He was very adamant, however, that it wasn’t money but the love of it that was the root of all evil.

I read an article today in the Express quoting Lyndon Guiseppi – Managing Director of RBTT – about the price of homes and the inherent danger it posed to the economy and I had to ask myself, where was Lyndon for the past few years? The nasty little truth is that the pyramid is about to crumble as there’s no longer any takers for the overvalued homes on the market. If you were ever privy to how “pyramid” schemes work, the middle and upper middle class housing market is a variant of the scheme by those who had the money to make even more money.

Here’s how it works: Developer A has a prime project and advertises on the market at pre-construction prices to raise cash and move forward, Speculator B has the cash to invest and pays the requisite down payment. Within a year and people seeing work taking place on the site (you know Trinis… the majority of us don’t buy “cat in bag” but want to seesomething first) interest is generated and are now willing to pay a higher price. Speculator B either sells the property to a committed home owner at a price that usually nets him more than his down payment – effectively doubling or more his outlay. Not bad… excellent investment.

But greed, for those who have the cash, is ever present and sometimes an offer is made to a friend or colleague to “flip” the house at a higher cost, that is Speculator B is now giving Speculator C a chance to get some of the action. Now Mr. Guiseppi is rightly warning people about paying too much for that home they think they must have. For there is nothing worse than owing a bank more than what your house is actually worth.

My advice for the last two years to young couples who are in the market for them to hold off as long as they can. The Government housing programme will ease some of the heat on the supply side eventually and the private developers such as HCL will also assist in filling some of the middle income gaps, but the bubble will burst eventually. What has been going wrong with that advice is that those who prefer to build still can’t get materials and reliable labour. Live with your parents, don’t rent, save your money, just don’t get into that trap.

Speculators are the bane of the world in the commodity markets today. They are they alone are responsible for the high costs for raw materials that they see as investment vehicles. In one year alone copper tripled in cost even though there was no shortage. Because they saw the possible demand, and here is your lesson, they got into buying and “flipping” to next round of speculators. The love of money totally disregards the destruction of lives of the underprivileged…  

People like myself who have no love for money, just a healthy appreciation of what it can do – like building a wall of security to protect my family and I in unpredictable times – always wonder when is enough going to be enough for these guys. There’s another theory about how they are destined to have this wealth, but that’s another post.

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