Eddie Hobbs, inflation linked bond,safe?

Freiheit

Sounds good for a number of reasons. Anything to be wary of?.

Jim2007

Freiheit wrote: »

Sounds good for a number of reasons. Anything to be wary of?.

These things have been discussed in great detail else where so google is your friend!

But here is a couple of things to think about:

- First of all Hobbs has an interest it promoting it as he designed it, from the fact sheet: "3.5% is paid to MS as the bond designer and structurer of the
bond."

- It's not bond, in the traditional since, but the use of the word 'bond' makes people feel safe....

- You are buying a financial product, not placing money on deposit, so exactly how secure is your money

- And if it is so secure why is there a need to have this warning in the documents:

"Capital security is provided by Bank of Ireland. If Bank of Ireland defaults or becomes insolvent, neither Bloxham nor Mount Street Group are liable for the repayment of the principal and/or the payment of the interest."

- Next look at how the return is calculated... there is every chance that the Irish rate will be higher than the average EU rate and you might in fact make more or at least break even by putting your cash on deposit.

- Always ask yourself how will the seller of this product make money on it... in addition to the fees there is a good chance they will earn more interest on the money than they have to pay out.

Jim.

NIMAN

Freiheit wrote: »

Sounds good for a number of reasons. Anything to be wary of?.

.. was he not advocating buying properties in Hungary right up until the bust in '08?

broker2008

On the website, they give an example of inflation http://www.inflationbond.ie/dib.html

In 1991, the Irish Times cost 0.89c and it now in 2011 costs €1.90 (vat decrease means €1.85).

Another example of inflation can be seen here http://www.brendaninvestments.ie/faqs/How_Is_Brendan_Investments_Different.php
where the minimum investment was €5,000.

In the 2011 version, the minimum investment is €10,000.
http://www.inflationbond.ie/docs/Terms_and_Conditions.pdf

Jim2007

broker2008 wrote: »

On the website, they give an example of inflation http://www.inflationbond.ie/dib.html

In 1991, the Irish Times cost 0.89c and it now in 2011 costs €1.90 (vat decrease means €1.85).

Another example of inflation can be seen here http://www.brendaninvestments.ie/faqs/How_Is_Brendan_Investments_Different.php
where the minimum investment was €5,000.

In the 2011 version, the minimum investment is €10,000.
http://www.inflationbond.ie/docs/Terms_and_Conditions.pdf

When it comes to inflation their comparison of doing nothing versus a bond is invalid. I have not looked it up, but it is a reasonable assumption that deposit rates at least kept pace with inflation over the same period... so the difference would most likely be minimum I would think.

And of course you need to also consider that the bond calculation will be on the based on the average European rate not the Irish rate.

Jim.

BrianD3

I've been thinking about this and have a thread about it in the investment forum. The thing that jumps out at me as mentioned by Jim2007 is the charges. 0.5% + 3.5% of the initial amount. That's 2000 on 50k or 400 on 10k.

This, and the fact that DIRT is charged @ 30% (as opposed to 27%) means that the net return is nowhere near double inflation.

And that's in the event of positive inflation.

If inflation is zero or negative the capital is protected apparently. But if you invested 50k, presumably you end up with 48k due to the 2k in charges.

broker2008

My post lacked a ! in case one didn't notice

IrionDevral

Also worth bearing in mind that the ECB mandate is to target inflation of 2% and they stick to this pretty rigidly so the most you'll get a year is probably 4% (i.e. 2% doubled).

PaulieBoy

NIMAN wrote: »

.. was he not advocating buying properties in Hungary right up until the bust in '08?

It was shopping centers in Germany if I remember correctly ...

Found it ! http://www.brendaninvestments.ie/

broker2008

And Cape Verde

http://www.eddiehobbs.com/_blog/EddiesBlog/post/Cape_Verde_a_New_Holiday_Home_Destination/