Wednesday 27 March 2013

Cypriot Implosion & The Budget.

Cracks in the Euro zone experiment have become evident once again, this time centering on the island nation of Cyprus. My shares in Lloyds Banking Group have taken a bit of a nose dive since this news was initially broadcast (about 15% fall), and there will probably be increasing downward pressure if a Cypriot bank run occurs when their banks are finally reopened. If prices are driven low enough I might view this as an opportunity to increase my exposure to the sector.
My views on the Euro zone haven't changed much since my first blog posts on the topic in Jan 2012, check out the links below if you're interested. EU policy makers are being very slow to address the problems they are facing, which is increasing the likelihood of an eventual currency breakup. Personally I think Cyprus would be much better off ditching the Euro in favour of their old currency, which would cause a painful devaluation but make them competitive once again.

The UK Budget was largely unexciting, although the Chancellor did announce policies intended to stimulate growth in the housing sector. One of these was a ''Help To Buy'' scheme directed at first time buyers that will offer up to £3.5bn for shared equity loads towards mortgages. Buyers who put up a 5% deposit can get another 20% from the Govt. The loan will be interest free for the first five years with a ceiling price of £600,000. Also there will be a ''Mortgage Guarantee'' scheme that intends to incentivise lenders to offer people with smaller deposits better mortgages. They will guarantee 20% of the loan on properties worth up to £600,000.
Although I disagree with these meddlesome strategies the Chancellor is employing, I was quite pleased to see that it gave the house builder's shares I own a huge boost. I have now sold my holdings in Telford Homes which have made over 100% profit in a few years and also Persimmon Homes which has made over 150% over a similar time frame.
I still hold shares in Taylor Wimpey and Barratt Developments but will look to offload these as well in due course. At the moment I’m holding the proceeds of the sales in cash.


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