thesundaytimes.ie/money 27.03.

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RTE

FAME & FORTUNE JOHN McGUIRE What is the worst thing to have
happened to you financially?
The last two crap years. They made me
TALKS TO GABRIELLE MONAGHAN appreciate the good times. Despite the
monthly payment commitments, I can

I got out
look back at 20 years of setting up
multimillion-euro companies from
scratch, becoming a television presenter,
managing a football team in Kerry, and
learning how to box.

Have you ever seen people spend

of there —
money in a way that shocked you?
By the early days of 2008, I began to notice
how much people were disrespecting
money and that annoyed me.

Do you manage your financial affairs

but too late

The property and financial tycoon had to
rent out his home when the crash hit
JOHN McGUIRE was so eager for spending
money when he was eight that he went on
milk rounds before school. By his early
30s, the Dubliner owned a property and
finance business worth ¤20m and he was
able to reward himself with a 1967 Aston
Martin and a holiday home on Dubai’s
seafront.
But when the property market
collapsed, McGuire owed so much money
he had to rent out his home and live in
one of the office blocks he had built. It was
a bitter irony for a man who came to
national prominence as the presenter of
I’m an Adult Get Me Out of Here on RTE,
which encouraged 20-somethings to quit
the nest and buy a place of their own at
the height of the property boom.
McGuire amassed a business empire on
the proceeds of a house he built with his
own hands, aged 26, in Sandycove. This
allowed him to establish financial services
company FirstCredit, that was completing
¤130m of mortgages a year by 2007.
By 2009, he was facing bankruptcy and
loan repayments of ¤42,000 a month —
McGuire was reluctant to discuss his
personally?
My little brother used to advise me on
properties. He was a broker, but he
had somewhat of an epiphany while
climbing Mount Kilimanjaro and went
to work for Unicef.
I ended up employing someone to
manage my affairs because I realised a
full-time person is instantly better than
you are if you are doing it part-time.
I’ve given up on buying individual
shares. Stockbrokers don’t appeal to me
when you can put money into Warren
Buffett’s fund and have a full spread.
What credit cards do you use?
I don’t have a personal credit card, but I What was your best investment?
use a Visa charge card for my companies Quote Devil. We’ve moved into car
that must be repaid every month. insurance, health insurance, and life
assurance and we’re flying. The bar is
Are you a saver or a spender? doing great as well. I love being a bar
I’m definitely a spender. As a kid, I was owner. It was my mortgage company’s
never able to balance the books. I’d go to boardroom for five years. When business
the sweet shop with my sister — a real at FirstCredit was down 90%, I went to
saver — with our 30p pocket money. She’d Dax and ended up going into business
get enough black jacks and chewing gum with them. I project-managed the build.
to last for the week but I’d get 20 white
chocolate mice and they’d be gone in What was your worst investment?
seconds. I’m still that person. Contracts for difference. And unlike many
At one stage, I had to decide whether to people who traded in them, I fully
spend less or earn more, so I opted to earn understood the risks.
more. As soon I was able to break even on
my business, I spent a bit of money on What is your money weakness?
myself, starting with two pinstripe suits. Vintage cars, custom-made motorbikes,
suits, property, food, wine and holidays.
Do you buy shares? I’ve no interest in being the richest man in
I’ve been buying them on and off for years. the graveyard. Money to me is freedom. I
If you did the exact opposite of what I did had a collection of vintage cars and bikes. I
since 2007, you’d have made a fortune. sold them all.
I heard all the advice about not putting It’s only in the past month or so that
all your eggs in one basket, and now I I’ve thought how nice it would be to drive
would recommend against buying my vintage car or go to my holiday home

predicament until earlier this year. He
remained in the public eye, taking part in
a celebrity boxing show, Charity Lords of
the Ring, managing a team for Celebrity
Bainisteoir, and being photographed at
events with girlfriend Karen Koster,
presenter of celebrity show Xpose on TV3.
McGuire, 38, disposed of his assets,
including the Dubai holiday home, and
ploughed the proceeds into six ventures,
including an online insurance company
called Quote Devil and Dax Cafe Bar in
Upper Pembroke Street in Dublin.
individual shares, but for years I thought I
knew better. I lost a fortune on shares in
three years. The bank shares were the
worst. I put up to ¤10,000 into Allied Irish
Banks that turned into ¤300. I also lost
money on CRH, Kingspan and Elan. My
heart goes out to those who put their
retirement money into bank shares.
Unless you are investing in shares
full-time, you’re better off putting the
money into a low-cost fund.
Have you ever been really hard up
McGuire’s plan for his financial future? ‘I’ve no interest in being the richest man in the graveyard. Money is freedom’
investing in two new companies. That
led to me losing money as well. It’s hard
to fathom the stress I had over those two
years.
I had two vacant office buildings losing
¤15,000 a month. I converted one into a
bedsit and lived there in 2010. I had a nice
orthopedic mattress so I wasn’t exactly
living like a bum!
I wanted to honour my commitments,
‘‘
retaining my sizable property portfolio
and keep going.
What was your first job and how much
were you paid?
When I was eight, I’d get up at 6am and
help the local milkman before school, in
return for a yoghurt and 10p. Even back
IF YOU DID THE EXACT then, in the early 1980s, I was a spender —
I wasn’t going to survive on pocket
in Dubai again. When I had my holiday
home, I often used to cancel at the last
minute so it was usually a friend who
would use it.
What is the most important lesson
you have learnt about money?
I know this sounds ridiculous, given that I
borrowed so much, but I wouldn’t have
survived if I hadn’t kept some reserves. I
would have been able to break even during
the bad times had I not gone for a fixed
rate of 5.1% on ¤7m of my mortgages.

OPPOSITE OF ME IN
McGuire is currently writing a finance or broke? so I decided to rent out my house and sell money. We moved to Sandycove when I My business model has also changed.
book for Penguin Ireland that is due to be I suffered a 90% decline in my main everything — my holiday home, cars, was 12, and I worked at a DIY shop and I’m more interested in businesses that will
published in January. business and income, enough to send shares, bonds, funds, and commodities. I collected glasses at the Royal Marine hotel. survive another recession, so businesses

How much money do you have in

your wallet?
Whenever I go to the ATM, I’ll take out
¤200-¤300, but I mostly use my Laser card.
most people into liquidation.
In 2009, when everything fell apart, I
was doing everything I could to replace
my income. In 2010, I committed to
higher loan repayments and began
reinvested a lot of it, though.
Do you still own property?
I’m no longer in residential property.
What I would judge my success on is
SHARES SINCE 2007, What is the most lucrative work you
YOU WOULD BE RICH have ever done?
What started it all was investing ¤40,000
in FirstCredit, which turned into millions.
that involve a one-off payment are not as
attractive as those that provide recurring
income. Even in a recession, people still
need to eat and still need to insure, so
that’s where I’m at.

PTSB considers giving tracker Any threat to dollar’s status

holders incentive to overpay could harm US investments
W
Lenders are desperate to wean hen Bobby now a holder of almost
borrowers from loss-making
JOHN
Moore lifted the $2.85 trillion — a figure that
Jules Rimet has risen nearly six-fold in
mortgages, writes Niall Brady trophy at
Wembley in
less than seven years (see
chart).

HOUSEHOLDS have been
advised to suspend voluntary
LOOBY
1966, each pound sterling Many commodities, most
that he and his compatriots importantly oil, are priced in
If Permanent TSB offers a 5% spent in celebration in the dollars. If Sweden, for
incentive, for example, this hostelries of London that example, wants to buy oil

overpayments on tracker mort-
gages from Permanent TSB
after it emerged last week that
they may soon be offered sweet-
eners for committing to these
payments, allowing them to
become debt-free sooner.
They should also delay
moving house because Perma-
nent TSB is considering
allowing borrowers to make
their trackers portable,
although this is likely to come
with an increased interest rate.
Details are expected in the
coming weeks, as Permanent
TSB becomes the first lender to
tackle its huge losses on
trackers. These mortgages have
lifetime price promises that
peg the interest to the rate set
by the European central bank
(ECB), currently 1%.
The average rate on a Perma-
nent TSB tracker is 2%, a
margin of one percentage point
over the ECB. However, the
banking crisis means it must
pay about 5% to finance these
loans. The funding gap has
made Permanent TSB keen to
shift trackers off its books,
leading it to consider offering
customers an incentive to
repay their loans ahead of
schedule.
Allied Irish Banks and Bank
of Ireland face similar prob-
lems and they will be watching
Permanent TSB closely.
Overpayments are popular
with households that have
spare cash because it allows
them to pay off their mortgages
early. Suppose that you bor-
rowed ¤300,000 at a tracker
rate of 2%. The payments would
be ¤1,110 a month and the
interest bill would be ¤99,190
over 30 years. Increasing the
payments to ¤1,500, an overpay-
ment of ¤390 each month,
would save you almost ¤34,000
in interest and would pay off
the mortgage after 20 years and
four months.
would boost the value of the
overpayment to ¤410 a month,
increasing the interest saving
to ¤35,050 and knocking
another four months off your
mortgage. This means you
would be debt-free 10 years
earlier than you would be
without overpayments.
Michael Dowling of Michael
Dowling Mortgage and Finan-
cial Services, a broker, said: “It’s
always advisable to make over-
payments if you can afford to
because your debt will be paid
off sooner. It becomes even
more attractive if lenders are
prepared to add a kicker to the
overpayments.”
Other advisers warn that
overpayments would be a mis-
take, however, if your spare
cash could earn a better return
elsewhere. EBS and Ulster
Bank, for example, pay 4%
gross for regular deposits of up
to ¤1,000 a month, twice the
return you would make by over-
paying on a tracker mortgage at
2% interest.
Savings on deposit can be
withdrawn if you need the
money in the future. Lenders
will refuse to return overpay-
ments, especially if you are in
negative equity.
Liam Ferguson of Ferguson
and Associates, a mortgage
broker, said: “One of the anoma-
lies in Irish banking is that you
can earn more interest on
deposit that you would pay on a
good-value tracker mortgage.
You would have to do the
maths before committing your-
self to overpayments, even if
lenders are offering incentives
to do so.”
The maths will turn in
favour of overpayments next
month if, as expected, the ECB
raises interest rates by a quarter
of a percentage point and this
increase is added to the cost of
tracker mortgages but not nec-
essarily to savers’ rates.
Borrowers must do the maths on mortgage overpayments
Your calculations should
also take account of deposit
interest retention tax (Dirt).
This is currently 27% but Fine
Gael threatened in its election
manifesto to increase Dirt to at
least 30%.
Tracker mortgages have left
some families in a honey trap,
where they need a bigger
house, but are reluctant to
move because this would mean
leaving behind the ultra-low
mortgage rates they are
enjoying. The gap between
trackers and standard variable
rates is now so wide that
many people cannot afford to
move house.
Suppose that you have a
¤350,000 mortgage on your
home. The payments would be
¤1,440 a month at Permanent
TSB’s best tracker rate of 1.75%.
If you move, you would lose the
tracker, forcing you on to a
higher standard variable rate.
To keep the same payments
as before, you could afford to
borrow only ¤250,000 from Per-
manent TSB, whose standard
variable rate is 5.19%.
Portable trackers would
make it more financially attrac-
tive to move house, although
you would have to agree to a
wider margin so the tracker on
your new home would be more
expensive. Permanent TSB
refuses to speculate on how
high that margin might be.
You would also be unable to
top up the size of your tracker
when moving. If you needed a
bigger mortgage to buy your
new house, the extra amount
would be on a standard vari-
able rate.
Dowling said: “The key ques-
tion is what margin you would
pay over ECB for the new mort-
gage. If it was ECB plus 4%, for
example, you’d be better off
taking your chances with a var-
iable mortgage from AIB or
Bank of Ireland, even though
these have no price promises.”
Bank of Ireland has the best
variable rate deal, 3.3% if you
borrow more than 80% of the
house price and the mortgage
is higher than ¤500,000, and
3.4% if the loan is under that
amount.
summer evening would also
have bought them more than
11 deutschmarks.
The crestfallen Germans
might have taken some
comfort from their bitter
defeat that day, could they
have foreseen their
subsequent World Cup
victories in 1974 and 1990,
and that the sterling in
Bobby’s pocket would barely
buy the equivalent of 2.25
deutschmarks today.
In a little over half an
average lifetime, sterling lost
80% of its purchasing power
relative to the German
currency.
The simple message for
investors is that, when
assessing how to maintain
your purchasing power, it is
crucial to devote some
thought to how the
custodians of any currency
(government and/or central
bank) are likely to treat that
custodial duty.
Relying on Her Majesty’s
government and the Bank of
England to maintain the
relative purchasing power of
sterling since that day of
days for English football has
proven to be very expensive.
In the face of a tendency
to consume more than it
produces, Britain allows the
purchasing power of its
currency to diminish, rather
than tackle the over-
consumption/under-
production problem at the
heart of its economic decline.
Notwithstanding some
temporary upswings, such as
when North-Sea oil revenues
began to flow in the 1980s,
sterling has proven to be
overvalued at every
exchange rate relative to the
deutschmark since well
before Alf Ramsey decided to
play without wingers.
COMMENT
There is nothing in the
more recent policy choices of
the UK authorities, and most
especially in their response
to the global financial crisis,
to suggest any change in this
long-standing trend.
Given the dollar’s greater
significance in the world
economy and investor
portfolios, the key question I
want to focus on is whether
something similar could lie in
store for the inheritors of the
Anglo-Saxon crown across
the Atlantic: should the
long-term investor now be
shunning the American
currency?
Like the UK, the US
economy is a persistent
buyer of goods and services
from the rest of the world in
excess of the goods and
services that it sells to the
rest of the world.
This should result in
supply of dollars outstripping
demand in the global foreign
exchange market and a
persistent loss of purchasing
power of the dollar.
Fortunately for Uncle
Sam, there are currently a
China’s foreign exchange reserves
1996
number of countervailing
buyers of dollars that
combine to generally dilute,
neutralise or reverse this
supply/demand imbalance.
This ensures that the value of
the greenback is maintained
at a level well in excess of
what its persistent balance of
payments deficit on current
account would produce.
Every central bank in the
world has been a net buyer
and consequent holder of
dollars (and US dollar
assets) because of its role as
the primary reserve currency
of the global financial
system. Ease of trade is
currently ensured for these
countries by possession of
this globally accepted “store
of value”.
Many countries that are in
a persistent current account
surplus position with the US
peg their exchange rates to
the dollar, forcing them to
buy and hold the American
currency.
The most conspicuous
example is China, whose
central bank has been a
consistent net buyer and is
$bn 3,000
2,500
2,000
1,500
1,000
500
0 years experience in financial
2010
from its neighbour Norway, it
must buy dollars to execute
the transaction.
In summary, the position
of the dollar as the
dominating reserve currency
of the global financial system
has allowed America to
consume more than it
produces over the past three
decades without a significant
collapse in its purchasing
power.
Facing the harsh
consequences of its
payments imbalance has so
far been avoidable. Similar to
sterling, which lost its
reserve currency status after
the devaluation of 1967, any
diminution of this status for
the dollar would see it
exposed to the full reality of
its fundamental oversupply.
It is impossible to predict
when, or if, this will occur.
It seems prudent to
expect that the Federal
Reserve would show the
same disregard as the Bank
of England for maintaining
the purchasing power of the
currency.
The long-term investor
should doubt the
commitment of the wielders
of policy in America to caring
any more about
fundamentally addressing
their payments imbalance in
the years ahead than their
cousins in the UK have
shown since a certain
Russian linesman broke
German hearts nearly 45
years ago.
It might be time to check
your exposure to the
greenback.
John Looby is an investment
manager with Setanta Asset
Management with over 20
markets.