Bashing Goldman Sachs Is Simply a Game for Fools

Bashing Goldman Sachs Is Simply a Game for Fools
By Michael Lewis - Jul 27, 2009
Bloomberg Opinion
www.bloomberg.com

America stands at a crossroads, and Goldman Sachs now owns both of them. In choosing which road to take, ordinary Americans must not be distracted by unproductive resentment toward the toll-takers. To that end we at Goldman Sachs would like to dispel several false and insidious rumors.

Rumor No. 1: Goldman Sachs controls the U.S. government.

Every time we hear the phrase the United States of Goldman Sachs we shake our heads in wonder. Every ninth-grader knows that the U.S. government consists of three branches. Goldman owns just one of these outright; the second we simply rent, and the third we have no interest in at all. (Note there isn't a single former Goldman employee on the Supreme Court.)

READ THE ENTIRE ARTICLE HERE

Goldman Sachs... the Good, the Bad, and the Ugly

The "Vampire Squid" at 142 years
By Joel Stonington 9/21/2011

Goldman Sachs (GS), the most profitable investment bank in Wall Street history, went through a bit of a rough patch during the economic downturn. The firm posted its first quarterly loss since going public and handed over the largest fine ever collected by the Securities & Exchange Commission. From a purely economic angle, it appears that Goldman is now back on track, with $8.35 billion in profit last year. In the court of public opinion, however, Goldman Sachs is still on trial.

The company was called the greedy cause of the downturn for selling bad debt and then betting against it. Rolling Stone framed Goldman as a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. That's not to mention a 650-page Senate report that hangs over the firm.

READ THE ENTIRE ARTICLE HERE

The Ever Increasing Parallels Between AIG And Greece 2/10/2010

The Ever Increasing Parallels Between AIG And Greece... And The CDS Puppetmaster Behind It All
Submitted by Tyler Durden on 02/08/2010

My comment...
Goldman Sachs & AIG (2008) and now Goldman Sachs & Greek currency swaps (2002-2005), which were used to hide the true extent of Greek government debt. What will be revealed next? Did Goldman Sachs create similar currency swaps for Italy and Spain? For more, Google: goldman sachs greece currency swap

Is the US Monetary System on the Verge of Collapse?

Is the US Monetary System on the Verge of Collapse?
By David Galland of Casey Research
John Mauldin's Investors Insight, Sept 13, 2011

READ THE ENTIRE ARTICLE HERE

My comment...
Reading this "Outside the Box" piece on John Mauldin's website gave me a new appreciation for how close the US monetary system, and by extension the global financial system, is to a complete collapse. This is scary.

An Impeccable Disaster... by Paul Krugman 9/11/2011

An Impeccable Disaster
By PAUL KRUGMAN
Published: September 11, 2011

On Thursday Jean-Claude Trichet, the president of the European Central Bank or E.C.B. — Europe’s equivalent to Ben Bernanke — lost his sang-froid. In response to a question about whether the E.C.B. is becoming a “bad bank” thanks to its purchases of troubled nations’ debt, Mr. Trichet, his voice rising, insisted that his institution has performed “impeccably, impeccably!” as a guardian of price stability.

Indeed it has. And that’s why the euro is now at risk of collapse.

READ THE ENTIRE ARTICLE HERE

My comment...
Paul Krugman sees the equivalent of bank runs in Spain and Italy as investors, fearing sovereign debt defaults, demand higher interest rates to hold Spanish & Italian government bonds. "We're not talking about a crisis that will unfold over a year or two; this thing could come apart in a matter of days. And if it does, the whole world will suffer."

Big Bank Chart... by Barry Ritholtz 9/12/2011

Big Bank Chart
By Barry Ritholtz - September 12th, 2011

My comment...

Do you remember Washington Mutual, Wachovia, Merrill Lynch, Countrywide, Bear Stearns? They have all been absorbed by four too-big-to-fail banks: Citigroup, JPMorganChase, Bank of America and Wells Fargo. Don't forget those names because we will be bailing them out again.

Fed Policy - No Theory, No Evidence, No Transmission Mechanism

Fed Policy - No Theory, No Evidence, No Transmission Mechanism
John P. Hussman, Ph.D.
September 12, 2011
All rights reserved and actively enforced.

Undoubtedly, one of the main factors prompting a benign response to what is now virtually certain recession and virtually certain Greek default is the hope that the Fed will launch some new monetary intervention. While Wall Street appears to view the present weakness as a replay of 2010, it is strikingly clear that the evidence tells a different story, with a broad ensemble of data implying near-certainty of oncoming recession (see An Imminent Downturn ).

READ THE ENTIRE ARTICLE HERE

My comment...
With $1.6 Trillion of excess bank reserves, and 10-year Treasuries yielding 1.9%, the Federal Reserve is simply an Emperor with no Clothes. We may still get QE3... but it will have zero effect, other than briefly stimulating the stock market. Whoopee!

S&P 500 Index and Dollar Cost Averaging 9-12-2011

Whatever investments your portfolio comprises, dollar cost averaging (DCA) is a useful strategy for minimizing asset purchases when the market is overvalued. DCA allows you to invest equal dollar amounts at regular intervals (monthly, quarterly) regardless of the current market conditions. In this way you buy more shares, bonds, etc. when the market is oversold (cheaper), and fewer shares when the market is overbought (more expensive).

DCA does not guarantee that you will make money however. If you are buying into a secular (long-term) bear market, or even into a trading-range market, you may lose money, or make no money. As an example, let's look at the S&P 500 Index over the past fifteen years, from September, 1996 to September, 2011.

The following chart shows the monthly adjusted close prices for the S&P 500 Index (Yahoo! Finance symbol ^GSPC) between September, 1996 (687.33) and September, 2011 (1154.23). The average index price over this 15-year period is 1160, and the standard deviation is 200. The average price plus/minus one standard deviation (960 to 1360) is shown as the blue shaded rectangle. This means that 67% of the monthly prices fall within this range. NOTE: The large size of the standard deviation reflects the high volatility of the index during this fifteen-year period.



There are 180 months in this fifteen year period. Let's say your investment plan is to invest $1000 each month in the S&P 500 Index, and you have faithfully followed that plan over the past fifteen years. You would have bought $1000 worth of index shares each month... fewer shares when the index was expensive, and more shares when the index was cheaper. Let's see how you would have done:

Index Starting Value: $687.33
Index Ending Value: $1,154.23
Total Shares Purchased: 160.40
Total Dollars Invested: $180,000
Current Market Value: $185,142
Total Profit: $5,142
Total Percent Profit: 2.86%
Annual Percent Profit: 0.19%

So, over the past fifteen years, your investment would have returned less than 0.2% annually. But, looking on the bright side, you have participated in a forced savings program, and you now have a retirement account with $185,000 in it.

What are the lessons going forward?

(1) The S&P 500 Index has been highly volatile over the past fifteen years. We've experienced three asset bubbles and two crashes, and we may well be in the early stages of the third crash.

(2) The S&P 500 Index is currently priced at its long-term average. This means that buying the index now virtually guarantees sub-par long term returns.

(3) A better strategy than DCA might be to watch the index and only purchase shares when the index is currently BELOW its fifteen-year average value of 1160. Clearly this means taking a more active approach to your portfolio purchases, monitoring the index each month before making your purchase decision.

Government Sues Biggest U.S. Banks Over Mortgage-Backed Investments 9/02/2011

Government Sues Biggest U.S. Banks Over Mortgage-Backed Investments
September 02, 2011

In a sweeping move that opens a new front on the housing crisis, the U.S. government on Friday sued 17 financial firms, including the largest U.S. banks, for selling Fannie Mae and Freddie Mac billions of dollars worth of mortgage-backed securities that turned toxic when the housing market collapsed.

Among the 17 targeted by the lawsuits were Bank of America Corp., Citigroup Inc., JP Morgan Chase & Co., Goldman Sachs.

READ THE ENTIRE ARTICLE HERE

My comment...
So... in Oct. 2008 Congress passed a $700 Billion law to bail out these too-big-to-fail banks. And now we're going to sue them because they sold toxic securities to Fannie Mae & Freddie Mac. We should have simply let them go bankrupt three years ago and then taken them apart... brick by brick.

HFT and Leveraged ETFs... Newest Financial Weapons

The Newest Financial Weapons of Mass Destruction

By Doug Kass 08/31/11 - 01:00 PM EDT



The toxic combination of price momentum-based high-frequency trading (HFT) strategies and the proliferation of leveraged ETFs has served to launch the newest forms of financial weapons of mass destruction, and they're alienating legions of investors.



Since the beginning of 2007, domestic equity mutual funds have had net outflows of more than $400 billion (in the same period, $835 billion of fixed-income funds have been purchased! That spread between stock outflows and bond inflows -- $1.235 trillion (in 4.5 years) -- is unprecedented in the annals of financial history.



READ THE ENTIRE ARTICLE HERE

Has the Fed Started QE3? 9-01-2011

Has the Fed Started QE3? 9-01-2011

By Bud Conrad, Casey Research



The Fed surprised the market by extending its policy of 0 to 0.25% Fed funds rate to mid-2013. The way the Fed manages to drive rates lower is to buy Treasuries with newly created money – driving the price up and the rates down. The big question is whether the policy will have a sizeable effect on markets. The chart below shows the historical jump in the Fed’s combined policy tools that were used to lower rates and bail out financial institutions through a variety of programs. These include the big purchase of mortgage-backed securities (MBS) called QE1 and the large purchase of Treasuries called QE2.



READ THE ENTIRE ARTICLE HERE

Is Credit Crunch 2.0 Imminent? by Satyajit Das

From Green to Red – Is Credit Crunch 2.0 Imminent?

By Satyajit Das - August 28th, 2011, 8:00AM



READ THE ENTIRE ARTICLE HERE



Satyajit Das is author of Traders, Guns and Money: Knowns and unknowns in the dazzling world of derivatives (August 2006) and Extreme Money: The Masters of the Universe and the Cult of Risk (August 2011)



Fact 1 – The European debt crisis has taken a turn for the worse.

There is a serious risk that even the half-baked bailout plan announced on 21 July 2011 cannot be implemented.



Fact 2 – Problems with banks have re-emerged.

Banks globally, especially European banks, are seen as increasingly vulnerable to European debt problems. The total exposure of the global banking system to Greece, Ireland, Portugal, Spain and Italy is over $2 trillion. French and Germany banks have very large exposures.



Fact 3 – Money markets are seizing up

Banks and financial institutions are finding it increasingly difficult to raise funds. Costs have risen sharply.



Fact 4 – The broader economic environment is deteriorating.

The global economic recovery is stalling. The risk of a recession or minimal growth is significant.

Is the market forecasting war? By Todd Harrison, 8/24/11

Is the market forecasting war?

Commentary: Fitting together the puzzled pieces in an unsure world

By Todd Harrison, Aug. 24, 2011



NEW YORK (MarketWatch) — The future is now; we must now decipher what it will be.



The stock market is a forward-looking discounting mechanism and throughout our slow-motion summer crash, Minyanville has diligently discussed what the market is trying to tell us. See: Where do we go from here?



When I awoke yesterday, after checking the overseas price action and scrolling through the headline news — but before my plain vanilla yoga — I checked my inbox to find a handful of folks proclaiming, “There it is!”



Stratfor, the well-respected global intelligence service, reported that an Israeli-Arab conflict is approaching.



CLICK THE TITLE LINK TO READ THE WHOLE ARTICLE

Japan: A bug in search of a windshield (John Mauldin)

Japanese downgrade may weigh on US stocks

Moody's rating service is downgrading Japan's debt.

Moody's doesn't like Japan's huge deficits and slow growth since the March earthquake.

By Charley Blaine on Tue, Aug 23, 2011



My comment....

John Mauldin has for several years described Japan's economy as a bug in search of a windshield, the result of a rapidly aging population together with an economy that has been economically depressed since its real estate bubble burst and its equities market crashed in 1990.

Boomer Retirement: Headwinds for U.S. Housing Market?

This graph from CalculatedRiskBlog (www.calculatedriskblog.com) shows existing home sales (left axis) and new home sales (right axis) through July, 2011.



After the housing bubble burst in 2005, new home sales fell much faster than existing home sales, giving rise to what CalculatedRiskBlog calls the distressing gap because of the flood of distressed sales, which has bouyed existing home sales, while depressing new home sales. Why? Because builders cannot build new homes as cheaply as foreclosed properties can be purchased.



The following post, titled Boomer Retirement: Headwinds for U.S. Housing Market? is also worth reading. With a little effort you can overlay the above chart with the ones in the following post. There is every indication that existing home sales will continue to fall, possibly fifty percent from this point. Why? Because as Baby Boomers are selling equities to fund their retirement, they will also be selling their homes in order to free home equity to find their retirement. They will be downsizing, moving into retirement homes, and living with their children. This will likely depress the U.S. housing market for at least the next decade. It's not a good time to be a real estate developer, builder, or agent.

Boomer Retirement: Headwinds for U.S. Equity Markets?

Boomer Retirement: Headwinds for U.S. Equity Markets?

By Zheng Liu and Mark M. Spiegel

FRBSF Economic Letter: Federal Reserve Bank of San Francisco

www.frbsf.org; August 22, 2011



Historical data indicate a strong relationship between the age distribution of the U.S. population and stock market performance. A key demographic trend is the aging of the baby boom generation. As they reach retirement age, they are likely to shift from buying stocks to selling their equity holdings.



My comment...

As Baby Boomers retire and cash in their 401k and IRA accounts, there will be downward pressure on stock prices; it is simply the law of supply and demand. Buying stocks or equity mutual funds now virtually guarantees sub-par returns over the next decade or longer. This demographic trend is shown in the above charts as the M/O ratio, where M is the middle-age-cohort (age 40-49) and O is the old-age-cohort (age 60-69). As the 77-million strong Baby Boom generation (born from 1946 to 1964) ages, the M/O ratio which peaked around 2002 will continue to fall, and as equities selling pressure increases and buying pressure decreases, the P/E ratio will fall in sync with the falling M/O ratio.

The Recession of 2011? by John Mauldin Aug. 19, 2011

The Recession of 2011?

By John Mauldin, August 19, 2011

www.investorsinsight.com



John Mauldin's Thoughts From The Frontline is a highly acclaimed blog that's primarily focused on private money management, financial services, and investments.



My comment...

The oncoming recession will make the last one look like a picnic. The focus now is on cutting government spending rather than more government stimulus, so a third Federal Reserve Quantitative Easing (QE3) is highly unlikely, and would be ineffective, anyway. Expect the stock market to lose 40% or more of its value. In a deflationary environment, cash is king.

Rob Arnott on bogus U.S. GDP numbers... 5/15/2011

U.S. GDP numbers are totally bogus because they fail to take into account how much of the economic expansion is government stimulus driven by federal deficit spending. Remove that deficit spending and the U.S. economy is essentially bottom-bouncing along the same GDP levels as back in 1998. Our economy is showing no signs of sustainable recovery.



Here are some quotes from the article. And, you can read the entire article HERE:



But what if the [GDP] number turns out be fake? That's the provocative question posed by renowned U.S. money manager Rob Arnott, who makes a convincing argument that what passes for growth in the U.S. and a bunch of other deficit-ridden economies is less than it seems.



... the chairman of California-based Research Affiliates is absolutely certain that next week's revised U.S. GDP number will be as bogus as a three-dollar bill. That's because it will not take into account how much of the American expansion stems from the government's deficit-spending binge.



Gross domestic product is used to measure a country's economic growth and standard of living. It measures neither, Mr. Arnott says flatly. GDP measures spending. It does not measure prosperity. Unfortunately, the finance community and global centres of power are wedded to a measure that bears little relation to reality.



The problem, he argues, is that the GDP figure fed to the public does not distinguish between consumption that is covered by current income and that which is financed by deficit spending. He likens it to a family with too many credit cards. The more credit they use, the higher the family GDP climbs. But that expansion is unsustainable. Once they are forced to slice up their cards, their GDP must plunge.



People would have a truer gauge of the economy's performance if the government provided what he calls structural GDP, which does not include debt-financed consumption. Currently, per capita GDP in the U.S. is not far off an all-time high. But excluding deficit spending, the real number is 10 per cent below the peak reached in 2007. Indeed, it has fallen back to levels not seen since 1998.



If structural GDP fails to grow as a consequence of our deficits, then deficit-spending has failed in its sole and singular purpose, he says. What we find is that this recession is horrific.



He would also isolate private-sector GDP by subtracting government spending (excluding transfers). Lo and behold, this measure is also back at its 1998 level. What his calculations show is an economy bottom bouncing and showing no signs of recovery. All we're doing is borrowing more and spending more. That's the only GDP growth we've got.



Ultimately, the addiction to debt-financed consumption has got to come down.



What should an investor make of all this?



As deficit-spending is reined in, either voluntarily or because the capital markets choke on new debt, that could have an effect on capital markets as quantitative easing winds down, Mr. Arnott says. It's hard to identify uncertainties that could drive markets massively higher, but relatively easy to identify those that could drive them massively lower.



Which means now is a wonderful time to have a very defensive investment posture.

Starbucks CEO to DC: You've been cut off

Starbucks CEO to DC: You've been cut off

By Charles Riley CNNMoney August 16, 2011

money.cnn.com



Starbucks CEO Howard Schultz is fed up with Washington. And he is doing something about it -- taking a stand against political contributions until lawmakers come up with a compromise deal on the debt ceiling.



READ THE ENTIRE ARTICLE HERE



My comment...

Well, I wouldn't exactly call this a grassroots movement - corporate CEOs not being in my definition of grassroots but it is certainly a step in the right direction. Good for you Howard Schultz !! Now, if we can get a few more Seattle-area-based CEOs (Amazon, Costco, Microsoft) to join Mr. Schultz, that would be great !!

Market in Death Cross Mode

Market in Death Cross Mode: Stay on the Sidelines Says Louise Yamada

finance.yahoo.com



Fast markets are emotional markets. In case you had any doubt on that, I would refer you to the comment section of Breakout stories from last Wednesday when bears ruled the roost, and the comments from yesterday when the dominant theme was the impossibility of "timing the market" (by, say, opining that stocks had hit a near-term bottom at 1,100).



READ THE ENTIRE ARTICLE HERE



My comment...

This is good stuff, especially if you're in the stock market and thinking about getting out, or vice versa. I really like her quote: There are only two losses that you take. Loss of capital and loss of opportunity. I'd rather be out of the market wishing we were in, than in the market wishing we were out.

George Friedman on a Crisis of Political Economy

George Friedman on a Crisis of Political Economy

www.stratfor.com

April 12, 2011



STRATFOR CEO George Friedman says the current economic problems in the United States, Europe and elsewhere are the result of systemic failure in two major communities: the financial and political elite.



My comment...

First the financial system and its elite lost credibility, then the political system gridlocked and the political elite lost credibility. Now, in all major countries of the world - U.S., China, E.U. - we have a general systemic problem born of the gross incompetence (and possibly corruption) of the financial and political elites.

How the Fed Got Itself Boxed In - by Barry Ritholtz

How the Fed Got Itself Boxed In - The Big Picture

By Barry Ritholtz - August 10th, 2011, 7:20AM

www.ritholtz.com



The Federal Reserve (unlike most other central banks) has a dual mandate: Maintain full employment and keep inflation at bay. History informs us that these two factors are often opposed to each other: Growth begets price rises, and excessive price elevation retards growth. Hence, for the Fed to do its job well, they have a neat balancing trick to perform. We can trace the origin of the current Fed situation to a drift away from those two mandates. This occurred sometime in the 1990s, when then Federal Open Market Committee (FOMC) chair Alan Greenspan somehow began focusing on markets, asset pricing and a nonsensical catchall investor confidence.



My comment...

Barry Ritholtz, who wrote the excellent book Bailout Nation, gives us a short, clear, succinct explanation of what happened after Alan Greenspan's Federal Reserve decided that supporting risky asset prices to instill investor confidence became part of the Fed's mandate in the mid-1990s.

Global Economic Downturn: A Crisis of Political Economy

Global Economic Downturn: A Crisis of Political Economy

By GEORGE FRIEDMAN, STRATFOR, August 9, 2011

www.stratfor.com



The current crisis must be understood as a global event with one overriding theme: the relationship between the political order and economic life.



My comment...

George Friedman at STRATFOR has written an easy-to-understand explanation of how our current crisis developed and where it might be going...

A Second Recession... Worse Than the First ?

A Second Recession in the U.S. Could Be Much Worse Than the First

By CATHERINE RAMPELL, NY TIMES

Published: August 7, 2011

www.nytimes.com



Policy makers exhausted their resources in the last recession and, in a weaker economy, would have few options the next time.



If the economy falls back into recession, as many economists are now warning, the bloodletting could be a lot more painful than the last time around.



Given the tumult of the Great Recession, this may be hard to believe. But the economy is much weaker than it was at the outset of the last recession in December 2007, with most major measures of economic health — including jobs, incomes, output and industrial production — worse today than they were back then. And growth has been so weak that almost no ground has been recouped, even though a recovery technically started in June 2009.



It would be disastrous if we entered into a recession at this stage, given that we haven’t yet made up for the last recession, said Conrad DeQuadros, senior economist at RDQ Economics.

Recession Warning, Dr. John Hussman 8/08/3022

Recession Warning, and the Proper Policy Response

Weekly Market Comment by Dr. John Hussman

Hussman Funds - August 8, 2011

www.hussmanfunds.com



My comment...

Dr. John Hussman's letter pulls no punches... through joblessness, unresolved housing strains & sovereign debt crises, policy makers have repeatedly opted for fiscal band-aids and monetary distortions instead of addressing the core problems: carelessly feeding asset bubbles and refusing to restructure bad debt.

Lessons For US From European Jobs Model

The labour market within Germany fared far better than that in the US through the recent recession and economic turmoil mainly in part due to Germany’s pre recession weakness within this area a recent report confirms. The study found that the EuroZone’s widely implemented practice of reducing working hours through tougher times as opposed to making employees redundant contributed positively and perhaps suggesting the US may well benefit from the practice.

The report also thrust at the heart of the incessant trans-Atlantic debate over who has the best labour model. While the US model allows companies to hire labour more easily than mainland Europe. While the economy expands this is a reliable model however proves exceptionally painful when events turn sour as per the 2009 recession. During the recent crisis the German economy contracted more than America’s but employment in Germany fell badly by around 0.5% compare this to US employment which sank by 5.6%, the largest decline within decades. This gap still shows today irrespective that both economies have grown at a similar pace since the US recession (supposedly) ended in 2009, unemployment in Germany stood at 7.9% in February which is a full 1% behind the US.

In the mid 2000s aided by a surging economy the unemployment rate fell to below 5% in 2006. It was double this in Europe. This portrayed the flexible US model as the better one compounded by Europe’s strict firing rules enforcing reluctance to hire. Post crisis unemployment soared in the US. European politicians sang the praises of their model i.e. fewer hours and les pay to check unemployment, but in Germany’s case it is argued that these facts aren’t the only reasons for better jobs performance.

Most explainations of the stronger jobs performance within Germany was argued to as a consequence of employers’ non confidence in the sustainability of the boom and/or it’s longevity and a reluctance to hire more. The study confirmed that 35% of missing employment decline within Germany was own to this. What also contributed was hours in lieu or flexi time that being working unpaid overtime during rising demand and when demand fell hours were cut by an equal amount of unchanged pay.

Other countries in Europe adopt similar practices to cope with crisis. France has ‘chomage technique’ (technical unemployment) which allowed ski making equipment firm Rossignol to bring a halt to production in February through March 2009 to wind down unsold inventory items. Under a programme also used within Italy workers at Fiat can receive upwards to 80% of pay even if they don’t work for several months, with help from government. Another paper presented also highlights the danger of wide spread long-term American unemployment and confirms how the country can benefit form looking at European ideas.

It was also found that the longer someone remains unemployed the less time they take to search for employment hence it becomes harder to find a new job. The report by Alan Krueger (Princeton economist) and Andreas Mueller (Stockholm University economist) tracked over 6,000 New Jersey workers while they searched for employment within the depths of the recession, Kreuger was a former assistant Treasury secretary for economic policy within the Obama administration and showed that job searching becomes more depressing throughout the course of unemployment.

Most economic models report that the duration spent looking for unemployment should remain constant and/or rise the longer unemployment continues partly in respect of people exhausting jobless benefits. However research finds the opposite as workers who cut the time spent job searching by around a third during the initial 3 month period. The economists put forward most workers may well run out of suitable jobs to go for or get discouraged the longer they seek employment. Continued unemployment brings with it the risk that many out of work may well lose relevant skills while also becomeing discouraged from searching for employment which, in turn, raises the hysteresis along with permanently higher unemployment.

A Bridging Loan Calculator To Assist with Estate Tax Planning

A loss in the family might well leave immediate relatives and next of kin in possession of a significant account for inheritance tax as a result of a large estate. The inheritance tax demand can be normally resolved by sale of the property. However if grant of probate should not be available within a reasonable time limit then sale of the deceased property can not proceed. As probate renders the executor the right to sell.

A bridging loancan be utilised in many probate situations with the aforementioned situation in mind. In order to settle the inheritance tax onus of an estate a probate loan, as an alternative term to a bridging loan, can be used. Following this the estate property can then be put up for sale. A bridging loan may also appease the added stress of perhaps paying the estate tax account in instalments.

By securing bridging loan facilities on a different or existing premises the tax bill can be settled. The retained, or rolled up interest as it is often called, may be used to offset any monthly premiums. Once the residence is realised the bridging loan finance can then be concluded. All estates and legacies that include assets over £325k have a likely tax liability. The Chancellor of The Excheqeur will maintain the estate tax limit (the level at which you’ll need to pay inheritance tax) at £325k until 2014. The estate tax payable over the nil rate band is currently 40 percent.

The laws that govern and dictate estate tax (Inheritance Tax Act 1984) are very perplexing and may well appear daunting to the layman, the executor's are required to settle estate tax due to HMRC (The Inland Revenue) within six months after date of death. Frequently for most individuals, the most important and essential aspects of Inheritance Tax concern mitigating the tax due to a minimum and to ensure it is disclosed to the Inland Revenue. Further to settling any estate tax due and payable in the prescribed time constraints.

Besides the constraints exacted on determining inheritance tax and whether or not there is a need for bridging loan funding to fulfil the estate's demands. What can also compound the issue is how complicated the estate is. This can involve deposits with the bank or building society as well as any current accounts, the deceased residential estate coupled with contents. Any stocks held along with privately operated businesses (irrespective of their trading status), the shares held and whether any tax relief is claimable. Also to consider is any disbursements in the seven years that preceded death such as care and maintenance of the deceased. Any gifts and whether any land owned was agricultural or business or no more than private.

Unequivocal requests for modest amounts of itemised chattels and money may well be dealt with immediately on grant of probate. In relation to distribution and disposal of the estate in it's entirety, the executor is not barred. This also takes in inclusion of residue. However it is encouraged that any distribution of the aforesaid is left until such time as all issues and inheritancetax with HMRC have been discharged.