Final Word from Thursday, October 18, 2007

Alan Greenspan brought a slice of the "age of turbulence" to Prague yesterday by telling the USA/EU Days conference by satellite that the end of the subprime crisis is unforeseeable. A lack of confidence on the real-estate market will continue for a long time, he said. Small investors sizing up the emergent Czech real-estate funds, such as Česká spořitelna's Reico fund, should see the writing on the wall. The deck seems to be loaded against them from the start, because the funds are having to buy high as the early "homesteaders" who bought low are cashing out. Plus, Reico's investors pay 1.9-3.8% up front and an early-exit penalty of 3% until Feb. 2010. CEO Gernot Mittendorfer of ČS isn't worried. Property prices aren't excessive, he told Ekonom. Reico's investors won't make a huge profit, he said, but neither will they risk a huge loss. Unless, of course, more Czechs start listening to Greenspan.[Czech Republic banking]


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