A number of contributors here are familiar with various types of financial models. The last year has exposed critical weaknesses in some of these. We’ve witnessed huge banking names disappear at rates we couldn’t imagine. Why? Because they trusted models that had fundamental flaws. It wasn’t that the calculations had errors. It was the assumptions were wrong.
The idea of this thread is to identify dangerous assumptions which could make a purchase extremely risky. I’d like to see opinions on how you might factor these in to the price you’re willing to pay. Or, are such possible events so calamitous, that it doesn’t make sense to buy until such an eventuality occurs and works though the system.
I see one such risk as Ireland’s Corporate Tax Rate. How long can this survive? If large economies go into recession, will they react? Do you think Gordan Brown likes waving goodbye to corporate taxes? The next US president will have a lot of work to do on their economy.
Should Ireland lose this advantage, what will happen? What would GDP look like? What would the wider tax hit be? Even with this advantage in place, we are hemorrhaging multinational jobs. This says much about our current competitiveness.
In turn, what would happen house prices? What sort of probability do you assign to this event? Is Irish property too illiquid to invest in? Or, what sort of discount should there be?
(let’s keep it to economic factors. Half a Canary Island flopping into the sea causing a tsunami is outside the scope)