The ISEQ Thread Part II - Trading below 2000

Iseq in cardiac arrest this morning



Pity you didn't sell them Aib Shares today johnfás. Isn't some investigation going on about purchases of AIB or other bank shares last week??

Should have kept those damn AIB shares . When I bought last week they were 42c or something then sold around 80c.

Thats how people get caught jf. You did the right thing.

IMO there is more risk than reason in buying just yet.

Strange to listen to people's advise; it is amazing how it is coloured by the nationality or country of residency of the person giving the advice. Everyone thinks Sterling is dead, Americans think the Euro weak, Europeans see the dollar as a basket case. From somewhere like Argentina they all look damn good and the Japanese feel smug.

Then there is the lads who believe in gold and silver with a handy small gold bar in their pocket, as if it was the sort of thing that just happened to linger there. To them all paper money is doomed so buy assets good advice when inflation kicks in, but what they define as assets unfortunately tends to be limited. Oh and you have to take physical possession of gold. This can be a problem all of its own!

In the first half of this year we will see a series of bad results but by September we should be through it. (Asset values should have been marked down 1-2 years ago)

By the Autumn we should start to see the net effect of the activity of various governments and the new world order that may emerge for the next decade. IMO virtually all western economies are going to print so guessing which one is strong or weak seems pointless, just avoid the lot. However as most will be 'easing' it is hard to see where this will go. Eastern countries want weak currencies and export lead growth but if the West prints then either they have to allow their currencies to rise in value or they have to literally accept paper in exchange for goods. Common sense suggests this would be insane, BUT!

Signs of real recovery will not happen until 2010. Stock markets usually rise about 6 months ahead of a recovery. So there should/may be a floor late this year early 2010. It could be we have floored now and will bounce along the bottom all year, there may even be a small rise? My guess is that there will still be falls and in any case why buy when there is a high possibility of companies going bankrupt. The cull will have happened by this time next year. Some wounds take time to kill.

Squire wrote:

Some wounds take time to kill.

Good title for a book that.
If you work it back, along any number of possible lines, I can see a best seller emerging.

It is indeed.

Just started reading Michael Hudson. He is less sanguine than you Squire and portrays it like a plummeting lift with a broken cable "going all the way to the bottom". Bank liabilities unknown, credit crisis, manufacturing and services job destruction, everyone afraid to spend and now protectionism - "buy US - burn Chinese" from Obama and Geigner (sp.?). Trade war. Best investments short term - arms. Long term best investment ? changing the way we run things, and who we run them for, bottom to top.

Reading another commentator who thinks the bailouts will keep it fuelled with a further few years - maybe ten-fifteen - of inflation driven activity before finally collapsing irretrievably. Peak oil is an issue for him.

I can't get my head around how China and the US could decouple. The deal at the moment is that transactions are done in dollars, but the Chinese currency is valued low. If Chinese currency/prices are driven up, would that not lead to inflation in the rest of the world, as they make half of everything at this stage? US debts to China are presumably in dollars?

Tonys

I promise it will be shorter than War and Peace.


Cactus

Some of them go over the top with their rhetoric. I reckon many have never had to experience any real difficulty in life and don't have a solid footing or proper perspective when threatened. If all crashes I will still own Squirehall, etc and I will have more free time. There is lots to do.

I will never invest in the arms industry. That really is immoral earnings. I despise those involved in that and related.

I tend to agree with the 10-15 year scenario. The real problems are a decade out. We need energy and food self sufficiency or surplus and enough copper, lead and other essential commodities.

China needs to transfer production towards domestic needs, but that is very difficult to do as the wealth generated has not really dispersed across the population. They have the same problem in India. In my childhood I used to see people cutting grass with scissors. This was for two reasons, firstly they were cheaper than a lawnmower and secondly to create a job! If you went into a small town beyond the railway station there was nowhere you would want to eat. There was no service sector because there was inadequate money in circulation. It takes time and opportunity to create wealth generation across the country. Look at the problems of over concentration of economic activity in Ireland and imagine the problem in China or India. It is as quick to fly to London as it is to get to some of the provincial towns and cities.

Western consumption cannot continue to be the motor for the global economy, but it will take time to readjust and in reality the 'easement' means that the Chinese etc will be forced to take a loss on the western assets they hold. They can't go to a gold based system as that would not benifit them either. They are buying assets to aid future production. They are investing in mines in Chile, Australia etc.

If the value of the people's currency goes up I don't think it will lead to noticeable inflation elsewhere. We will buy less, and only the essential, so it will result in a reduction of consumption. Also you will find that production moves out of China to say Vietnam.

The whole set up is a mess as it is based on the fallacies that there is a global free market and that this is of necessity good for all.

What is sad in all this is that we equate wealth with consumption of goods. That is a very superficial view of well being.

Indeed. US protectionism might force China to become a more self-sufficient economy. In the long term, a different kind of globalism, based on location of resources, makes more sense than globalism chasing the cheapest labour.

As soon as the cold winds begin to blow, most people want the same basics, a job, a home, wamth and something to eat for themselves and their children. Then there is health and education. Other priorities become memories pretty quickly. The free market is demonstrably pretty poor even in the good times at providing that to everyone, so I would go with the Icelandic Green-Lefts in favouring nationalisation of the banks and main commodities.

State investment in renewables is the best way of avoiding arms investment, in all sorts of ways.

As a side note - I remember a time that seems about a week ago when the EU would have laughed in your face if you suggested putting state money into an ailing industry like the French or British car industry. When the bigger States are in trouble the rule book is out of the door before you can blink.

Cactus

The new pro subsidy (and previous anti subsidy) regimes simply indicates that politics is about serving the needs of vested interests. All in the pursuit of false Gods!

Squire wrote:

Cactus

The new pro subsidy (and previous anti subsidy) regimes simply indicates that politics is about serving the needs of vested interests. All in the pursuit of false Gods!

Some people call it the "kick away the ladder" principle

cactus flower wrote:

State investment in renewables is the best way of avoiding arms investment, in all sorts of ways.

There's no doubt that money spent on wind turbines is money not spent on warships. There is also the added benefit that it is quite difficult and extremely inefficient to kill people with wind turbines, at least in any sort of quantity.

cactus flower wrote:

Some people call it the "kick away the ladder" principle

That is a fair description, vested interests never like competition and contrary to what we are meant to believe politicians always oblige. If it were otherwise the bail outs and similar would have a very different hue.

The problem right now is confidence, transparency and all that, and getting the trillions of dollars of private money back into doing something useful. The Banks are a side show.

Banks are going UP something mental today.

The ISEQ is up massively too - it's getting nice and ripe.

Could be something to do with the talks of a 'Bad Bank' system in the U.S. where all the toxic crap will be dumped. Could happen here too then the main banks here could offload any toxic non-perfoming rot they have and then free up some cashflow for investment. The taxpayer will pay for the toxic crap though.

Or are the bears taking a short break from the battle?

The days are lengthening, snow drops are out and Spring is coming. The world went green today.

Twas a lovely day indeedy doo Squire. Are you surprised there wasn't a hefty sell-off in the shares today?

Crocuses are going up here too

Audi

I have long ago given up on trying to assign reason to the markets. Head wildebeest decides to trot and the rest follow. Markets don't think they react on instinct.

In Ireland the financials have gone as low as they were likely to go, but the problem with investment there is not further decline but Nationalisation or bankruptcy. I would imagine the bet is that the government will bail out no matter what, but that assumes very deep pockets.

The American Banks with their Off Balance Sheet vehicles have been dumping toxic for quite a while. I think fraud would be a suitable description of that activity and they should be brought to account. So now the greatest fraud of all, off load to the government, or rather the tax payer.

From Bloomberg,

FDIC Chairman Sheila Bair is pushing to run the operation, which would buy the toxic assets clogging banks’ balance sheets, one of the people said. Bair is arguing that her agency has expertise and could help finance the effort by issuing bonds guaranteed by the FDIC, a second person said. President Barack Obama’s team may announce the outlines of its financial-rescue plan as early as next week, an administration official said.


Now for me that does not instil confidence. This is counter intuitive. I am probably stupid, but I think we should use our limited money and have made it available through a Bank that was sound or had been sanitised. That way you know the extent of your involvement and the money and multiple is available. That does not mean picking up the liabilities of existing Banks. Only in the world of looking after existing interests does this course make sense.

On fundamental considerations of investing why buy risk now when there can be increased clarity in December. The recovery is at least a year away so why buy shares now? I think there is still a bumpy road ahead.

The real problem is lack of clarity. People with money cannot make sensible investment decisions. Until that investment cycle starts to move we are in recession no matter what governments and banks do. Why borrow to invest if there is no clarity as to the likelihood of return and no certain future market? Obviously this will change as we see how government intervention actually works.

If Government was concerned about the "small people" losing their homes and businesses they would be putting these bail out moneys through their bank accounts and getting the money into circulation that way. Not a chance. They will take it out of their accounts and into the hands of bankers and big borrowers.

Putin is speaking at Davos at the moment and has bought into the idea that it was lack of regulation that caused this: hmm. But he did say that Wall Street has lost an equivalent amount in the last year to 25 years of profit. This is effectively a financial nuclear bomb going off, not a bubble bursting. The bailouts are trying to shovel good after bad to secure the gigantic shift of wealth into the hands of the few, that was one of the reasons for the crash in the first place.

Cactus

I agree, if it was sub prime we could easily have paid the mortgages off many times over.

What is happening now is a disgrace, whither your politics is of the left, centre or right. It is fraud. It is taking money out of your pocket and using it to pay someone else's liabilities. It is you taking a loss and giving someone money to run their business. This is wrong.

Squire wrote:

Cactus

I agree, if it was sub prime we could easily have paid the mortgages off many times over.

What is happening now is a disgrace, whither your politics is of the left, centre or right. It is fraud. It is taking money out of your pocket and using it to pay someone else's liabilities. It is you taking a loss and giving someone money to run their business. This is wrong.

Agreed. But, how do they fix it?? the problem is, the "modern" financial system is so complex that let one bank go to the wall has incredible unforeseen consequence risk. The approach I suppose that they are taking is to put all the grunge in one place so they can spend some time going through it and figuring out what they have actually got.

I am afraid one of the reasons I think Ireland is unfairly hammered in all this is the lack of complexity. We didn't slice and dice our developers debts to quite the same extent, nor are they sold all around the world such that foreigners have most of our liabilities. We have Irish developers with simple bad debts and a collapsing property bubble. On the other hand, this simplicity may stand to us in the future, when the Government has repossessed assets that may still appreciate in value

I can predict confidently now that, just as they don't know what prompted the Weds evening selling of auto stocks that sparked the 1929 crash, they will still in 80 years time, be staring at some of those mortgage bonds in confusion.

We shall see...

Expat

Fraud is fraud and it is no way to fix anything. The liability remains only it has been transferred onto people who are not responsible for accruing it in the first place. All you needed is one sound bank, if you feel inclined bunk money in there and when leveraged up you have liquidity and confidence.

With X Nunber of banks with unknown liabilities (for God sake Expat these Banks can't even write their own balance sheet) run by people of dubious worth what do you end up with? The potential to bankrupt the country, confusion, unimaginable liabilities, and reprieve for those responsible. They keep using the term liquidity, but basically the Banks are bust and we are pouring money in to try to get them above the zero line. To me is a bad and inefficient use of limited resources.

Anyway yesterday was as green as a day in spring, today it has opened as red as a socialists flag.

Yeh, fraud is fraud. Do you not think some of the sub prime securities might have been just a teenchy weenchy bit fraudulent too?? Not to mention the Bernie Madoff-with-other people's-money types?? Don't forget, we haven't LEGALLY managed to decide if Seanie's loans were actually technically illegal yet (although the corporate prosecutors office is on the job and the Dail seems behind that all the way). So far, as far as I'm aware, Madoff is the only one accused (rightly) of criminality. There's buckets of immorality everywhere on this. That's why we have to sort out, slowly and carefully, the detail of what went wrong where and make sure it can't happen again. Any deliberate fraud (as opposed to being stupidly swept along with the boom's gambling spree) needs jail time

Name me an international bank that CAN subtantively prove it can run its balance sheets at the moment. There's a challenge for everyone

I have argued before that I'd see nationalisation (and maybe creation of a good bank/bad bank scenario, followed by orderly winding up of the bad bank) as an option to restore confidence. That is what I was arguing above. Sounds like you agree with that?? I would say keep 2 banks not one (or the charges will go thru the roof)

At least then we'd all know for sure what is going on.

Is anyone aware of any bank job losses other than the RBS subsidiaries here?? Watching numbers employed and attempts at consolidation might actually be rather a good guide to the underlying health of the institution. Or, more pertinently, lack of health....

The word kleptocracy seems to be becoming current both for governments and financial hierarchies.

Expat

If you want to clean it up you need, if necessary, the existing management out and a good receiver in. Soon get to the bottom of it!

You only need one nationalised bank for your scenario to work. There will be competition from Building Societies etc and other Banks will move in if there is a vacuum. The assets and liabilities of the others can be transferred through receivership if that is desired r if the receiver considers it the best option. They may even be taken over by others in which case the government does not need to spent one cent. Or who knows they may survive on their own! I would be a lot more brutal than you and ensure that the bond and share holders took the full hit first.

Don't forget that a business gained through receivership does not have the liabilities of the one entering receivership. A bit of sharp practice but needed in the current situation.