The ISEQ Thread Part I - March 2008 - October 2008 **LOCKED**

Auditor #9 wrote:

Squire wrote:

rockyracoon wrote:

While a lower price pb of oil is nice in the short term, if you believe that peak oil has been reached, a too cheap price may only serve to delay the investment and implementation of alternative fuel sources.

We need to keep fixed on the need for medium term energy self sufficiency. It is more than just an economic consideration. IMO it should be a priority.

Is there the fear that the low oil price will remove the stimulus for developing renewables?

We could answer your question with simply supply and demand analysis which would state that the lower the price the greater the demand, yadda, yadda, yo. Personally, I think that alterntive energy sources will continue to be pursued, and indeed are quietly being pursued by some govts like China, for the forseeable future. The problem is how quickly and urgently will alternative fuel sources come on stream if oil were to fall, say, to $40 pb for a sustained period. While this price fall and price levels would have seemed inconceivable only 2 or 3 months ago, the collapse of Wall Street and today's take over of AIG by the Fed has dramatically changed the economic landscape.

The amount of debt destruction and deleveraging is just beginning in earnest now. The Fed and Treasury may be able to hide the mess until the election is over to give the Republicans an even chance to retake the White House but the piper is going to paid on these financial instutional collapses. For the very first time all the junk (MBS, CDOs, SIVs etc.) are going to be valued as Lehman Bros is unwound. We are going to get a glimpse at the "worth" of these pieces of paper. If other banks (or any financial intermediary like insureres) have to mark their junk to market, we'd see the greatest reduction of banking assets values in the history of the world. The contagion is endemic to the entire US financial system and sits on other banks balances sheets outside the US.

My concern for oil prices is predicated on the belief, that while we do not know if peak oil production has been reached or will be reached shortly, we do know that the peak of discovery of new sources of oil was reached in the 1960's. Since about 1964, we have discovered an ever decreasing amount of new oil resources. This is a fact and can be verified through numerous on-line sites - www.theoildrum.com/ and www.chrismartenson.com/ which while not definitive provide some insight. You could also read up on the oil market through the IEA (intl energy agency). While they are cheerleaders for the oil producers, if you read between the lines, you can find some enlightening information. For example, while they acknowledge that the US need not improve its refining capacity (no new refineries have been built since the 70's), their cry for opec and especially Saudi to increase refining capacity is enlightening in their reponse of OPEC not wanting to do so. Why would OPEC spend billions (est almost a trillion dollars) on new capacity when their proven reserves are shrinking?

Now what govt or leadership in the world has come out and explicitly stated the conditions in the energy markets? Hmmn, none is my answer, but I would be happy to hear of other government responses by more knowledgeable posters. Rather, many governments who are currently facing recession will be jumping for joy at the quick decline in oil prices. The longer unsustainably low oil prices (anything under a $100 a barrel in my estimation based on underlying inflation figures) continue we will only delay the inevitable and fundamental shift in energy dynamics. Instead of focusing on a sustained program of energy diversification, consumption reduction and changed attitudes will we continue to see a higgledly-piggledly governmental approach. One thing we can be sure about is that if China and India continue to their exponential demand for energy resources into the future a bit of cotton wool stuck between wall cavities will have been seen to be an entirely feeble response. A bit like putting a sticking plaster on an amputees wound.

[On a sidebar, I'm wondering if the US govt, through the Fed, has now become the largest Socialist govt measured by asset value that has ever existed?]

rockyracoon wrote:

[On a sidebar, I'm wondering if the US govt, through the Fed, has now become the largest Socialist govt measured by asset value that has ever existed?]

Funny a similar thought has been rattling around in my own head. The irony of it. Dogma is a dangerous thing, tends to make fools out of us all.

There are a number of issues relating to oil and energy production, energy security and one that I think we need to consider is about the empowerment of small scale production. What type of energy industry should we be aiming to achieve?

ISEQ has at last gone through the 4000 mark in a meaningful way and it will make people a little more careful about that particular line in the sand in future assuming we get some recovery this afternoon.

rockyracoon wrote:

cactus flower wrote:

My question is did this artificial bubble happen because of a slip up in the morality stakes, or were there fundamental reasons why sound business was replaced by pie in the sky ? The Islamic banks are said to be doing well, and have a theoretically zero interest system - in practice as far as I understand when they advance money for a project they take some form of a share in it. Perhaps that makes them examine the viability of the arrangement more carefully.

Also, I've read here that some workers co-operatives in Spain proved more able to deal with recessions and slumps than conventional firms.

It seems to me that if the financial crash puts masses of people out of work, this should not be accepted, and that wherever possible people should take over the workplace and continue working/production. But making this work with no credit and a shrinking market is easier said than done.

Bubbles seem to take on a life of their own and are driven by primarily by the basest of human emotion, namely greed, allied with a large dose of stupidty. The external drivers may change from bubble to bubble but the dynamics (or internal workings) remain constant. Take Ireland, for example. Our housing bubble was made possible through but not exclusively by:

1. cheap money (ie cheap loans)
2. cultural belief that property is a safe have of wealth and only ever goes up in price. This belief is held despite concrete evidence that home prices over the past 100 years only marginally outperforms inflation. More often than not, you would have received surperior returns in alternative investments.
3. banks constant lowering of lending criteria to pump ever more money into the bubble
4. almost total relaxation of central banking regulatory examination of lending criteria
5. a government almost wholely dependent on construction revenues (taxes) for surplus spending projects and whose whole existence was predicated upon economic managerial expertise to win elections.

Boiled down, you need a commodity, surplus cash sources and the ability to ignore historical risk/reward criteria. For a really good bubble, you need a central theme (unlimited growth potential with no down side risks) which requires a communication channel (the media outlets) and it helps vastly if the authorities at least ignore the bubbles creation and implementation or are ignorant of its ramifications. If the authorities actually become involved in sustaining the bubble, all the better.

Those who remember that the risk/reward ratio will always revert back to a sustainable mean will win in the bubble game. The vast majority loose in the long run, and not just those who bought at the top of the bubble. It can take years or possibly longer for the corrosive effects of inflation, capital depletion and cost base dislocation to return to norms. Some people never recover.

I would consider anything less than a 20% reduction in property prices to be considered a soft landing. However, this will leave us with some of the highest property prices relative to economic growth potential in the world. In any case, for those who can afford a mortgage and for those who will never be able to afford mortgages at high property price levels their standards of living will decline. Money borrowed today detracts from savings and the ability to invest. Contrary to popular belief, paying rent is not "dead money". It achieves the same things as paying a mortage, which afterall is nothing but 30 or 4o years of renting the property off the bank but with the added bonus of owning the property at the end of the mortgage period. If renters choose to rent because they can get a higher rate of return on excess capital than would accrue to the mortgage holder's final property value upon receipt of the deed, then renters would be better off in the long run. However, Imo many future renters will fall into the weekly wage/debt spiral in the coming years and won't have the excess capital to invest.

I'm coming back to this post rockyracoon as it says a lot about this crisis. It seems to me that the property business is a red-herring. Before that it was the dot.com bubble and before that it was tulips. It is finance capital itself that breeds bubbles, and in my view boom and crash is inherent to the whole system.
Finance capital is a pyramid scheme - in order to exist it has to find something to invest in that will bring a return. If there is nothing sound to invest in, and by sound I mean a development in manufacturing/production that creates real additional use value, it will pour by default into any area of the market in which any kind of return can be hoped for and crank that sector up. Even in the last months we saw the petrol bubble as confidence dropped in other sectors and was switched to commodities.

The problem is that overall rates of profit in manufacturing always decline as costs increase and competition drives prices down, in a finite market. This inevitably drives finance capital periodically into speculative nonsensical areas of investment to get a return. Any bubble endlessly inflated will burst.

There is going to be very little credit from now on. People will be asked to pay up front. Any business depending on a business overdraft will not last long. That will mean a big contraction of the economy and very substantial unemployment.

The only other thing I know of that brings about a renewal of investment after a crash of this kind is recovery after war has wiped out substantial productive resources and people. If we are to avoid this I think that fundamental change of the way production and investment take place needs to take place. Until proven to have worked that one out, banks taken over into public ownership and conservatorship should imo be kept there.

One other stimulus to the Irish property bubble that we didn't mention was the cut in taxation. This was disastrous imo as it did not lead to investment, only to expenditure and eventually inflation. Increased or steady tax levels in the late 1990s and 2000s would have helped to hold back the price increases that have scuppered our competitivity.

Hiya, Cactus. I agree with your analysis. The conclusions and insight you've drawn seem to be almost inescapeably logical at this moment in time. I'm trying to form alternate viewpoints and conclusions to the general hypotheses but am failing miserably. Maybe as things settle down, we'll see things a wee bit differently. Or maybe the analysis and conclusions can't be mitigated, which is a bit scary.

I can't help feeling that we'll get another bounce off the debt junket, especially in Ireland, but I think everyone at this moment sees the need to create a long-term and sustainable economic plan that takes into account escalating resource cost or scarcity. At some point, somewhere, some government is going to bite the bullet and come clean about future prospects but I fear it will take years if not decades. I can't see our own government leading the way forward.

I noted with interest that a new national pay deal has been hammered out. I find it quite strange that wage earners are constrained by Soviet-era agreements while the profit making entities are left completely unrestained and in fact given a boost by the wage agreement. The notion of a trickle-down wealth framework is alive and kicking in Ireland. Collective agreements which only apply constraint to one side of the economic equation must be inherently destabalising to the whole system imo. [disclaimer: This last paragraph is only my own musing and I'm aware doesn't reflect on your previous comments or reflect your opinions in any form or manner, nor should it be construed to do so by others .]

Its a conundrum. At the moment we're paid more than other EU populations - at least in the middle and upper income brackets. Also, our employers may well be close to bankrupt. On the other hand, where our bosses are in profit, more money again is concentrating into fewer hands which is not healthy in any way.
My ad hoc preference would be for a 12 month wage freeze for everyone except people on low incomes and benefits. In the medium-long term though, this whole system is crazy and totally unjustifiable in terms of distribution of wealth: what's to be done?

Finished the day around 3850.

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Way to go Ping Ping

javascript:NVF_toggleBox('429496729511', 'https://www.youtube.com/v/0dJCfzyxTEY','u-AFQjCNFF97387RFnx2VK65eRwDPiWKyrAA:v-1-1_1246951597', 'n');

Yerra Dan, Wat's de video link? or wat's it aboot?

The IFIN (Irish Financial Index) down to 4294.5 - a 10.95% drop today. That's after an 8-9% drop yesterday. I'm pretty sure the index was over 6000+ not that long ago. Dat's not a crash, dat's a bleedin' a nuclear meltdown of mad max destructive magnitude. There must be corpses littering the Irish stock market floor.

Didn't Quinn take on some 20% of Anglo's shares recently after losing a fortune on a CFD long sided punt? It can't be fun watching 100's of millions being wiped off your wealth within one year.

This it on youtube youngdan? Or did you get it on google?




1. Click the embed code to highlight
2. Right-click to copy
3. Paste the embed code in your post

I see my creameries are doing well...

rockyracoon wrote:

Yerra Dan, Wat's de video link? or wat's it aboot?

The IFIN (Irish Financial Index) down to 4294.5 - a 10.95% drop today. That's after an 8-9% drop yesterday. I'm pretty sure the index was over 6000+ not that long ago. Dat's not a crash, dat's a bleedin' a nuclear meltdown of mad max destructive magnitude. There must be corpses littering the Irish stock market floor.

Didn't Quinn take on some 20% of Anglo's shares recently after losing a fortune on a CFD long sided punt? It can't be fun watching 100's of millions being wiped off your wealth within one year.

I saw earlier that the market capital of AIG went from $190 billion to $10 billion very rapidly too. It's a €2 shop in the irish stock market and others now though isn't it? If you've balls you'll be buying ... there's no way it could fall down to 1000 now is there?

I've a bit of money in a current account I could throw into the mix. Not prepared to though.

Thank you Audi. Now I am sure everyone realised the very important point I was making here. The tall beautifull lady represented the ISEQ when it was at it's height. Poor Ping Ping represents the market as it continues to shrink. A less appealing sight indeed. Now as Ping Ping stands there and he looks straight up it represents the longing of those who did not sell when they were closer to Heaven. As he(and we) gaze up we all long for what is above our head but which we can no longer reach.

youngdan wrote:

Thank you Audi. Now I am sure everyone realised the very important point I was making here. The tall beautifull lady represented the ISEQ when it was at it's height. Poor Ping Ping represents the market as it continues to shrink. A less appealing sight indeed. Now as Ping Ping stands there and he looks straight up it represents the longing of those who did not sell when they were closer to Heaven. As he(and we) gaze up we all long for what is above our head but which we can no longer reach.

Thank you for the explanation youngdan. We are a bit slow sometimes.

Cactus. I only though of this happy metaphor later. Your first thoughts on my post were correct

youngdan wrote:

Cactus. I only though of this happy metaphor later. Your first thoughts on my post were correct

The workings of the subconcious mind are a thing of wonder.

We're up 6.66 points! It has been a long time coming but I think we're onto something big here.... number of the beast and all that - perhaps Cowen has sold our souls.

johnfás wrote:

We're up 6 points! It has been a long time coming but I think we're onto something big here....

I got an extra tenner but I'm waiting. I reckon a could become a majority shareholder in one of the Irish banks if things continue as they are.

From the state of the ISEQ (up from 3700 to 3950) some of that 247 billion has filtered through...

They'll be selling BOI shares in the €2EuroShop in town next. You might get two for that price.

Oil is going up too and there's no money around to buy it ... it's the feckin end lads, the end.

cactus flower wrote:

From the state of the ISEQ (up from 3700 to 3950) some of that 247 billion has filtered through...

It is heading back down. I can't see a floor until there is further adjustment in London, New York and elsewhere. If they fall so does the ISEQ. Don't forget the last low of the FTSE was 3287 in March 2003.

We also need a bit of adjustment in the financial sector, too many rumours and no confidence means that it is impossible for the institutions to improve their financial base. You can't move forward if there is no confidence in the Banks.

All indices up this morning (so far). Paulson talks it up - cash injection from the printing press fuelling this? Santander rumoured to be eyeing up BOI for takeover (newstalk/Bloomberg)

Is the ISEQ really up 900 points at 0830?

3

Yes. Bank stocks have leapt in value - some by upto 60% on London.

Shudda put some money in yesterday so. Ah well!