The ISEQ Thread Part II - Trading below 2000

Squire wrote:

Nothing too terrible happened in Asia last night.

It will be good when we get through these periods of government interventions, hard to predict their effect. The amounts involved are colossal and are bound to have an effect on the economy of the country in question in the decades ahead. Spending borrowed money is easy, repaying it is a different matter.

If governments do not get a sizeable return in their investments in banks etc this is bound to have a negative effect in the overall economy as someone has to pay and that is money that would have been spent or invested elsewhere. If instead they print then reason would suggest that they would devalue the currency, but devalue against what other currencies or assets? The major world currencies all have weaknesses.

So perhaps commodities but unless economies turn, and move forward, demand is going to be flat. Price drops in basic metals must also make investment in extraction unlikely so problems ahead when the economies do turn. All basic production needs investment but why invest if demand is falling?

Food I think will become more critical with time as the worlds population increases. Some countries that once exported now import. UK population over 60 million on a small island in a climatic zone that severely limits agricultural production.

If the current crash was to lead to a proper reassessment of our world financial model it would be a good thing, because it is not too difficult to imagine all sorts of problems ahead if demand outstrips production in key sectors. Unfortunately a reassessment just won't happen.

I am still of the opinion that the very concept of interest is part of model that ultimately cannot be sustainable. The idea that you can earn beyond the rate of inflation by doing nothing. I think we need a more robust system for investment where it is difficult for gamblers to gain, where investment is just that and is long term.

I've been watching Ron Paul on youtube lately - he's always on about Government fecking things up by intervening. He's gunning for the Federal Reserve too of course but he was saying yesterday that there are 19million housing units hanging around in the US now (if each could fit 4 people that would potentially cover 80 million people - a quarter of the population of the US) and he said that the Government is trying to prop up the price when they should be left to the market and the price allowed to drop if that be their fate.

It's a bizarre one but the lack of regulation allowed all this stuff to spring up which a regulated market would not have so there is plenty of stuff there only it's not appropriately priced. There's some justice in it and some injustice hanging about it which Ron Paul's line of thinking could bust open if adopted. Everyone dreams of cheap, accessible property don't they?

There are very interesting tensions between free market and loaded market and all that and it's true to say that all this stuff wouldn't have been built without the profit incentive. Where's all the money gone now though if the stuff was to be written down? Loads of people got their bit - from the deli counter worker who supplied the builder with the Jumbo Breakfast Roll, to the pig farmer who supplied the pigmeat for the Jumbo Breakfast Roll to the accountants, foremen, engineers, bankers, bank staff who all got a bit of pork along the way from the loan ultimately derived from where ? Could it all lead back to China somehow? Or lead back to cheap energy and interest rates?

Perhaps housing should be built at very low interest rates if any as it is always an asset to the country. Regulation would involve observing strict planning codes and maybe following a reasonable version of your bugbear - environmental efficiency.

Ron Paul and Bernanke recently on the Fed and the Great Depression
https://www.youtube.com/watch?v=Xeb2VnI7S4U

The houses and offices are assets, the illusion is the monetary value we place on them. How much is anything worth, what someone is willing to pay. We can let the price drop and when people can afford they will buy but if the price is too low no one will build any more! we can print money and reduce the value of the currency and by that means reduce the price along with everyone's earnings.

One of the major problems is that most loans are secured using property as the asset. So as property values fall small businesses find it difficult to borrow to invest.

We need to be very careful, there is an arguement that low wages and low costs cause economic collapse. Certainly I have seen countries where there was little employment because those working had no surplus income and therefore could not purchase goods or services.

Blaming the Fed. I would have thought that much of the blame should rest with Congress?

Some time must get back about Argentina, but everywhere I look I see work that really does need to be done. I recently had a look round some very poorly built council type flats. The people living there cannot heat them, they are cold and damp. They don't have the money to improve them, so they are stuck in a cycle of pointless high fuel bills, white goods rusting, cloths and bedding destroyed by mould. They are trapped in a vicious cycle that perpetuates poverty and causes poor health. I think we need to look at the government bailouts with this in mind. If money is to be spent this and similar is where it should be spent.

I think the reality is that this will all continue-worldwide- until asset prices stabilize. That means an end to depreciating property values, so this could continue for Quite Some Time... didn't Morgan Kelly say the average property slump lasts 10 years? Is this the average property slump??

expat girl wrote:

I think the reality is that this will all continue-worldwide- until asset prices stabilize. That means an end to depreciating property values, so this could continue for Quite Some Time... didn't Morgan Kelly say the average property slump lasts 10 years? Is this the average property slump??

Well no, its a property slump combined with a financial crisis combined in Ireland with a fiscal catastrophe

Very hard to work up a coherent plan for recovery based on pumping limited available money into institutions that are insolvent.

Banks banks banks, Iseq financials back down about 8% today. Everywhere you look, it is banks out in front of any falls.

Financials tanking again today. No surprise there.

This may be interesting.

http://www.bloomberg.com/apps/news?pid=20601109&sid=anccctVJnemE&refer=exclusive

It would appear that some Banks cannot lend! So investors are spooked, citizens are worried and are drawing in their outgoings, and therefore decline continues.

When will politicians realise that saving a load of banks is not the key to this, the key is confidence. Sometimes confidence building requires decisive action, like letting failed banks go under, like introducing rigid regulation of the financial sector, like ending government intervention and distortion of the markets. Obama's lot had plenty of time to prepare and what did they come up with?

wow, that was interesting; banks that are trying to lend and can't find customers... anecdotally I have heard here that the brave folks at AIB have been trying to increase mortgage lending here with little luck....

I think they need to sort the banks out, cut the pay, have a good look at the books etc. But the problem is, "marking to market" at the moment is very hard; how do you value illiquid assets such as property if the market is frozen.

Frankly, getting the Government books in order would be a start. And I don't mean by cutting special needs teachers either.... how about a lower payoff for the financial regulator, a cap on political and public sector salaries of E150,000-200,000 ?? A stop to drawing pensions while still in employment?? Wipe out half the quangos and put and ADMINISTRATIVE only hiring freeze into the HSE?? Taxes to be raised by adding another band at 70K.... don't attack the lower paid as they're more likely to spend at home. And no more recapitalisations. Merge some of the banks if necessary. Tell them they can't lend more than 3x joint income and declare a floor on the property market that way. People then might start buying again... that's the long term average, innit?? Postpone all NDP spending post crisis, unless the project is already under construction

You cannot get the governments books in order because it has decided to bond itself unnecessarily to the likes of Anglo. Everything else is change by comparison. As for sorting out the Banks, you first need new management, one's that work for you and with your interests in mind. Ones with no history or possible interests! Receivership would have been so much easier.

With regards mark to market, yes it is difficult but not impossible. The real problem is ongoing uncertainty. If you thought that you were being presented with an accurate set of books, dire as they may be, without any off balance sheet vehicles or any other nonsense you may be surprised to find that the companies have a value and people invest. But who is going to touch this lot with the possibility of dilution or heaven knows what. I tell you receivership would have been better and we would have this problem behind us by now. This is madness.

Squire wrote:

You cannot get the governments books in order because it has decided to bond itself unnecessarily to the likes of Anglo. Everything else is change by comparison. As for sorting out the Banks, you first need new management, one's that work for you and with your interests in mind. Ones with no history or possible interests! Receivership would have been so much easier.

With regards mark to market, yes it is difficult but not impossible. The real problem is ongoing uncertainty. If you thought that you were being presented with an accurate set of books, dire as they may be, without any off balance sheet vehicles or any other nonsense you may be surprised to find that the companies have a value and people invest. But who is going to touch this lot with the possibility of dilution or heaven knows what. I tell you receivership would have been better and we would have this problem behind us by now. This is madness.

As you keep stressing - confidence is the lifeblood of banks as much if not moreso than money. Sinn Fein want a State Bank - is that more madness? Richard Bruton of FG wants an AIB New/ AIB Old; BOI New / BOI Old and the bondholders would take the hit on the old bit while there would be a fresh balance sheet on the New parts and these are the parts that would be recapped. Sounds like there would be a lot of work and a lot of weeping and gnashing over what was good and what was not.

There no doubt are plenty of other healthy models. What'll we be saying in a few months time when 5bn more is needed ??


The iseq finished just above 2355 today - banks down - AIB down 10% to 96c

http://www.sharewatch.com/iseq.php

Audi

It is an awful lot of money that is going to plug holes that do not need to be plugged. In the short term, all a country like Ireland needed was 1 sound bank. money put into such an entity leveraged up and what do you know you are afloat. UK is a different matter. The problem there is the size of the financial sector.

AIB hovering around 70c and BOI languishing just below 50c

AIB getting hammered this morning - trading at 62c at this point in time. - 8%

IL&P around 1.50 -5%

BOI dropping to 46c -4%



Has the government run out of money to push in there ?

Audi this is following on from a bad few days at the second half of last week.


EDIT

What this neatly shows is that you have to be decisive andutterly above board in circumstances like those surrounding Anglo. If not then the market takes fright. This drifting about really is not good, better to have all the bad news out and done with, take whatever hit and get a floor.

What kind of fright is this Squire ? Haven't seen this before on the Sharewatch site ...

Squire wrote:

Audi this is following on from a bad few days at the second half of last week.


EDIT

What this neatly shows is that you have to be decisive andutterly above board in circumstances like those surrounding Anglo. If not then the market takes fright. This drifting about really is not good, better to have all the bad news out and done with, take whatever hit and get a floor.

No one knows if the banks are worth anything, at this stage. There is a complete loss of trust. What is coming out at a drip feed about Anglo Irish and the complicity of the Regulator/Government imo means a General Election at the earliest feasible date is essential. A massive private debt has been socialised. Next they will want privatise/sell off everything we have left of any worth.

Brian Lenihan told us that Anglo Irish, a junk bank which had massive loans out in the main to less than 100 people for purposes of speculation or illicit share support, was systemic i.e. essential to the functioning of the Irish economy. On the strength of that, an unprecedented blanket Guarantee on the Banks in Ireland was put in place, making us liable for those loans and all other liabilities of the banks.

Following the Guarantee the terms, in particular the collateral and personal guarantees, for some of those loans were changed: it is suggested in some cases from assets to shares or other. Government is now, after Nationalising the Anglo Irish Bank without due diligence, trying to renegotiate some of these terms.

Six Cabinet Ministers would not say whether of not they had Anglo Irish Loans at the time of the Guarantee. Perhaps they did not. They should clarify this immediately.

Is there any legal reason why a list of the main Anglo Irish debtors could not be published?

AIB = 61c
BOI = 43c
Tesco Beans = 29c

No doubt as to where the value is there Audi.

Cactus

The way this has turned I think was reasonably predictable. It is amazing what people will do when a business is going under. Total truth is often very hard to ascertain. At a very basic level people don't want to admit their own failure and many once saved try to engineer their own partial salvation. If you are buying anything you need a good look under the bonnet. With the Banks I think you actually need a receiver in and management out to get a clear, uncluttered picture. The decisions around Anglo were crass.

I would imagine there is considerations of confidentiality surrounding the debtors. They are not all of dubious character and you could inadvertently do someone a lot of damage.

Squire wrote:

Cactus

The way this has turned I think was reasonably predictable. It is amazing what people will do when a business is going under. Total truth is often very hard to ascertain. At a very basic level people don't want to admit their own failure and many once saved try to engineer their own partial salvation. If you are buying anything you need a good look under the bonnet. With the Banks I think you actually need a receiver in and management out to get a clear, uncluttered picture. The decisions around Anglo were crass.

I would imagine there is considerations of confidentiality surrounding the debtors. They are not all of dubious character and you could inadvertently do someone a lot of damage.

Yes - that sounds probable to me. Few of us would want our bank balances/imbalances on the front page of the local paper. When it comes to the Cabinet Ministers though, there is no question in my mind that they should clarify this, one way or another. There is an issue of potential conflict of interest.

I agree about the Receiver etc. for Nationalisations. The Guarantee should not have been in place at all. It was obviously capable of being used to carry out transactions that were reckless of the liabilities being created for the public.

At every step it appears that Government has been asking the banks what to do, rather than making decisions in the national interest.

I think the rest of my 2009 drinking money is going down the pan.

Sorry to hear that, EVM.

cactus flower wrote:

Is there any legal reason why a list of the main Anglo Irish debtors could not be published?

Yes, it would breach the Data Protection Act in the absence of consent from such individuals. It would be a serious breach.

Auditor #9 wrote:

AIB = 61c
BOI = 43c
Tesco Beans = 29c

Banks were absolutely hammered today.

AIB = 55c, down 19%
BOI = 37.5c, down 21%
ILP = 145c, down 8%

Recap rejected by the market before the money is even handed over. Surely it's time to call a halt to this farce and nationalise them and get credit flowing?

ISEQ financials are back down to within a couple of points of their all time low.

There is a need to get all the nonsense out of the way. If only we could have some clear, trustworthy picture as to the exact strength or weakness of these businesses, then you may find that investors start to take a long term view. They appear to be insolvent. Find a reason to withdraw the guarantees and support, let them crash and buy up the salvage. Bond and share holders lose. It could even be that an outside Bank would be interested in which case the cost to the public is reduced.

What happened to the ordinary Anglo shareholder ? Did they get a penny or are the shares deemed zero value ?