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

More SBP gloom - ‘‘They just don’t want to know about Irish shares. Short the PIIGS and long the BRICs,” is what they say.

"What they are really saying is sell stocks from Portugal, Ireland, Italy, Greece and Spain (PIIGS). Buy stocks from Brazil, Russia, India and China (BRICs)."

Auditor #9 wrote:

there's Scottish and Southern Energy which bought Airtricity, disappearing it over to the FTSE, when the share price jumped but the price hasn't changed so much overall since - is this the case in general with the FTSE? I can't help thinking the share price is tied to energy and that subprime thing, although Kingspan has also dived fairly dramatically over the last while when it might be expected to rise or stay steady at least

http://www.ise.ie/app/equityDetails.asp?equity=573

There's amateurishness for you.

Kingspan is getting stuffed because it's an Irish building materials company. Businesses like that are personae non grata on the exchanges. Nobody wants to know them. Kingspan's market cap was larger than alphabet-neighbour Kerry back in 06 when the property boom reached its finale. Now it is less than a third of it. It's sobering to see the contrasting capitalisations on the IT's Markets Page.

Ard-Taoiseach can you say how the fall in the share price affects Kingspan's day-to-day business? Does it mean that the banks are less likely to loan to companies whose share price is falling? Does the share price reflect the books and bottom line of Kingspan i.e. are the shares being sold because Kingspan aren't selling nothing or what?

Auditor #9 wrote:

Ard-Taoiseach can you say how the fall in the share price affects Kingspan's day-to-day business? Does it mean that the banks are less likely to loan to companies whose share price is falling? Does the share price reflect the books and bottom line of Kingspan i.e. are the shares being sold because Kingspan aren't selling nothing or what?

It affects the business certainly in that banks would be less likely to lend to them. They would be concerned that Kingspan would default on payment and their loans would go bad.

It also means that rights issues are out of the question. When your main share price is down over 50%, nobody's going to want to buy some new issue from you. You're damaged goods.

That means that two major sources of funding are largely off the table for Kingspan and they have to rely on their own resources and cash reserves. That impacts their ability to make big acquistions and build huge new facilities.

The share price itself reflects the market's opinion on the intrinsic strength of a company. It is the average of every market participants' opinion of what the company is worth.

Ard-Taoiseach wrote:

That means that two major sources of funding are largely off the table for Kingspan and they have to rely on their own resources and cash reserves. That impacts their ability to make big acquistions and build huge new facilities.

The share price itself reflects the market's opinion on the intrinsic strength of a company. It is the average of every market participants' opinion of what the company is worth.

Thanks, you've saved me a fortune

The share money is largely for growth of the business so? and R&D etc.? The banks will surely loan them on the strength of business within the company - turnover and all that - which will presumably continue as long as there is a business there at all, regardless of the share price unless as you say the share price directly reflects the intrinsic worth. But it doesn't does it? as sentiment also plays a part but how much isn't known - isn't a large part of the share value a guess at the future of the company too? Presumably the accounts and profits of these companies are readily available quarterly ??

Auditor #9 wrote:

Ard-Taoiseach wrote:

That means that two major sources of funding are largely off the table for Kingspan and they have to rely on their own resources and cash reserves. That impacts their ability to make big acquistions and build huge new facilities.

The share price itself reflects the market's opinion on the intrinsic strength of a company. It is the average of every market participants' opinion of what the company is worth.

Thanks, you've saved me a fortune

You're very welcome. Tbh, I wouldn't buy any Irish equities since there's a weight of international money flowing out of Ireland and selling our shares. I'd wait for things to settle down before taking the plunge.

Quote :

The share money is largely for growth of the business so? and R&D etc.? The banks will surely loan them on the strength of business within the company - turnover and all that - which will presumably continue as long as there is a business there at all, regardless of the share price unless as you say the share price directly reflects the intrinsic worth. But it doesn't does it? as sentiment also plays a part but how much isn't known - isn't a large part of the share value a guess at the future of the company too? Presumably the accounts and profits of these companies are readily available quarterly ??

The share money is used to invest in the company to fund long-term projects like R&D and future acquisitions. It's a long-term source of finance.

Banks would be attracted to a company with a proven ability to earn profits and pay back loans though a crash in the share price does affect the bank's opinion of a company. They'd be thinking, "if KBC, Dolmen, Davy and Goodbodys are all liquidating their client's positions in this company, why should we lend them €400 million to buy a UK rival?"

Sentiment is a big part of share-price valuations, particularly in the short-term. A large part of the share value is certainly a guess at the future of the company too. However, returning to Kingspan, they've been tanking for the past year and a bit. That means that there is a deep discount to Kingspan's value now. Sentiment is less of an issue with Kingspan. Their profitability outlook is quite poor and that is driving its shares down.

Accounts are available quarterly in plcs. That is a requirement of a company if they want to be listed on the ISE or any Stock Exchange. Porsche famously refuses to issue quarterly results leading to its perennial exclusion from Germany's MDAX.

With regards Kingspan look at the products it produces and look at who else produces similar. They are in a competitive market and many of their rivals are UK based. These have recently become that bit more competitive due to the decline in sterling. We must assume that demand for their products is probably weak.

ISEQ overall at 4624

Financial taken a pounding and is at 5166

Looks like an interesting summer developing.

I am getting to the point of deciding to buy some BoI/Anglo shares for the heck of it.

Zhou_Enlai wrote:

I am getting to the point of deciding to buy some BoI/Anglo shares for the heck of it.

Perhaps, but I wouldn't touch Irish equities before we see some sort of floor established on Irish equities. We haven't seen a floor in the ISEQ since the start of 2007. It's been downhill since the big bull run of late 2006 which saw us to 10,000. God, I remember how sweet that was. I was still using Yahoo then and every day the ISEQ was bright green when I logged in to check.

Now we are in the Hadean, Dantean pits of agony. Here's a musical accompaniment to our predicament;

4414 today. We are now entering the zone of interest. Question is where will it be say end of 3rd week in August?

Squire. Your abode as discussed elsewhere is modest. Were you to put money into this market before it loses another 3500 points then sparse would be your furnishings

The ISEQ fell 5.8% today, financials down 8.5%, General down 4.6%. This is apocalyptic stuff. This index'll probably be below 4000 by Wednesday.

youngdan wrote:

Squire. Your abode as discussed elsewhere is modest. Were you to put money into this market before it loses another 3500 points then sparse would be your furnishings

Abode is definitely ruinous, as for furnishings less is more, but house keeping money is safe.

Big difference between taking keen interest and doing. Down almost 60% so it is now worth paying very close attention. I expect drift down to continue over the holiday period, if it hits 1000 I will be delighted. I don't mind playing a long game and if it gets to the level you are suggesting the assets of some businesses will be worth a lot more than the share value.

Likely to be strong demand for gold and silver in the near future but don't get mesmerised by things that glisten. In times of uncertainty people jump to gold and silver and they have already gone up. For a bit of context here is a historic graph.

http://www.taxfreegold.co.uk/images/goldpricegraph480.jpg

For the longer haul I'd still say water and land are your best bets.

My standing prediction over yonder is for 100 dollar silver by year end. I am a keen follower of the metals market and indeed most of the markets. The Irish market is just falling. What we need is a good panic. This big bank failure Friday night could get the ball rolling for Monday morning. Ah well sure it was called a year ago but nobody would listen. One person that I know of sold everything and went into silver and gold at 12 dollars and I think about 650 respectively.

I know the feeling about nobody listening, I warned and warned associates that they need to get out of property in Ireland and that they could not leave it any longer as property takes time to sell. Did they listen NO. Greed and lemming instinct takes over, must get in, get a slice of the action. Well they sure got that.

Agree Monday should be very interesting to watch. With a bit of luck we will have some good falls before the end of the silly season.

The problem I have with gold and silver is there has already been a flight into them. It is the sort of investment that the goat herders in Afghanistan make. Buy another bracelet for the better half.

I am with Cactus flower, I like land, but again in Ireland a lot of that is at a ridiculous price. Water in Ireland; there is plenty off it. It is just poorly managed. I have an elderly relation who lives on the west coast of the Sahara facing the Atlantic. Dry as dust good for old joints. A few years ago was helping to build a small desalination plant that works on evaporation. Very simple stuff. Was a bit tricky getting the condensation end of it working properly but works a treat and more than enough water for a large garden, now with all sorts of interesting bushes. Smells like heaven on a still evening. You also end up with a lot of salt as a by product.

With enough investment you could cultivate large stretches of the Sahara, not only that it is a potential power house. Forget the oil and gas in Algeria and Libya the power falling on that region from the sun is the real power source. Problem is how do you make a return on any investment and how stable are the governments. One thing to be tucked away in some remote corner, quite another to be cultivating many many square miles. I am utterly convinced it is doable and on the Mediterranean coast there are large areas of inland desert that are actually lower than the level of the sea. A few pipes and it is a gift.

Land you can improve, and manage, it produces food and timber. It can be a long game or a short term speculation. You have several opportunities. You have multiple chances to redeem loss. Gold is dead money, you totally rely on markets to gain or lose.

You should not underestimate the number who might read and take note. Especially on the markets where many would be afraid of being wrong. Well even Jimmy Rodgers who is one on the best told us the other day he still likes Chinese stocks even though the Shanghai index is down over 60%. Some people pmed me about the market last year and one piled into gold and silver at that time and is 50% up on the silver.
Most would have ignored me as a call for 1000 when the index was over 7000 looked like trolling. For the left wing readers Sidewinder and Akrasia would have a good reputation. A right leaning reader would follow what Anorakphobia has to say.
I miss the optimistic guys. The markets went against them but so what. I would be interested to hear what they think should be done when things get bad. The government is still talking rubbish. I just say a headline with the figure of 400 million. I did not even read it because the figure should have been 10 billion.
Anyway on to Monday. Indymac was not seized till after the global trading was done for the week, probably in fear of panic.

I wouldn't have the courage to call a floor of 1000 what I will say is that all news currently points down and 3500 looks very likely. When it gets in that vicinity re evaluate and so on. Sooner or later we will hit a bottom, but the scale of the mismanagement is staggering. This has been running over a year now and we still can't clearly see the extent of the problem.

I am optimistic enough though and there is enough land around Squire Hall to feed me.

Squire wrote:

I wouldn't have the courage to call a floor of 1000 what I will say is that all news currently points down and 3500 looks very likely. When it gets in that vicinity re evaluate and so on. Sooner or later we will hit a bottom, but the scale of the mismanagement is staggering. This has been running over a year now and we still can't clearly see the extent of the problem.

In times of boom we usually miss the beginning of the downturn and in times of gloom we miss the moment things began to recover. I feel we will reach a floor in the index in the fourth quarter and it will rally from there. The economy will also bottom out around then and begin to recover next year. We won't notice this till the end of 2009.

Quote :

I am optimistic enough though and there is enough land around Squire Hall to feed me.

As am I. I am certain we can see our way out of this crisis and emerge the stronger.

Ard-Taoiseach wrote:

In times of boom we usually miss the beginning of the downturn and in times of gloom we miss the moment things began to recover. I feel we will reach a floor in the index in the fourth quarter and it will rally from there. The economy will also bottom out around then and begin to recover next year. We won't notice this till the end of 2009.

I tend to agree, but we seem to be hit with an endless stream of bad news out of the USA and levels of debt bother me. On the home front there are comparisons in property with the Japanese bubble but what we face is nothing like that. (land costs of 1 million sterling per sq.m 20 years ago!)

The down turns provide new opportunities. and are much more interesting than the booms. Some of the economies of Europe seem to be doing all right, India is motoring along but inflation on the rise, China is going to take a hit, but what do we export to there? Japan is holding a serious number of dollars but is strong enough. At long last we are taking seriously alternatives to oil, so some day soon the Middle East can wallow and no one will care. The USA will be rid of Bush in the new year and even though neither of the possible replacements inspire confidence on the economic front the symbolic value of Bush leaving will help lift spirits.

If American consumption ceases to be the dynamo that keeps the worlds economy rolling perhaps we will be entering a more responsible era?

One opportunity that is there for Ireland is to become self-sufficient in energy. I see no signs that this is grasped by government or the ESB who are toddling on moaning about the difficulties of wind power, rather than trying to crack the problems. It is essential that we put in place a plan for zero oil dependency, with energy conservation being a substantial part of the solution. Tidal power, wind and solar seem to be the main things we have. While government still has some money they should get a solar panel onto every house and fully insulate every roof. There should be incentives for car sharing - it is an easy way of halving fuel consumption. I hear that people in the States are buying Smart cars. If they can do it, surely we can. At the moment we are the most oil dependent country in Europe.

The idea that the Press and the Government seem to have, that a bit of trimming of excess expenditure will put everything back the way it was three years ago, is shocking.

We have lost our competitivity and there doesn't seem to be any strategy for gaining an edge.

Broadband is improving, but given that we are an island we should be aiming at being the best in Europe, not number 15 or whatever it is.

Education, and IT in schools should be another priority.

Lastly, we should be maximising our capacities in food and timber production.

The people running the show at present have actually done amazingly well. The last time the system could have been saved was the recession of 1991. Had a severe recession/depression been allowed to happen then things could have come back. Instead Clinton was lucky to have the Fed drop short rates to 3% while long rates were at 8 or 9. This allowed the banks to reliquidify. This money supply increase almost balanced the budget but it is a clear con job. Since then it has been one rabbit after another out of the majic hat. Even people who want the Fed gone were impressed how the system was saved from collaspe when they took over Bear Stearns on a Sunday.
Unfortunately the jig is up now as this bank will exhaust the insurance pool on it's own. If the lug on the street knew what was going on the atms would be empty by now and the banks would not be able to open Monday.

Cactus. You still refuse to accept the idea that the government would not like you to have an independent energy supply.

youngdan wrote:

Cactus. You still refuse to accept the idea that the government would not like you to have an independent energy supply.

Not at all youngdan. I'm not bothered if its independent or not, so long as its sustainable and affordable.

Perhaps we should put a bit of tax on the gas we have given away (thanks Ray B) , now that the value has gone through the roof, and use that to pay for the solar panels?