youngdan wrote:

Not a lot of happiness in the index today. The drop seems entirely due to Elan and would be well up otherwise. This is very bad and we will be in the 3 thousand millium soon

Yep, élan is going through yet another of their near-death experiences. élan truly is the white-knuckle ride of the ISEQ.

Squire wrote:

youngdan wrote:

Moral Hazard is a technical term and it is the exact reason that the whole mess developed.

Means being able to behave like a spoilt brat because daddy is going to bail you out no matter what. Spare the rod spoil the child. They really should be allowed to sink and some of it goes well beyond moral hazard.

Anyway I am starting to sent blood.

Indeed it is a technical term which is being used to sugar-coat the bitter pill of incompetence / structural flaws in the lending system.

I think it actually means
(i) linking people's remuneration to how much they lend no matter whether the borrowers can afford the loan or not, i.e. bonus systems for bank staff and sub-prime brokers,
and then (ii) being utterly shocked that the system worked exactly as it was designed to work with people giving out loans to dud borrowers all over the shop (in a kind of immoral way??).

Like I said, "Moral Hazard" my ass.

It's a bit like paying a doctor extra if he diagnoses a patient healthy.
It looks to me like a serious conflict of interest.

cactus flower wrote:

It's a bit like paying a doctor extra if he diagnoses a patient healthy.
It looks to me like a serious conflict of interest.

Already do it in America, the drug companies will pay you a commission if you prescribe their product. They'd love to be able to do it here as well. My Mum (a doctor) is convinced, from the manner and frequency of the visits of certain drugs reps, that the drugs companies here manage to get statistical data of what is being dispensed in a certain location.

cactus flower wrote:

It looks to me like a serious conflict of interest.

I think we can be a lot more assertive than that. It is a conflict of interests and it is built into the system and alas is an integral part of it.

I really don't understand any professional person who is influenced by commission. They should be struck off.

They are all influenced by commission.

The only difference is a professional can be sued for negligence and stands to lose their reputation and their income if they mess up (though not necessarily). An employee cannot be sued and if it is company policy he cannot be disciplined. Even if he doesn't buy in to the system he is just as likely to be laid off when the bank needs to cut costs or goes tits up.

There was no "Moral Hazard". The boards reward themselves according to annual growth with huge bonuses. This trickled down to staff who were encouraged to lend lend lend notwithstanding the shit would hit the fan eventually. In the meantime, the top dogs got their money up front wihout reference to future stability and knowing they might only be there for a few short years in the normal course of corporate life. Meanwhile, the geniuses in the rating agencies also had no problem ignoring the lessons of Economics 1.01 while they raked in their fees from the rates. That is how people work in corporations. The greed is the basis of all markets.

Essentially, the board designed it, the board implemented it, the rating agencies ok'd it and the shareholders and the public funded it. How could it have been otherwise when the boards could decide on remuneration and share prices did not reflect the real reduced value of the stock? That of course is the real problem for Friedman's disciples - the stock did not represent the value of the companies. Why? Because the whole financial system was involved in the suicide trapeze act, and the real information was not available to ordinary shareholder. Sure when is it available? How do you value a share?

Who can people look to to avoid this boom bust phenomenon where all their prudently invested money disappears in the blink of an eye and the system sells them back into bonded slavery, working till they are 80? To the politicians and the legislature. That's the bottom line.

Zhou_Enlai wrote:

Who can people look to to avoid this boom bust phenomenon where all their prudently invested money disappears in the blink of an eye and the system sells them back into bonded slavery, working till they are 80? To the politicians and the legislature. That's the bottom line.

Not a snowballs chance in hell then.

Squire wrote:

Zhou_Enlai wrote:

Who can people look to to avoid this boom bust phenomenon where all their prudently invested money disappears in the blink of an eye and the system sells them back into bonded slavery, working till they are 80? To the politicians and the legislature. That's the bottom line.

Not a snowballs chance in hell then.

Is that why the Islamic Banks are growing so rapidly?

This market is about to crash

youngdan wrote:

This market is about to crash

I thought it just had. Not much reaction to the WTO collapse as yet. To me it is another sign that the game is up with the US economy. India and China have told the US to go and take a jump.

cactus flower wrote:

youngdan wrote:

This market is about to crash

I thought it just had. Not much reaction to the WTO collapse as yet. To me it is another sign that the game is up with the US economy. India and China have told the US to go and take a jump.

India and China are not the most open economies in the world and I don't blame them. Good luck to them if they can get away with it, but we should treat them as they treat us. Ever tried exporting into these countries or setting up a business in India? Also there is the not inconsiderable under valuation of their currencies. We also have our vested interests but when it comes to paperwork we are amateurs compared to India.

Weather not great so will the ISEQ reflect the gloom or will we have a mini bounce?

I think there is still a lack of confidence around.

Over all down to 4373 already.

youngdan wrote:

This market is about to crash

What, with AIB reporting better-than-expected profits and Deutsche Bank doing the same? Those were damn good figures from AIB, there profits are still very high at 1.28 billion euro. They're running a tight ship and weathering the storms admirably. AIB is actually earning more in profits than Lloyds TSB, a bank which has 3 times the market cap.

ISEQ at 4380 - that number looks like an Airbus number.

Auditor #9 wrote:

ISEQ at 4380 - that number looks like an Airbus number.

Yeah, it does. I'd be hoping that AIB's results are a catalyst for a recovery in the index.

It looks as Elan carried a big weighing in the index. The price for this will be steep now that it is cooked. The past 2 sessions have been a disastor as he market index would be up about 300 points were it not for elan. How is it going to avoidbreakink 4000 on the next downleg.

youngdan wrote:

It looks as Elan carried a big weighing in the index. The price for this will be steep now that it is cooked. The past 2 sessions have been a disastor as he market index would be up about 300 points were it not for elan. How is it going to avoidbreakink 4000 on the next downleg.

A renewed strength in the financial sector and a rebound in other shares like Aer Lingus and Ryanair on the back of lower oil prices could keep it above 4000.

AIB's earnings have been in the order of 1-2 billion for several years now and this year is no exception. What's the story? These tools are not giving out mortgage loans now or what? Are they cracking down on their loan facilities or is there just less production power in the economy now or is this just a certain portion of the stock market that's going to apparently crash - if you look around you then there seems to be a good atmosphere of spending but the stats might say otherwise.

Also, did Ryanair speculate on energy prices recently and are suffering consequences now? Michael O'Leary the gambling man...

I'm going for a massive ice-cream now.

Auditor #9 wrote:

I'm going for a massive ice-cream now.

Nice.

Auditor #9 wrote:

AIB's earnings have been in the order of 1-2 billion for several years now and this year is no exception. What's the story? These tools are not giving out mortgage loans now or what? Are they cracking down on their loan facilities or is there just less production power in the economy now or is this just a certain portion of the stock market that's going to apparently crash - if you look around you then there seems to be a good atmosphere of spending but the stats might say otherwise.

AIB have managed to keep their business model going through the first six months to earn broadly the same as the first six months of 2007. AIB wouldn't be giving out half as much mortgages as before with mortgage growth down to a 17 year low. The production power in the economy is broadly unchanged and is ready to go.

Quote :

Also, did Ryanair speculate on energy prices recently and are suffering consequences now? Michael O'Leary the gambling man...

They did, they thought that prices would stay around 75 dollars, so they didn't hedge their fuel requirements like other carriers. They are paying the price for their actions now with the fact that they are the most exposed large carrier to the rise in oil prices. They have no price cushion so they will have to draw on their 2.5 billion euro cash pile to stay in profit.

Quote :

I'm going for a massive ice-cream now.

Right!

Some good info on the BBC news site today on the sub prime thing


http://news.bbc.co.uk/2/hi/business/7073131.stm

and that mortgage bond market is largely backed by the government i.e. the wider economy. If banks are forced to do deals with their clients and ease off the mortgage repayments and interest as I understand is happening with some lenders, does the country foot the bill or do the banks lose out a little of that 1.2 billion profit (sickening if people are crippled with debts) ?

Please tell me it's the banks profits which get eaten into..

Ard-Taoiseach wrote:

Auditor #9 wrote:

ISEQ at 4380 - that number looks like an Airbus number.

Yeah, it does. I'd be hoping that AIB's results are a catalyst for a recovery in the index.

There is an interesting report in todays Irish Times about the AIB's relationship with property developer clients. Over 10 billion owed is on a "watched" list.
The AIB conveys that numbers of developers may not be in the position to pay interest and that it will not be collected for some time. The bank also says there is no point of foreclosing while the market is "illiquid" i.e. the lands are unsaleable.

I am not an expert on banking, but the possibilities that occur to me are -

1. Everything going to plan, the market picks up in 3-4 years, the lands get developed and the Banks cream off huge interest.
2. Not so favourable to the developer, - prospective cash-rich buyers emerge and the Bank forecloses on the shakiest clients and sells cheap to cut its risk
3. Not so favourable to the Bank - it is asked to repay something it can't repay, whilst the market remains "illiquid".

Am I wrong?

Auditor #9 wrote:

Please tell me it's the banks profits which get eaten into..

Well, yes. Lots of banks are experiencing huge falls in profits now. Merrill Lynch, Citigroup, Bank of America, Deutsche Bank, UBS, Credit Suisse, BNP Paribas, Unicredit and so on have all lost billions as a result of the unwinding of the sub-prime market.

However, people have also lost out in terms of destroyed credit ratings, repossessions, unemployment, stress and a sharp deterioration in living standards.

Auditor #9 wrote:

Some good info on the BBC news site today on the sub prime thing


http://news.bbc.co.uk/2/hi/business/7073131.stm

and that mortgage bond market is largely backed by the government i.e. the wider economy. If banks are forced to do deals with their clients and ease off the mortgage repayments and interest as I understand is happening with some lenders, does the country foot the bill or do the banks lose out a little of that 1.2 billion profit (sickening if people are crippled with debts) ?

Please tell me it's the banks profits which get eaten into..

The poor old bond holders don't even seem to own the property, or know what property the "product" relates to - so who does own the property if the mortgage holder defaults? The foreclosures are flying in the US so clearly someone does. I just got an email asking me to buy cut price foreclosed on property across 50 states. If the banks go down that would not be good either.

cactus flower wrote:

The poor old bond holders don't even seem to own the property, or know what property the "product" relates to - so who does own the property if the mortgage holder defaults? The foreclosures are flying in the US so clearly someone does. I just got an email asking me to buy cut price foreclosed on property across 50 states. If the banks go down that would not be good either.

And those bonds are sliced and diced so many times, rolled into SIVs and CDOs and other very exotic financial instruments that the original bond gets lost in the thicket. That was the main problem with the credit crunch in that the bonds had been so thoroughly mixed up that nobody really knew who owed what.