IMF Report on Ireland

ixus

Take the time and read the IMF report on Ireland for yourself (in pdf).

Bank related.

A. Bank Restructuring

20. Estimates of losses being faced by banks vary but are likely to be sizeable. On a
gross basis, staff’s review of available estimates and methodologies suggests that the losses
faced by banks through the end of 2010 could be about €35 billion, or about 20 percent of
GDP. The authorities did not formally produce any estimate for aggregate bank losses. They
have focused on the needed restructuring of property-development loans, which they rightly
view as at the heart of stress faced by banks. Staff noted that losses are likely to extend
beyond the property-development sector as the economy weakens and the design of NAMA
should incorporate that possibility.

21. As the authorities recognize, translating NAMA from concept to reality is
pivotal to the orderly restructuring of the financial sector and limiting long-term
damage to the economy. NAMA is to purchase property-development assets with a book
value of between €80 and €90 billion from banks that are supported by the government’s
guarantee. (The total assets of the guaranteed banks are €440 billion.) Since the assets are to
be purchased at less than their book value, the resulting losses will require the authorities to
inject more capital into some banks. If well managed, the distressed assets acquired by
NAMA could, over time, produce a recovery value to compensate for the initial fiscal
outlays. NAMA’s success will also be the precondition for a safe exit from the guarantee to
creditors and depositors, which recent experience shows can be a long-drawn process unless
aggressively managed (Text Table 1). If not effectively managed, weakness of the financial
sector, public finances and economic growth can reinforce each other (Box 2).

I'd also direct you to Quiet Coup article I posted previously.

Also, check out the pin and the economics forum here for some decent commentary.

If you don't draw the conclusion that the Irish market has been in a bear market rally from this I'd love to hear your reasons why.

TTNYWWBM

ixus wrote: »

If you don't draw the conclusion that the Irish market has been in a bear market rally from this I'd love to hear your reasons why.

You could call it that, a dead cat bounce some call it too, but since Jan 07 the market has been in Bear till the crushing lows of March 09, generally most ISEQ stocks have Bulled and risen since then. It just depends on how big a window you look at your stats converted to graphs. Few exceptions of course like Ryanair which weathered the worst of it.

If it's a rally its a verrry long rally Overall, big picture I'd call it recovery!

Only recently stocks have veered back to Bear, due to profit taking, influence from the IMF, ECB, and other true reports – snapping investors back to reality. In light of recent reports from the OECD and IMF yesterday stocks will fall sure a S**t off a shovel, particularly banks! So it's time to bail and use as an opportunity to buy back lower for a bigger holding. But the future outlook is not all doom and gloom?!?

But thanks a million for posing the link to this it makes very interesting reading! Jeesh how the Irish economy was propped up on property!

Comordha

Interesting to see the FDI flows in other countries from 2002-2007. Some have gone up considerably. So many countries you just don't hear about in the press for economic reasons - Finland, Belgium, Sweeden, Norway, Italy (not too much), Denmark (where unemployment at the moment is around 3-4% max). The reason we don't hear about these countries is because they just keep things ticking over at a gradual nice pace. No Boom, Bust, Bust, Boom, Boom, Boom, Bust as the ad says. Unfortunatly, this is really a lesson which most countries have to suffer before they become a truly DEVELOPED economy. Once we get out of this some other young gun will come along and fall into the exact same pitfalls as we have and others before us because guess what - History repeats itself. It's like when you are growing up and when you first start earning the $ how you often splurge recklessly until you learn the true importance and value of saving & spending prudently. There will be another country just like us who get carried away with themselves and they'll probably be turning to us for advice on how to get out of their mess.

5 years of pain and we'll be on our way to becoming a prudent, DEVELOPED nation folks.

TTNYWWBM

Comordha, quite an astute perspective on the whole thing!

I think you are quite right, although a proportion of the blame has to fall on the property sector, the banks who lent them ridiculous sums of money, and the politicians or recent years, particularly Cowen when he was Min of Fin, what a balls he made of that job!

The consumer 'child' spending their first few quid as you brilliantly described them is of course partly to blame too.

MrMatisse

Have to agree with people saying its a bear market rally.

I dont think the serious money is back in, i think the irish market is being driven by retail investors and people lashing money into pension funds in december/january. Things got so low that this level of money is able to drive shares like BOI etc.

I remember the day when BOI was at 80 cent and ordinary joes were putting in 5 or 10 grand thinking that the company was undervauled because a share was only 80 cent...... Most didnt seem to have a clue.

EyesLeft

Really-Stressed wrote: »

I remember the day when BOI was at 80 cent and ordinary joes were putting in 5 or 10 grand thinking that the company was undervauled because a share was only 80 cent...... Most didnt seem to have a clue.

Yes, you have to feel sorry for those poor clueless fools?

royaler83

Really-Stressed wrote: »

I remember the day when BOI was at 80 cent and ordinary joes were putting in 5 or 10 grand thinking that the company was undervauled because a share was only 80 cent...... Most didnt seem to have a clue.

EyesLeft wrote: »

Yes, you have to feel sorry for those poor clueless fools?

You're right eyesleft, how embarrased would you be if you bought 10k worth of BOI at 80c and sold at 220c :rolleyes:

MrMatisse

problem was a lot bought at 80 then sold at 13

pension funds are the ones that held on. A lot of people panicked

TTNYWWBM

Really-Stressed wrote: »

Have to agree with people saying its a bear market rally.
I dont think the serious money is back in, i think the irish market is being driven by retail investors and people lashing money into pension funds in december/january. Things got so low that this level of money is able to drive shares like BOI etc.
I remember the day when BOI was at 80 cent and ordinary joes were putting in 5 or 10 grand thinking that the company was undervauled because a share was only 80 cent...... Most didnt seem to have a clue.

Are you smoking horse feathers or what? Usually big investors will not expose their position by doing trades over 20k. Trading is usually done in blocks. Trades can influence the market. A big sell or a big buy results in "Ohh someone must know something..." and the market adjusts, this is day one trade craft. No big secret btw.

AIB and BOI have turned over more trades per day on average than this time last year, and you have the sillyness to say the 'serious money' is not back in! See the attached graph of BOI over the past 2 years (AIB is also a similar).

However What I do agree with what you say, there were a lot of small or 'punter' trades and there still are a good few going through, disregard the 15 or so odd units here and there that's just making up someones partial trade. A large proportion of punters accept the current 'bid' when selling and the 'ask' when buying. This moves the price up and down much more quickly than in the past in pre-internet trading days.

Punters tend to be more reactionary in their trading, taking to heart every bit of news and not digesting it properly. This has created the wild waves in the daily and weekly charts on BOI and AIB in particular in the past few months.

Oh and at 80c of course BOI was undervalued! It was trading way below its (at the time) TNAV!

A stock price is mainly driven by.
- the actual value of the company (will influence the pro more)
- the health of a balance sheet
- TNAV (tangible net asset valuation)
- the media influence on investors / punters
- investor relations by the company (will influence the pro more)
- in the day to day, rallys and sell offs / stop loss tumbling
- forthcoming events eg NAMA or Stock options, dividends etc.
- rarely a public relations crisis, or world shaking event, or disease etc.
- prospective earnings, projections, product launches etc.
- reports by reputable institutions like the ECB etc.
- changes in taxation, the budget
- and of course the economy global and local factoring in currency exchange as well...

There are probably a few other things like "sell in May" and such like...

MrMatisse

There was very little institutional buying in small blocks. Lots of selling though. Hundreds of small trades per day.

Any meaningful purchase of an Irish bank stock will send any funds/institutions VaR flying off the wall. They wouldnt touch it.

TNAV? The bank is insolvent.

Assets = Irish property loans.

MrMatisse

my point made yesterday is also backed by an article on page 9 of todays irish times.(business supplement)

If you dont want people to know what your buying you set up a nominee company, buying in small bits and pieces is pointless,costly,time consuming.

Once a trader or a more likely a hedge fund rings a broker/tells the floor dealer what to buy even if its to buy 500 euro worth of stock the word is out and speculation begins.

As i said and as it says in todays times, its a bear market rally being driven by the retail market.

Day one tradecraft?. Most trades now by funds/hedge funds and especially quant funds are automatic programme trades. You tell the computer what you want at what price, it tells another computer. Trade happens. or its following a set model. you could set it to buy in 20 grand blocks but thats a bit pointless when theres only machines involved. There not gonna email such and such to tell them such and such is buying this or that.

if your old fashioned and your trying to cover your tracks you make a big buy small sale, big buy small sale and gradually build up a net position watching the average price your paying.

MrMatisse

from the irish times website

'Stock market professionals note that most of the business currently being done in the market is down to small retail shareholders – presumably grasping at any good news in trying times.
The institutions, which are generally the main investment force in the market, are, we are told, still sitting firmly on the sideline.'

TTNYWWBM

Really stressed, in rebuttal to a few points, I'm not disagreeing with you in the main.

Financial Heavyweights / Institutions
We shouldn't believe everything that's printed in the papers, even the reputable Irish Times, their retired business editor is a friend of mine btw. 'Institutions' and 'Big Business' are well aware of the market volatility and yes the market saturation of punters and have adapted methods accordingly, wouldn't they be stoopid not to?

If the public think the financial heavyweights are sitting on the sidelines they would be very very naive. We're not sitting with thumbs up our a**es while a rally whatever you want to call it was happening. So make you own mind up ask brokers (in confidence) not journalists for the truth!

Even the Irish Times was careful enough to say most not all. If you watch trades every day like I do you see what's happening, this is what I do for a living as a serious private investor btw! If any broker I know was found blabbing to a journo they'd be in serious doodoo, do you really think broker is going to say "cmere and I'll tell u!" to a journo, we mind our own business!

TNAV (In the sense of Tangible / Total Net Assets Value)
Agreed it's mostly used in insolvency situations, however for example if a company's share is trading near it's TNAV +/- it comes into relevance. Also TNAV is a dynamic value, particularly for example as property is devaluing this depreciating effect on assets is profound. Just for example see 2nd last paragraph right down the very bottom:
http://www.finfacts.ie/irishfinancenews/article_1016725.shtml

Fair enough on everything else, computers do talk to computers, but still in basic share trading, they can be split to see which way the market will turn, I did this today and saved me 3 points on BOI quite significant!

A Nominee Company was/is a popular shield but any single trade over 20-30k still turns heads in todays market, that is indeed saturated with punters, so if you want to call the rally 'Susan' if you like, then really who cares? The facts are punters have added significantly to the trading volume but not replaced it. Still a huge % is partials from big business.

MrMatisse

the times article rings with what ive seen myself.

i dont think theres much big business in this rally at all.

daveirl

This post has been deleted.

TTNYWWBM

Daveirl, I never said 25k buy or sell was an institutional block?

The bulk of my point was that big business for want of a better description is indeed in the mix. It was not a purely punter driven rally.

I've seen smaller punter trades reduce significantly since the first BOI/AIB exodus a while ago.

daveirl

This post has been deleted.

TTNYWWBM

$? This was talking specifically about BOI and AIB a totally punter saturated market since the low of 12c in March!

Yep enough 25k shares (Approx €45k as BOI was around the 1.80 euro at the time btw) trades one way or another and the punters in the market will be influenced.

You are right you and I might not be impressed or influenced, but punters will follow the big money, and more punters have better online trading interfaces and do see the trades going through!

daveirl

This post has been deleted.

TTNYWWBM

See the attached trading today, daveirl, I know it's fyffes, but you see the buys of 14k of shares only 4200 euro! each, actually I do think its a good buy IMHO but for the right reasons through researching the company, and it's recent favourable results. See thread:
http://www.boards.ie/vbulletin/showthread.php?t=2055611064

A punter looks at this and says "Jeesh someone knows something I don't! Loads of buys! I'll take a punt..."

Remember our Mothers saying "If Johnny puts his hand in the fire would you do the same?"

daveirl

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cbweb

Good to read the interesting posts above.

I've been trying to understand the issues and doing research to help my understanding as much as I can. To that end, earlier this month I began a blog at http://colmbrazel.wordpress.com/

I've made an accompanying website at http://www.namasayno.com I will add more to as time goes on. You might be interested to read some of the points raised there as well.

thanks

Colm