jaedi

Historic Post-Crash Market Returns: How Will This Crash Fare?

You're forgetting that annual percentage returns are compounded. The figures over a span of several years are way off.

Ireland's Ailing Banking Sector

Where do I start?

Maybe I should let RTE's current affairs program do it for me:

www.rte.ie/news/2008/1...

The problem in the Irish financial system is twofold - a lack liquidity due to the international credit crunch - and SOLVENCY which will become all too clear when the Irish banks are forced to reveal all the hidden bad debts on their books from collapsing Irish property market.

Although the Allied Irish Banks (AIB) share price has bounced nicely, we can look forward to extended negative shocks. Both the bank's management, the country's politicians and even the financial regulator, Patrick Neary, are effectively in complete denial about the domestic source of the problem - huge property speculation financed by the banks, and completely useless regulation which permitted the leveraging to explode with no basis in fundamentals. The massive deleveraging process taking place across the globe will be magnified in Ireland.

So why are we not seeing this in their balance sheets? As one Irish senator put it - Irish banks are incestuous - among themselves and with their clients. They're in bed with the property developers and constructors to such an extent that they are avoiding calling in their loans which are massively in breach of the covenants (conditions) already. The values of the assets on the banks' balance sheets is now completely unrealistic and therefore the amount of bad debt is invisible to investors doing their due diligence.

At least, it will be an interesting fourth quarter. Avoid AIB, (ALBK on the London Stock Exchange) and IRL (Ireland ETF) for the moment.

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iShares ECH holdings:
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Attractively Valued International Dividend Stocks

Watch out for Allied Irish Banks. Although AIB is relatively well managed, Irish financials in general have far more to fall before they reach a floor. Irish banks balance sheets are full of toxic assets. In Ireland they don't call it subprime but mortgages were given at ridiculous multiples of gross salaries for property that was over-valued to a much greater extent than in the US. Undeclared credit union (i.e. savings & loans institutions) are used by property buyers to pay for deposits which drives up the effective salary multiple even more. They are also over-exposed to property developers who have speculative holdings in agricultural land priced at over 7 times the average European value. Construction has collapsed across the board and the banks will be left holding worthless loans to bankrupt property developers. A silver lining is their ownership of a large Polish bank and other assets in Eastern Europe.