# "Fill your shoes"  revisited



## Bronco Lane (5 Nov 2015)

_ moved from the thread on Day Trading _

I remember you telling us all years ago to "fill your shoes" when the Bank of Ireland share price was falling. Did you ever hear the saying "never catch a falling knife". Why did you tell us to "fill our shoes? Sentiment or something else?  Are you prepared to tell us now all these years later or are you going to delete my post?
Believe it or not it was exactly the outcome of your comment that got me involved in Day Trading. I remember thinking that this guy actually believes this. There has to be some way of making money from people who believe this kind of thing.

https://www.youtube.com/watch?v=z2q7bBVAo74


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## Brendan Burgess (5 Nov 2015)

Bronco Lane said:


> I remember you telling us all years ago to "fill your shoes" when the Bank of Ireland share price was falling. Did you ever hear the saying "never catch a falling knife". Why did you tell us to "fill our shoes? Sentiment or something else? Are you prepared to tell us now all these years later or are you going to delete my post?



Why would I delete your post? For misquoting me? It's better to correct the misquote than to delete it. 

http://www.askaboutmoney.com/thread...rty-prices-and-borrowing.133122/#post-1009150


"Bryan Dobson: “Just finally …Irish bank shares are down at where they were in the mid 80s. Is that a buying opportunity?”

Brendan Burgess: I think we are going to look back in a few years time at the state of the Irish banks and the Irish stockmarket generally and say how did we not fill our boots with those shares.

I might regret saying that later

Dobson: Brendan Burgess on your head be it."


The ISEQ General Index was  7,136 at the time. Today, it's 13,582 - i.e. it's up 90%. 

_Believe it or not it was exactly the outcome of your comment that got me involved in Day Trading. I remember thinking that this guy actually believes this. There has to be some way of making money from people who believe this kind of thing._

I am sorry that you lost money from not believing me.


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## Bronco Lane (5 Nov 2015)

"Bryan Dobson: “Just finally …Irish bank shares are down at where they were in the mid 80s. Is that a buying opportunity?”

Brendan Burgess: I think we are going to look back in a few years time at the state of the Irish banks and the Irish stockmarket generally and say how did we not fill our boots with those shares.

I might regret saying that later

Dobson: Brendan Burgess on your head be it."

I am sorry that you lost money from not believing me.[/QUOTE]

You were wrong and I didn't believe what you were saying on RTE, and I was right not to believe you. Also I didn't lose money because of you. I actually made money because of you. Unfortunately many other people believed in what you said and purchased bank shares for the long term and lost money. Their fault, but your comments did not help. While these were purchasing, others were selling. Among those buying & selling at the time were many Day Traders, these were the people who made money. 

Your state that share price movements are random. Do you not think that your comments caused an anomaly to the randomness that you speak of, to the banks share price fluctuations?

For some people holding shares for years is the norm. For some people holding shares for a few months is the norm. For some people holding shares for one full day would give them palpitations.
Some people only want to hold them for minutes.

As I said before there is a time to buy and a time to sell. You decide the timeframe and if you are making a profit then you are not making a loss.


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## Fella (5 Nov 2015)

I think its unfair to point to something someone said years ago. I have given loads of bad advice in my time! I'm just lucky no one filmed me and can relay it to me , but meh he was asked a question and on the facts he had at the time he answered it , he was either going to be right or wrong. He can only answer on all the information he had at the time and maybe it was a good time to buy but more information made it a bad time to buy, the fact is nobody knows what way the market is going. I kinda feel you and Brendan are debating different things , I see what your saying you are "on it" trading small bits of news that happen each day but Brendan is talking about not beating the market long term like comparing to a person buying and holding stocks. I could probably day trade I appreciate that the day traders are making money out of marco moves in my stocks that I couldn't be bothered to micro manage .


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## Brendan Burgess (5 Nov 2015)

Hi Bronco

I get lots of things wrong, but I was not wrong with that comment other than  I should not have answered the question.  I was asked to come in and explain how the €20,000 deposit guarantee worked and whether it should be increased or not. I explained very clearly that guarantees are not free, and that it should not be increased from €20,000.

When he asked me the final question, I should have replied "You asked me to talk about the bank guarantee - I would need a lot longer to talk about investing in shares."  My summary "I think we are going to look back in a few years time at the state of the Irish banks and the Irish stockmarket generally and say how did we not fill our boots with those shares." has been shown to be right. The ISEQ has increased by 90% since then.   I stayed invested in the stockmarket back then and I am glad I did.  I wish I knew then which shares were overvalued and which were undervalued but I don't have that skill, which is why  I had and still have a balanced portfolio. The stockmarket continued to decline after September 2008. I continued to advise that a balanced portfolio of shares was the best long term strategy.  My AIB shares were wiped - but the gains on the other shares far outweighed the losses on my bank shares.

Brendan


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## Sarenco (5 Nov 2015)

Well, the ISEQ General Index has certainly recovered strongly over the last 7 years but I'm afraid the same can't be said about the financial constituents of that index.

If reinvested dividends were included, the divergent performance of the financial and non-financial stocks would look even more dramatic.

To be honest, I don't have a dog in this fight.  I really don't believe any retail investor should ever have any need to hold shares in any individual companies any more, whether for a minute or three decades.

However, if people want to spend their time searching for unicorns - well, fire ahead...


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## Dan Murray (5 Nov 2015)

Brendan

I just had a look at the infamous clip....

Are you looking for a professorship in Trinity?! 

Remember - you were invited onto the programme as an expert - and consequently are subject to exacting standards.

You said the banks were well regulated - Not true

You identified liquidity as the key risk to banks - Not true

That was then. Today you wrote......



Brendan Burgess said:


> I suspect that this is very rare and is part of PaddyPower's PR to make punters think that they can make money.



This, of course, is true because it's what you suspected. It, nonetheless, is undeniably wrong - my son worked with a large bookmaker and I can confirm the accuracy of Fella's post in this regard.


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## Brendan Burgess (5 Nov 2015)

Hi Dan 

As I said, I often get things wrong.   And of course I was wrong about the banks being well regulated. But we did not know at the time what we know now about the Central Bank. 

The key risk to the banks at that time certainly  was liquidity. There was the beginning of a run on the bank. I said that the banks were solvent.  That was probably not correct.  But a few months later, PwC, having studied the capital position of the banks on behalf of Finance came to the same conclusion. 

Did you watch the whole interview?  I was very clear that if lenders were not solvent, they should be let fail.  That the deposit guarantee should not be raised above €20,000.  That would have saved the taxpayers a lot of money. But that might be wrong as well.  Had AIB and BoI been let fail, there would have been even bigger damage to the economy.  Irish Nationwide and Anglo should certainly have been let go. 

Brendan


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## Dan Murray (5 Nov 2015)

I suppose what I'm wondering - and apologies if you have covered this elsewhere previously - is what evaluations had you done to support your contentions that:

1. The banks were well regulated?

2. The banks were solvent?


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## Brendan Burgess (6 Nov 2015)

Hi Dan

I think it's worthwhile reading the full transcript of that interview:

http://brendanburgess.ie/brendan-bu...burgess-advises-against-government-guarantee/

Joan Burton was calling for an increase in the government guarantee and I was advocating strongly against it:

"Dobson: *Is it not unthinkable that an Irish government or any government would allow a retail bank*, a major retail bank with all these branches and with all these customers *to go under? *

Brendan Burgess: I don’t think it’s inconceivable at all. *The Government regulates Irish banks but the government does not and should not guarantee Irish banks and that is a very , very important distinction. *

*If banks behave badly in their lending or if they are reckless in their management or whatever, they should be allowed to go to the wall *and that is a fact of economic life.

It would have an effect on the economy but giving some sort of soft guarantee to a badly managed banks would be irresponsible and very bad news for the long term."

Back to your questions.  Why did I form the wrong opinion that the banks were well regulated?  I dealt with the Financial Regulator on consumer issues, and they weren't great.  Because of the banking secrecy rules, we got no insight into their prudential supervision. However, I was under the impression that they were very conservative. They were proactive around the time of the Northern Rock issue. I had put down a motion of no confidence in Michael Fingleton a few years earlier, and they prudential guys tried to block it saying that it could damage confidence in the bank and trigger a run.  At that time, Pat Neary and Con Horan had very good reputations.  I was wrong in my assessment, but there was no evidence at all at the time which would suggest otherwise.

Why did I conclude that the banks were solvent?  The big issue affecting international banks at the time was the securitised sub-prime loans and complicated derivative products.  The Irish lenders had little or no exposure to them. According to the accounts, the Irish banks were very well capitalised and could comfortably withstand a crash in property prices. As I have noted above, some months later, PwC examined the books of all the banks, and concluded that they were solvent. From memory, I think that they concluded, that not only were they solvent,  but that they were adequately capitalised.


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## Dan Murray (6 Nov 2015)

Thanks for the explanation, Brendan


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## Steven Barrett (6 Nov 2015)

The best sight is hindsight.

Easy to through back comments made 7 years ago after the subsequent disclosures of how the banks behaved and how the Central Bank was asleep at the wheel. 

Remember, the banks hoodwinked the government too, something that saw the IMF called in and the Pension Reserve Fund decimated. The effects of the lies will be felt for generations. 


Steven
www.bluewaterfp.ie


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## Sarenco (6 Nov 2015)

As the saying goes, “prediction is difficult, especially about the future”.

However, the errors of the past should, hopefully, lead to wisdom and success in the future.

The lesson I would draw from the recent financial crash is that it is (and always was) very risky to invest any significant portion of your net worth in a concentrated portfolio of equities, particularly a portfolio of shares issued by companies in a single sector of a small economy.


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## joe sod (6 Nov 2015)

That's true but is there a danger people are making the same mistakes again with the dairy and food companies. They now constitute a large proportion of the iseq just like the banks did back in 2007. Even with the trouble in world food markets with the closure of the Russian market  and China jitters their shares keep rising inexorably. It's a side issue but it is noticeable.


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## Sarenco (6 Nov 2015)

joe sod said:


> That's true but is there a danger people are making the same mistakes again with the dairy and food companies. They now constitute a large proportion of the iseq just like the banks did back in 2007.



I couldn't agree more. 

Making mistakes provides a great education but you need to understand what your mistake was in the first place before you it can teach you anything.


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## Bronco Lane (6 Nov 2015)

Brendan Burgess said:


> The ISEQ has increased by 90% since then. I stayed invested in the stockmarket back then and I am glad I did



Was the 90% calculated after the bank shares had crashed or before the bank shares had crashed? It would be interesting to see the percentages over different timeframes.

Back in the day many investors would have invested in the top companies. AIB, BoI, IPBS, INM, CRH, Fyffes, Glanbia, Kerry Group, ICG.  If they were weighted in the first 4 named then they would have been almost wiped out. I believe many invested in the banks believing them to be a safe investment.

Having lost their money many would not have the money nor the inclination to reinvest so they would not have benefitted from any upturn.

I was not a holder of the bank shares but I was and still am a holder of INM & CRH. In addition to Day Trading I also held shares medium term. Now for me, medium term is about a year maybe two. Unfortunately for me, I am holding about 8 shares (mostlY U.K.) that I had hoped to keep medium term but have now turned into long term.

Stupidly I have not cashed in the good ones when they were on a high and bought back in again when they were low. If I had done this I would have eroded those losses built up in the dogs that I own.


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## Steven Barrett (6 Nov 2015)

The ISEQ index since the night that Brendan made his tv appearance...and how it's done against the S&P 500 and MSCI World Index.

Edit: Problems uploading the graph. 

The S&P 500 has risen 162.73%
ISEQ has risen 143.86%
MSCI World Index has risen 113.42%

I still wouldn't recommend investing in the Irish index though, far too small an index with not enough diversification. High risk stuff.


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## Brendan Burgess (6 Nov 2015)

SBarrett said:


> ISEQ has risen 143.86%



Hi Steven

I have calculated it at 90%.  Are you looking at the index excluding banks?  I am looking at the Overall Index, total return.

Brendan


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## Steven Barrett (7 Nov 2015)

Brendan Burgess said:


> Hi Steven
> 
> I have calculated it at 90%.  Are you looking at the index excluding banks?  I am looking at the Overall Index, total return.
> 
> Brendan



Hi Brendan

I'm using the data supplied by FE Analytics, a fund returns piece of software that I use. It would be a general index


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## galway_blow_in (7 Nov 2015)

Bronco Lane said:


> _ moved from the thread on Day Trading _
> 
> I remember you telling us all years ago to "fill your shoes" when the Bank of Ireland share price was falling. Did you ever hear the saying "never catch a falling knife". Why did you tell us to "fill our shoes? Sentiment or something else?  Are you prepared to tell us now all these years later or are you going to delete my post?
> Believe it or not it was exactly the outcome of your comment that got me involved in Day Trading. I remember thinking that this guy actually believes this. There has to be some way of making money from people who believe this kind of thing.
> ...





Sarenco said:


> As the saying goes, “prediction is difficult, especially about the future”.
> 
> However, the errors of the past should, hopefully, lead to wisdom and success in the future.
> 
> The lesson I would draw from the recent financial crash is that it is (and always was) very risky to invest any significant portion of your net worth in a concentrated portfolio of equities, particularly a portfolio of shares issued by companies in a single sector of a small economy.




i sometimes hear people refer to the fact that they had their pension in bank shares and thus condemn all pension plans as a result , since when is a legitimate pension consisting of only one sector in one country , i would not call that close to a pension , a very narrow portfolio


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## Brendan Burgess (8 Nov 2015)

Hi Steven

We should be looking at the ISEQ Overall, Return Index - as this includes all the shares. Your figures are for the ISEQ General Index which excludes AIB, BoI, ptsb, FBD and IFG. 

Here are the correct figures:


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## Duke of Marmalade (9 Nov 2015)

It could have been worse, he could have advised to fill your boots.

Seriously though.
I don't think Brendan purports to have insider info. His advices are based on publicly available info.  I remember at about the same time my doctor, whose pension was obviously invested in Anglo shares, asking me (knowing I was in financial services) what I thought of Anglo. He was clearly worried.  I remember answering that the regulators and auditors said everything was fine but that the stockmarket didn't believe them. Not so much a "fill your boots" but not quite a "empty your slippers".

If Brendan had said dump your bank shares he would have been quite irresponsible, he had no publicly available info to say that.  It would have been pure speculation.   Of course, with hindsight he would have been proved right and he would now be head of the Trinity economics faculty.


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## Bronte (10 Nov 2015)

galway_blow_in said:


> i sometimes hear people refer to the fact that they had their pension in bank shares and thus condemn all pension plans as a result , since when is a legitimate pension consisting of only one sector in one country , i would not call that close to a pension , a very narrow portfolio



Was it also not the case that Irish company pensions in particular were heavily loaded on Irish shares, and especially Irish bank shares.  And the powers that be thought this was a good idea.


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## Bronte (10 Nov 2015)

Duke of Marmalade said:


> I remember at about the same time my doctor, whose pension was obviously invested in Anglo shares, asking me (knowing I was in financial services) what I thought of Anglo. .



My OH's brother thinking he knew about shares (assumption) landed out with a glossy brochure once to him and said what will I invest my 5K in.  Needless to say he lost everything and that would be a lot of money to him.  My OH told him he didn't have a clue.  That's the best thing to tell people so that you are not blamed afterwards.  From my own point of view, and you'll disagree as will others, I find shares to be no better to gambling on horses.  But some people are very good at it and make plenty of money from it.  But it's on the backs of all those who lose is all I can deduce.

I can't believe anybody would buy shares based on a guy on the Six One news.  Didn't Bertie make a suicide remark about property and there was another politician that told people at the very pinnacle of the boom to buy property.  Some gombeen one, ?  it will come to me.


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## Dan Murray (10 Nov 2015)

Duke of Marmalade said:


> If Brendan had said dump your bank shares he would have been quite irresponsible, he had no publicly available info to say that.  It would have been pure speculation.



It is simply wrong to say that there was not publicly available information to opine that the bank had serious solvency issues - see Morgan Kelly's clips below.

Also, I've been thinking about this topic more generally.

One can judge the calibre of the man that Brendan had confidence in from the clip below of the 2nd October 2008. I recall watching at that time and not getting a warm, cuddly feeling.

https://www.youtube.com/watch?v=QXu40YW_quw

I also think Brendan's comments regarding the strength of the banks need to be considered in comparison to other commentators. Look how prescriptive Morgan Kelly is in these two clips from 17th April 2007 and 30th September 2008. I especially like, Jim Power's facial expressions in the 2007 interview - priceless.

https://www.youtube.com/watch?v=Gd6ZwqLePC0

https://www.youtube.com/watch?v=11CCxv2ueiQ


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## galway_blow_in (10 Nov 2015)

Bronte said:


> Was it also not the case that Irish company pensions in particular were heavily loaded on Irish shares, and especially Irish bank shares.  And the powers that be thought this was a good idea.



well if they were , that doesnt say much for the industry , many banks were selling products which were about returns for the banks rather than the pension buyer , i would not invest in a pension which didnt have a global scope across all sectors


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## Brendan Burgess (10 Nov 2015)

Hi Dan

Morgan Kelly was one person who made what were seen as extreme comments on the banking system. I attach the spreadsheet he used to calculate the losses to taxpayers.

He said that the optimistic loss to the taxpayer would be €52 billion and the realistic loss (not sure if this is the loss for the taxpayer or the total loss)  would be €106 billion.

He said that the realistic loss on Anglo would be 38 billion and Irish Nationwide 3 billion.  It will probably be around €30 billion combined.

He said the realistic loss on AIB would be €37 billion.  AIB and the government is forecasting that the taxpayer will get their full investment back. That seems a bit optimistic to me, but we won't lose €37 billion on AIB. 

He said that the realistic loss on BoI would be €26 billion. We have made a profit on our investment.

He came on the scene at the peak of the bubble which was too late. Mc Williams said we were in a bubble back in 1999 , when clearly we were not, so he was way too early.

Kelly thought that the guarantee was a huge mistake. McWilliams said it was a master stroke and that it should have been wider.

Which of these  two mavericks with completely different views should the government have listened to? Unfortunately for the taxpayer, it was McWilliams and not Kelly.

Since Kelly's pronouncements, he has got lots wrong - see
*"Morgan Kelly's Hits and Misses"*
"We would be demolishing more houses than we are building."
*"If you thought the bank bailout was bad, wait til mortgage defaults hit home." way off. 
"*The state will need to provide €5 billion to the banks for the losses on €1m+ home loans" August 2011 - nonsense

So, not only do you have to pick the right economist. You also have to know which of his actual pronouncements to pick. There was really no good basis back at the time of the guarantee to have any particular confidence in Morgan Kelly in general, and that particular pronouncement in particular.


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## Dan Murray (10 Nov 2015)

Hi Brendan

I think we will have to agree to differ 

I think what's at debate in this thread is your specific comments. In this context, I made two comments today.

1. Morgan's analysis of the extent of the property bubble and consequent massive impact that this would inevitably have on banks was not only on the money but based on publicly available information which you and others choose incorrectly to take sufficient regard of in your analysis/public comments. I have had my disagreements with Morgan on other issues but let's acknowledge please that he was right in this specific regard.

[You can't have it both ways - as in "he came on the scene at the peak of the bubble which was too late" and simultaneously defend your position the extent of the solvency issues were not visible when you made your comments 1 year and 5 months after the clip showing Morgan's comments! This is simply not a logical position to take.]

2. Mr. Neary never impressed me as a capable regulator. Personally, I would have been very, very reluctant to express unqualified confidence in him as a regulator and by extension, the quality of regulation in the organisation he was responsible for.


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## Brendan Burgess (10 Nov 2015)

Dan Murray said:


> 1. Morgan's analysis of the extent of the property bubble and consequent massive impact that this would inevitably have on banks was not only on the money but based on publicly available information which you and others choose incorrectly to take sufficient regard of in your analysis/public comments. I have had my disagreements with Morgan on other issues but let's acknowledge please that he was right in this specific regard.



Of course, we *now *know that he was right on that occasion. And of course, we know that I was wrong. 

But my main point is that there was no way whatsoever of knowing *at the time *that Morgan Kelly was right.  He seems to have gone quiet lately, but if he reappears tomorrow forecasting the collapse of the euro and some other economist says that it won't collapse, we won't have any idea whom to trust. 

The world is uncertain.  That is why I have always recommended holding a diversified portfolio of shares. I lost most of my investment in my shares in AIB, but have compensated for my losses elsewhere in my portfolio.  I would love if you or Morgan Kelly could tell me today exactly which shares would rise over the coming year and which would fall, but you can't. 

I am not sure why my position is illogical? I didn't believe Morgan Kelly at the time he made the comments.  I did believe the Central Bank and the Financial Regulator and the vast majority of other commentators. I may have been wrong, but I don't see how it's illogical. 

Brendan


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## Sarenco (10 Nov 2015)

Brendan Burgess said:


> I would love if you or Morgan Kelly could tell me today exactly which shares would rise over the coming year and which would fall, but you can't.



Surely that's the key takeaway.

Forget looking for a needle in a haystack - just buy the haystack.  

Most retail investors have no good reason to hold a concentrated portfolio of individual stocks and yet many continue to do just that.


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## Dan Murray (10 Nov 2015)

Hi Brendan

If you don't see my point or choose not to, it's up to you.

Let's just agree to differ on this one.....


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## Brendan Burgess (10 Nov 2015)

Dan Murray said:


> If you don't see my point or choose not to, it's up to you.



Or alternatively, you could explain your point.

Brendan


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## Duke of Marmalade (10 Nov 2015)

Brendan Burgess said:


> Since Kelly's pronouncements, he has got lots wrong - see
> *"Morgan Kelly's Hits and Misses"*


I think this was the  last time that Morgan had one of his sporadic public doomfests.  The article does not therefore cover the assessment of this particular one.  Let me remind folks (I watched the video again).  He was in fact making some very short term predictions of a looming disaster.  Brave indeed but more likely hubris.  The thrust of his message was that the upcoming ECB stress tests (due in the fall of 2014) would be used to make a lesson of Ireland.  Banks would be made to purge the SME sector, the results would make the 2008 crisis look like a picnic.

The stress tests came and went.  Only PTSB failed and that was easily remedied.  Where was the grand conspiracy that would teach Ireland a lesson and decimate the SME sector?

Don't get me wrong, Morgan's PrimeTime performance in September 2008 was a classic, I never tire of watching it. But since then he has had a very poor run of form.  Unfortunately Michael Noonan believes we should take him seriously because of that one spectacular success, fortunately Morgan, undoubtedly aware of his poor record since, seems to have gone to ground.


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## noproblem (10 Nov 2015)

I would suspect that Morgan Kelly has stayed quiet because of the vitriol directed at him from certain sections of "society" who were 100% out of touch, but had media friends. Then again, saying he's quiet at the moment is somewhat questionable, he has made certain points that may yet "happen". Time will tell. Let's hope that if it happens to be somewhat true, the so called experts will show more respect.


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## joe sod (10 Nov 2015)

"Don't get me wrong, Morgan's PrimeTime performance in September 2008 was a classic, I never tire of watching it. But since then he has had a very poor run of form. Unfortunately Michael Noonan believes we should take him seriously because of that one spectacular success, fortunately Morgan, undoubtedly aware of his poor record since, seems to have gone to ground."

probably at that time he was absolutely certain he was correct, maybe it was a moment of extreme clarity and brilliance. Since then he has had opinions but not that absolute certainty. But George Lee was also spot on with his critique of the irish economy in 2006 but it was not as memorable because the crash did not happen for 2 years.


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## Dan Murray (10 Nov 2015)

joe sod said:


> George Lee was also spot on with his critique of the irish economy



This is my recollection also - George does not get enough credit for the quality of his analysis. I think his warnings from the mid-noughties that we were on a slippery slope were very solid.

I remember one excellent piece from c. 2005 (I just can't find the link) where he warned about the folly of banks lending silly multiples of salary and/or 100%+ mortgages. Of course, the regulator allowed the banks to carry on such reckless lending.........a public example of poor regulation that some on this site will, no doubt, dispute!


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