"Fill your shoes" revisited

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:

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.

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

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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.

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. .

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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.

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.

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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

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.

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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

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.

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.

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.

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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

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.

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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.

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.....

Dan Murray said:

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

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Or alternatively, you could explain your point.

Brendan

Brendan Burgess said:

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

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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.

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.

"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.

joe sod said:

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

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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!