Fitzpatrick's Loans?

Smiley is making a very valid point. You should be able to handle a 100% loss of any particular investment.

The senior executives of Anglo appear to have been fully invested in Anglo and probably had borrowed money to do so. This would be a very foolish strategy.

If Smiley has a broad portfolio, he can live with the loss of his investment in Anglo and take a balanced and relaxed view of events. If he had bet his shirt on Anglo, he would be less forgiving.

This is a theoretical point about diversification. I am not excusing Fitzpatrick's behaviour.

Brendan
 
smiley said:
Why do the Irish love to see successful business people get into trouble??
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I cannot believe you use the word successful in relation to this person's actions. It will take me a long time to get over hearing him being interviewed by Marian Finucane and that's before we heard some of what's going on. And I say some. As for anyone who thinks he got the loans at normal commercial rates...... no way, it was normal "special" commercial rates. The rates you and I cannot get. The auditors didn't even spot 'the loan' so who is to say what is a normal commercial rate. It's a lovely cozy club with those bankers. As it was ever and will ever be.
 
The problem is that correlation seems to have increased across asset classes. Owning a geographically diverse bunch of stocks didn't help last year. Owning property, junk bonds, emerging market bonds. even investment grade bonds didn't help. Unless you owned cash/Govt. bonds you got whacked last year.
We may need to rethink what diversification means.
 
tyoung said:
Owning a geographically diverse bunch of stocks didn't help last year. We may need to rethink what diversification means.
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Last year? I couldnt give a monkeys about one year. Anybody that takes a short term view like this might as well go down to the bookies.

Personally speaking i would own a basket of about 15 companies with more money invested in some, much in a similar way to what Mohnish Pabrai advocates in his book 'The Dhando Investor'.
 
Let's see what the Institute of Chartered Accountants makes of the affairs of the three accountants who have now resigned from Anglo - the Chair, the CEO and the FD. Wow!
 
I never realised this but in the past company executives were often given loans that were subsequently 'forgiven'. Yes, 'forgiven'. Companies would give loans to senior managers at below market rates of interest and then often quietly forgave the loans a few years later.

In the US this used to go on until the Sarbanes-Oxley act banned it in 2002.
http://en.wikipedia.org/wiki/Sarbanes-Oxley_Act

So at least Sean Fitzpatrick wasnt given a golden handshake.
 
smiley said:
So at least Sean Fitzpatrick wasnt given a golden handshake.
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Well if he doesn't have to pay back the loan what would you call that? Forgiven loan. If he paid little or no interest on it what would that be called? Normal commercial rate. Aren't words great.
 
When someone says it is not the money its the principle, it usually IS the MONEY.

It is is worth remembering this as a regulatory principle.
 
Bronte said:
Well if he doesn't have to pay back the loan what would you call that? Forgiven loan. If he paid little or no interest on it what would that be called? Normal commercial rate. Aren't words great.
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He does have to pay back the loan. Nobody said he never had to pay back the loan.
 
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