Time to buy bank shares?

[Firefly]

I know discussing individual shares is not permitted on AAM, but in general, do people think it is a good time to start buying? Personally, I'm edging towards buying (but need to convince Mrs. Firefly ).

 

[thespecialon]

I brought certain bank shares at 40 cent a share and most people in here were telling me i was mad!!! And they were probably right at the time, we live in strange economic times anything is liable to happen.btw i have since sold them off at aroud 2Eur a share, a nice tidy profit, but in essence it was gambling!!

 

[Howitzer]

I know discussing individual shares is not permitted on AAM, but in general, do people think it is a good time to start buying? Personally, I'm edging towards buying (but need to convince Mrs. Firefly ).

On what basis?

Do you see the Liam Carroll judgement yesterday as a positive?

 

[Guest116]

If you are looking to make short terms gains with shares then you are just gambling.

 

[Brendan Burgess]

This is very close to breaking the guidelines as there are only three banking shares - AIB, Bank of Ireland and Irish Life & Permanent.

We would certainly regard "is it a good time to buy Irish publicly quoted packaging companies? " a breach of the guidelines.

I think we made an exception before at the height of the crisis and if the discussion is kept at a very general level, we will allow this discussion.

 

[Bronte]

I know discussing individual shares is not permitted on AAM, but in general, do people think it is a good time to start buying? Personally, I'm edging towards buying (but need to convince Mrs. Firefly ).

Mr. Bronte wanted me to put 20K into 'bank' shares this year. He reckoned that they were so low the only was was up (He was correct). His logic was we wait until they doubled (they have more than doubled) that we take back the 20K and let the rest ride. A win win situation as they say. It's very logical, makes sense even. Only problem is I see it as the same as putting it on sure thing at 4.50 in Kempton. It was probably more a sure thing in that shares were so low it would be hard to lose short of the bank going bust (and that wouldn't happen in dear old Ireland where we have the government allowing banks free to gamble with all our lives). The reason I can't go for shares and I've been mightly tempted this year with 'banking' shares is that if you start where do you stop.

 

[z107]

Do you see the Liam Carroll judgement yesterday as a positive?

judging by the share prices today, this judgement does seem to be a positive. Why is that? Does anyone know?

 

[Firefly]

On what basis?

On a long-term basis. I think they'll be looked after by the state via NAMA or whatever else the gov can condure up. I wouldn't be surprised if any future profits (0-3 years) in Ireland were low, but these banks have international interests which could be more positive. I think that after NAMA the banks will take a large hit via writing off bad debts in 1 big go and then they'll be well capatilised.

Thanks for the advice Brendan, I hope this thread stays within the guidlines.

 

[Duke of Marmalade]

In the short run (next 12 months, say) this is all about the size of the NAMA haircut. It is well accepted that based on fundamentals (i.e. without State support) the shares are near worthless.

The NAMA haircut is now a hugely political hot potato. We all now know the balancing act, even Joe Duffy and that is dangerous.

Too deep a haircut and the State stumbles into quasi nationalisation which it seems definitely not to want. Too generous (with share prices suddenly soaring) would be political suicide.

Listen to Frank O'Dwyer of the IAIM, he sees the danger of the political pressure.

Buying bank shares at this particular point of time is a gamble on the politics of the NAMA project.

 

[Raskolnikov]

Before you even consider buying shares, ask yourself these questions.

- Have you ever read the annual report of a company?
- Can you read and understand the balance sheet of a company?
- Do you understand how the market capitalisation, dividend yield and price/earnings ratios are relevent to a stock?

If the answer to any of these questions is no, you have no business whatsoever buying stocks.

 

[Firefly]

Before you even consider buying shares, ask yourself these questions.

- Have you ever read the annual report of a company?
- Can you read and understand the balance sheet of a company?
- Do you understand how the market capitalisation, dividend yield and price/earnings ratios are relevent to a stock?

If the answer to any of these questions is no, you have no business whatsoever buying stocks.

I hear what you're saying, but given that the vast majority of professional investors are qualified in these areas were buying these shares a year-18 months ago at 10 times their present value, I'm not sure that your points (while relevant) should preclude a non-professional from investing.

 

[Firefly]

In the short run (next 12 months, say) this is all about the size of the NAMA haircut. ....
Buying bank shares at this particular point of time is a gamble on the politics of the NAMA project.

+1 Duke, and for my tuppence the gov is siding with the banks because it will get them out of a jam. The taxpayer will pay for this gradually over the next 10 years and the current FF'ers will be happily retired at that stage!

 

[Raskolnikov]

I hear what you're saying, but given that the vast majority of professional investors are qualified in these areas were buying these shares a year-18 months ago at 10 times their present value, I'm not sure that your points (while relevant) should preclude a non-professional from investing.

Being a "professional" has no bearing on how well you can pick stocks. Professional money managers are driven by herd mentality. They get their fees regardless of how well their picks perform. If they value their jobs; they will want to be performing in and around the level of their peers. After all, if they make an incorrect decision that's contrary to the market, they'll be fired. It's simply not worth it for them to deviate from the consensus.

I lost money on investments I made in 2008, but because I can do the things I described, I was able to minimize my risk.

 

[Duke of Marmalade]

Ultimately, the value of the Irish banks still hinges on a number of key variables: the NAMA haircut; the level of capital required in the 'cleansed' banks; whether there is a levy down the road to cover any possible second loss in NAMA; and both the pre-provision profit potential and impairment outlook for the 'cleansed' bank.
However, the recent publication of the draft NAMA legislation and the relative 'cheapness' of the Irish banks (on any post-NAMA estimate, be it operating profits, TNAV or more 'normal' earnings a couple of years hence) has put the Irish banks firmly back on investors' radar screens.

 

[joe sod]

if you buy shares in any company you have to do a proper valuation of that company, that is not possible with the banks because firstly they have not properly valued their bad debts, nobody knows how many people will continue to pay their loans if house prices continue falling, thirdly nobody knows what the government is going to do with the banks. Therefore buying bank shares is essentially gambling, therefore you have to weigh up the odds of the above events happening, warren buffet has already written off the losses he made buying irish bank shares, yet the banks themselves are refusing to write down their own losses and are still living in a world of unreality, no workers have lost their jobs as would normally happen in any other company that had such difficulties, so the banks are already operating like a quasi semi state company. there is world of investment opportunities out there with much stronger fundamentals than irish banks

 

[tiger]

The fact that people are even comtemplating buying bank shares surely SCREAMS that NAMA is a bad deal for the tax payer?

If capitalism was to prevail, the bank shareholders would already be wiped out?

 

[smiley]

Being a "professional" has no bearing on how well you can pick stocks. Professional money managers are driven by herd mentality. They get their fees regardless of how well their picks perform.

Excellent points Raskolnikov. People that invest in companies without doing some serious homework are doing nothing but gambling.

If I become interested in investing in a company i will do a very quick analysis of the company. Usually it doesnt take too long before i decide to investigate further or bin the idea. If i like what i see initially i can spend days/weeks investiagting further...and going through lots of annual reports. I read these starting at the back. Once i am happy i wait if i have to for a suitable share price.

The great investor Peter Lynch said "Investing without looking at the numbers is like playing bridge without looking at the cards."

Anthony Bolton has stated on numerous occassions that many analysts do not understand balance sheet risk. Many dont even look at the balance sheet! Madness. And these are the so called professionals!

For anybody that is interested in learning about how company accounts work this is a very good book: http://www.amazon.co.uk/Investors-Guide-Understanding-Accounts-Questions/dp/1897597274

On the Irish banks (i own some) most are still highly leveraged institutions. Leverage is wonderful on the way up, but highly destructive on the way down.

Warren Buffett once said that there are two things certain to kill you: drink and leverage.

 

[Chris]

The fact that people are even comtemplating buying bank shares surely SCREAMS that NAMA is a bad deal for the tax payer?

If capitalism was to prevail, the bank shareholders would already be wiped out?

I couldn't agree more. If free market capitalism would actually be allowed to run its path, then there would be no bailouts for failure. Free market capitalism is meant to reward success and punish failure. The constant intervention by governments and central banks has and will only make things worse.

 

[Bronte]

Before you even consider buying shares, ask yourself these questions.

- Have you ever read the annual report of a company?
- Can you read and understand the balance sheet of a company?
- Do you understand how the market capitalisation, dividend yield and price/earnings ratios are relevent to a stock?

If the answer to any of these questions is no, you have no business whatsoever buying stocks.

I'm sure Michael O' Leary did all of those things when he purchased 30% of Aer Lingus and much good it did it him. Ditto for the pilot's. A monkey picking shares is just as good as any expert.

 

[Chris]

I'm sure Michael O' Leary did all of those things when he purchased 30% of Aer Lingus and much good it did it him. Ditto for the pilot's.

Bad example as neither O' Leary nor Ryanair nor the pilots are professional/expert investors. The reason he bought shares was to take control of the company.

A monkey picking shares is just as good as any expert.

Depends who you use to define 'expert'. Soros, Rogers, Buffett, van den Berg, among others, have all proven the monkey analogy wrong.