Monday, October 6, 2008

The bail out to where?

Where is this all going. Ireland, followed by Greece and now one of the big Euro four, Germany.

Watch the Irish banking stocks tomorrow, I expect drops, as their unique competitive advantage from last tuesday disappears.

Here's whats most worrying about this; it is plainly obvious that at least one of the six guaranteed Irish institutions is a basket case - weighed down with loans tied up in deprecating property.

Its increasingly difficult to see how their collapse, or lets say, their end of being an independent company, can be avoided. The benefit of the Irish bail out was that, overnight, bogey Irish institutions became globally unique (with exception of Northern Rock).

But now that the Germans, Greeks and presumably the other Euro countries by the end of the week, are also guaranteeing deposits, their USP disappears. At this point they will be naked to the market and off we go again, collapse in share price and flight of capital irrespective of Ireland's guarantee. Remember confidence is an emotion.

I have no doubt that the end of this week will deliver a longer term indicative verdict on the Irish Banks future.

p.s. - From Worth a read.

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