A new dip is courtesy of our Government's 'Best 5 Ways to Ruin a Country' Framework that I released yesterday (beating the Irish Times in bringing it to public attention by some 12 hours - here).
But enough bragging - back to charts.
The first one is self-explanatory:
Mass of volatility (risk) being dumped onto Irish shares by our Government wobbling on economic crisis and banks is self evident. If the Government was really accountable for its actions, maybe investors could have taken it to courts for value destruction.Alas, this is not how the real world works. Here, on Planet reality, Brian-Brian-Mary prevaricate (in taking hard decisions), we pay. And so it looks like we've had a bear rally and now we are back on a downward track. The only hope - it might bottom out at somewhere above 550 for ISEQ FIN this time around, fingers crossed.
It is the second chart that opens up a more detailed picture of the latest outbreak of the Irish markets disease.
As shown above, weekly correlation between Irish Financials (ISEQ FIN) shares index and the broader Eurozone markets had a series of rollercoaster rides ever since the current Government took up a task of 'fixing' our economy. In particular, Irish markets forays outside the 'No Hedge' territory - into low positive (below 0.25 or negative) correlation values implies that at virtually every point of change in the Government policy, an investor would have done better by betting against the Irish market and in favour of the broader European indices. As powerful of an indication as one can get that markets do not trust this Government in resolving Ireland's economic crisis.I mean, how bad can the things get for a Government if selling into Brian-Brian-Mary's statements can become a winning strategy for investors?..
I really enjoy your blog and as much as I agree with a lot of what you write, I think that looking a the performance of a sickly subsector of the stock market is not the best barometer of this Government's ineptitude. If you were to repeat your analysis for US, UK or European financials the results would not be dissimilar.
ReplyDeleteI also disagree that the government has dumped risk upon the Irish stock market, indeed I think that the reverse is true. The goverment has transferred stock market risk to the taxpayer (with no upside) via the hastily announced bank guarantee and the soon to be completed recapitalisation.