The continuing saga of the Irish banking system took another twist on Friday as tracker funds were mandated to sell the Irish banks as they fell off the Morgan Stanley Composite Index. Allied Irish Bank shares were down 20% at 0.38 cents and Bank Of Ireland were down 30% at 0.19 cents.

Allied Irish Banks report their results tomorrow and it will be interesting to see where the share price ends up. At this stage I wonder what Eugene Sheehy could possibly do or say to pull these shares back from the brink.

I know this isn’t confined to Irish banking shares but the Irish banking system seems to be suffering from sever lack of confidence. The plunge today of Allied Irish Banks to 0.29 cents assumes the bank is worthless and values the bank at around 278 million. Bank of Ireland and Irish Life and Permanent stocks have also fallen to new lows. This is quite amazing and worrisome not only for the banks, government but for me as an Irish citizen. Ireland stands on the verge of yet another downgrade and our government better step up to the challenge soon because the ramifications of inaction are unthinkable.

Some more reading on the topic.
Irish regulator: bank short selling ban in place
Irish financial stocks suffer further falls
AIB chief executive’s message to staff
http://www.thepropertypin.com
http://www.askaboutmoney.com

Wow what a start to the week. Today Ireland takes another plunging step into what I’m sure our children will term “The Depression”. I’m not one for doomsday scenarios but the bleak outlook for Ireland just seems to be spiralling out of control as the government stand idly by dumbfounded by the accelerating momentum.

I’m looking at the complete and utter collapse in confidence in the Irish banking system. Allied Irish Banks (AIB) is trading down 45% at 0.80 cents while Bank Of Ireland are down 35% at 0.49 cents after Goggin steps down early. This is amazing and looks like a run on the banks. I’m not sure if the ban on shorts being lifted has accelerated this but there are many people panicking now. Some of the message boards read “this is a bloodbath”, “I can’t work as the world is in meltdown outside the office”. Others apologise for offering advice “I would like to retract my advice to buy at 11 Euro”. Today is going to be a very interesting day for the government and the Irish banking system.

As I type AIB are down 50%. Carnage is the only word to describe the ensuing sell off. Thankfully I dumped a long, long time ago. So where do we go from here and are AIB and BOI the next to be nationalised as they fail to recapitalise? Interesting times ahead.

Well I for one am putting my neck on the line by stating that this could be one of the lows if not the low before the year end. Whilst we may test these lows again I don’t see us going lower than 3500 on the FTSE 100. So how does this affect my trading, well I’m still long.

The Trend Continues
Putting my money where my mouth is I placed a 3 Euro buy on the FTSE last night at the US close. However as I had two positions already open I had my finger on the trigger and was watching the close as I pushed the button. As I turned to the screen I realised to my horror that I had sold thus closing my existing positions for a very large loss. It’s still too raw to fully discuss but it will be in my trades next week. This is a diary after all documenting the ups and downs.

I went on to place a 3 Euro buy which is now in profit and to reinforce my conviction I think I will leave this alone and stop pressing buttons. I am now down 35% from my high which will give you an indication of the losses I have been taking recently. I hope you are all trading safely, although that brings me to another point. I had a sell on the DOW but due to my recent follies I placed a stop. This was just triggered even though I has 80 points margin and then it sold off. I was 800 Euro out and was stopped out for 0. Stops in this market are so hard to call with swings of 5%.

Just as an aside is it time to dip back into banks?
Bank Of Ireland 1.80 Euro
Allied Irish Bank 2.70 Euro.

How low is low and do you think it’s worth a few quid, interested in any comments.

Fears still abound and financials are taking the beating of their lives. It’s the car crash scenario where you can’t look away and every time you look it looks worse. The ISEQ index of Irish shares is down 20% in the last five days. This has taken Bank of Ireland down to 4.50 and Allied Irish Bank to 6.90 (my purchase at 11 was not my greatest moment). Other recession proof industries like gambling are also taking it on the chin. Paddy Power is down 25% with rivals William Hill and Ladbrokes taking a trouncing. In fact there is very little on the upside. No shares on the FTSE 100 are in positive territory.

However with my -2.50 sell on FTSE yesterday not above 400 Euro I can’t complain. The question now is where to short again?

How wrong was I when I placed a 2.50 buy bid last night thinking the FTSE 100 wouldn’t open 100 points lower? It turns out I was very, very wrong. Last night Freddie Mac and Fannie Mae drove US shares down (Dow was up 250 and down 250 at various points, amazing) and today it’s the turn of European shares to take an ass kicking. The new concerns are that the two banks will need to raise 75 billion because of accounting changes.

From an Irish point of view the ISEQ is currently down 5% with Bank of Ireland down 12.25% at 4.44 and AIB is down 8.85% at 8.17. Now that’s some drop. The thought of cherry picking the bottom is well out of my mind as we whiz down lower and lower. The truth is who knows 25%, 40% or 50% correction its all just academic and back are the days when your friendly taxi driver gives you his best guess at a market bottom.

As this is the beginning of the earning season could this be the straw that breaks the camels back. I really hope so as we badly need the moment of capitulation that seems to be the word of the day or the big flush out as I like to call it. One big drop of 500 – 600 points and we can get moving onwards, maybe not to the old levels but to new levels more appropriate to our new market conditions.

The big one to look out for this week is General Electric on Friday which could see a big drop if the market doesn’t like what it hears. Unfortunately at moments like these the markets recently seem to become resilient to bad news and ignore it in favour of a rally. I wonder will this happen again or could we truly hit new lows.

No positions open but I will be watching events closely.