The Big Bailout of the Eurozone (Another crisis coming? - Seriously)

[orangeman]

Can anyone expalin why the dollar has strengthened so much against the euor and the £.

Last year £1 = $2.10 - todays it's worth $1.55

[passedit]

Cowan's bluff soon to be called?

SHARES IN IRISH BANKS PLUNGE ; Bank of Ireland
Thursday, October 23, 2008 5:14 PM
(Source: Daily Mirror)trackingBy EOIN REYNOLDS

IRISH banks took a hammering yesterday as panic gripped European markets over fears of a global recession.

Bank of Ireland was the worst hit, with shares plunging 16 per cent to EUR1.61.

Irish Life & Permanent took a 6.5 per cent hit while Anglo Irish Bank lost 6.8 per cent and AIB dropped 5.9 per cent.

Dublin's ISEQ index of shares slumped by five per cent, largely fuelled by the banking downturn.

And the global economy moved closer to worldwide recession after another disastrous day for financial markets.

Government moves to bail out and secure banks across the world were overshadowed by the deepening crisis. The euro and sterling both took a battering with the UK currency hitting a five-year-low.

At one point the euro dipped to its lowest point since 2006.

Amid the turmoil British bank chief Mervyn King warned a recession is now likely.

Mr King said the combination of banks not being able to give out loans and higher energy and food prices would drain the economy of money. The doom and gloom was prevalent across Europe with London's FTSE index sinking 3.5 per cent, the Paris Cac slumping 3.9 per cent and the Frankfurt DAX suffering a drop of 3.5 per cent.

Asian markets also took a pounding yesterday, with Tokyo's Nikkei index tumbling 6.79 per cent.

Hong Kong's Hang Seng was down 6.2 per cent, while South Korea's main index shed 5.1 per cent of its value.

US Treasury Secretary Henry Paulson, the architect of the recent bail-out of the American banking system, said: "Clearly, we're going to have a number of difficult months ahead of us in terms of the real economy."

(c) 2008 Daily Mirror. Provided by ProQuest LLC. All rights Reserved.

A service of YellowBrix, Inc.

[muppet]

Can anyone expalin why the dollar has strengthened so much against the euor and the £.

Last year £1 = $2.10 - todays it's worth $1.55

The Americans can't really cut interest rates any more than they have while there is still room for the Euro zone and Sterling to do so. That leads to a traditional move into the currency not going to cut rates.

Also investors, when the dollar was falling, ran to fuel in particular and now that has tumbled in recent weeks so maybe they are fleeing back to the dollar.

There is a train of thought that the recent rise in the dollar is an abberation and it will fall big time in the near future as the current administration are just printing as many dollars as they possibly can at the moment.

As for our screwed up market. Rumours are that the banks will have to deal with all the developers mortgage holidays. That could bring about the final fall in both property prices and shares. Then we might see a bottom to this here in Ireland. 

[orangeman]

Can anyone expalin why the dollar has strengthened so much against the euor and the £.

Last year £1 = $2.10 - todays it's worth $1.55

The Americans can't really cut interest rates any more than they have while there is still room for the Euro zone and Sterling to do so. That leads to a traditional move into the currency not going to cut rates.

Also investors, when the dollar was falling, ran to fuel in particular and now that has tumbled in recent weeks so maybe they are fleeing back to the dollar.

There is a train of thought that the recent rise in the dollar is an abberation and it will fall big time in the near future as the current administration are just printing as many dollars as they possibly can at the moment.

As for our screwed up market. Rumours are that the banks will have to deal with all the developers mortgage holidays. That could bring about the final fall in both property prices and shares. Then we might see a bottom to this here in Ireland. 

It's hard to see the dollar $ falling to $2.10 against the £ again anytime soon.

The bottom ?? That's been exercising the minds of an awful lot of people.

[muppet]

Can anyone expalin why the dollar has strengthened so much against the euor and the £.

Last year £1 = $2.10 - todays it's worth $1.55

The Americans can't really cut interest rates any more than they have while there is still room for the Euro zone and Sterling to do so. That leads to a traditional move into the currency not going to cut rates.

Also investors, when the dollar was falling, ran to fuel in particular and now that has tumbled in recent weeks so maybe they are fleeing back to the dollar.

There is a train of thought that the recent rise in the dollar is an abberation and it will fall big time in the near future as the current administration are just printing as many dollars as they possibly can at the moment.

As for our screwed up market. Rumours are that the banks will have to deal with all the developers mortgage holidays. That could bring about the final fall in both property prices and shares. Then we might see a bottom to this here in Ireland. 

It's hard to see the dollar $ falling to $2.10 against the £ again anytime soon.

The bottom ?? That's been exercising the minds of an awful lot of people.

It can't come until the banks deal with the developer loans. After that maybe....

[Bogball XV]

I'd agree muppet, the us policy of printing money HAS to come home to roost, the dollar must be massively overvalued at the moment - i think worldwide we may be over the worst of it (not in terms of market falls), but that maybe we'll survive a total market failure THIS time.  That's a good point re oil and the same could be said for gold which has fallen off in price over the last week or so too.  The other thing we should remember re the dollar surge is that many of these rallies are manipulated to an extent by speculators and they like to follow a trend - demand for dollars last week was extremely high as the lehman brothers derivative positions were being unwound to the tune of 400-500bn dollars, so holders of dollars could almost name their price. 
Against sterling the utterance of the word RECESSION by BOE governor was the cue for another 2p off the value, basically the two main things forex rates are based on are supposed to be potential growth rates and interest rates and King's speech basically said that both would be low for the forseeable future - though why anyone thinks the US are going to avoid a recession is beyond me, imo bar ourselves and iceland they're about as fcuked as there is.
The Irish market is also probably oversold, but until the banks come clean who would have a punt on it?  I might have a look for some products that could give me a little exposure to a potential upside (to worldwide recovery), i wouldn't dream of picking individual equities though, any suggestions off the tops of your heads - is it too early still?

[Zapatista]

In the papers yesterday Irelands bail out was being hailed as the cheapest in the world (I wonder were that came from? a government in bad need of good publicity perhaps?) and we can  therefore assume the best

The Irish banks were bailed out on the promise of credit. What was it caused the problem again? While the rest of the world inject money and buy shares the Irish tax payer goes Guarantor for a credit which cannot be repaid

Someone please take that spade away from Lenihan. When they come after the guarantor for the funds and are a caught looking into an empty purse who will offer the credit? I'd say we should go to the Brits and ask for the credit. We can use the 26 counties as collateral. Neo colonialism

[Bogball XV]

Someone please take that spade away from Lenihan. When they come after the guarantor for the funds and are a caught looking into an empty purse who will offer the credit? I'd say we should go to the Brits and ask for the credit. We can use the 26 counties as collateral. Neo colonialism

I think the brits are done with sub-prime lending though

[muppet]

http://www.breakingnews.ie/business/mhidmhsnojsn/

The Fed cuts rates to 1%. ECB likely to cut rates next week.

I wonder will we see rates at 0% as happened in Japan. I will be looking for some big interest only loans in that event.

[Down Gael]

http://www.breakingnews.ie/business/mhidmhsnojsn/

The Fed cuts rates to 1%. ECB likely to cut rates next week.

I wonder will we see rates at 0% as happened in Japan. I will be looking for some big interest only loans in that event.

But will you get those loans?

[passedit]

The Banks' asset base continues to shrink. I hope the poster who was on a few weeks ago looking mortgage advice kept his money in his pocket.

House prices post biggest annual drop
Thu Oct 30, 2008 7:59am GMT


LONDON (Reuters) - House prices fell 1.4 percent in the month of October to post their biggest annual drop since comparable records began in 1991, the Nationwide building society said on Thursday.

The 12th consecutive monthly drop highlights the reversal of fortune for the property market since the credit crunch took hold last summer. Nevertheless, September's fall was smaller than the declines registered in each of the previous three months.

The annual drop of 14.6 percent took the average price of a property to 158,872 pounds, almost 30,000 pounds less than their peak a year ago.

"A looming recession and continued financial market instability have uncomfortable implications for the housing and mortgage markets, and will undoubtedly affect the pace of recovery in house prices," said Fionnuala Earley, Nationwide's chief economist.

Nationwide said homes were now taking 60 percent longer to sell than a year ago and turnover rates had fallen to their lowest level since this series began in 1974.

The precipitous drop in house prices both in the country and overseas has been a key driver of the crisis that has rocked the banking sector, prompting unprecedented government intervention.

Economic newsflow has continued to be dismal, raising expectations the Bank of England will follow up this month's half-point interest rate cut with further reductions in the coming months.

"The possibility of even deeper rate cuts this year is increasing as the Bank of England attempts to prevent a deep and prolonged recession," Earley said.

"This will make life easier for borrowers on variable rate loans and those coming to the end of fixed-rate deals."

[passedit]

Rumours of a bank holiday tomorrow.  Get some cash out mexicans.

LONDON (Standard & Poor's) Nov. 5, 2008--Standard & Poor's Ratings Services
    said today that it reviewed its counterparty credit ratings on the following
    four independent rated Irish banks:
    -- Allied Irish Banks PLC
    -- Bank of Ireland
    -- Irish Life & Permanent PLC
    -- Anglo Irish Bank Corp. PLC
    Standard & Poor's revised its outlooks on Allied Irish Banks (AIB) and
    Bank of Ireland (BOI) to negative from stable. At the same time, the 'A+/A-1'
    counterparty credit ratings were affirmed. Additionally, Standard & Poor's
    lowered its long-term counterparty credit ratings on Irish Life & Permanent
    (IL&P) and Anglo Irish Bank (Anglo) to 'A-' from 'A'.

    At the same time, Standard & Poor's placed its 'A-/A-1' long- and short-term counter party credit ratings on IL&P and Anglo on CreditWatch with negative implications.
    Furthermore, we resolved the CreditWatch placements of the senior and dated subordinated issues of the four independent rated banks, which are guaranteed by the Republic of Ireland (AAA/Stable/A-1+).

[passedit]

http://ftalphaville.ft.com/blog/2008/11/05/17853/the-deteriorating-picture-at-aib/



The deteriorating picture at AIB

Shares in Allied Irish Bank were down 17 per cent on Wednesday morning after the bank warned on profits for the second time this year. Shareholders can now expect earnings of just €1.20 in 2008 versus the €1.85-1.90 figure the bank suggested back in July (cut from €2.06 in 2007). Analysts had expected EPS to fall no further than €1.75 a share.

After solidly defending the quality of its loan book the past few quarters, the bank is finally admitting bad debts are significantly on the rise, be it, mainly in the Irish residential development book:

At the operating level, before bad debt charges, all our businesses continue to perform well and the overall group rate of income growth is expected to exceed that of cost growth in 2008 by c. 2% The credit environment though continues to deteriorate and is doing so at an accelerated pace in recent months, heavily influenced by an acute scarcity of liquidity and highly elevated funding costs. There has been some negative effect on asset quality generally across our loan portfolios, though the effect is most material in our Irish residential development book. Deterioration in that book is the principal driver of a revised group bad debt charge expectation of c. 75 basis points (bps) of average loans in 2008. The expected charge comprises c. 45 bps of specific provisions and c. 30 bps of IBNR provisions, the latter figure reflecting our forward looking view in a credit environment which will continue to be challenging. This revision, together with the costs of higher funding and an estimate of the cost of the Irish Government guarantee scheme, lead us to reduce our earnings per share target for this year to around euro 120c.

Luckily, that extremely well-timed Irish government move to guarantee 100 per cent of Irish-bank held deposits has helped AIB in the funding of those impairments (for the time being). Being the first to do so in Europe, Irish banks clearly benefited from a rush of deposits into their accounts. The bank states:

Customer deposits, sourced from across the range of our domestic and international franchises, continue to be our largest source of funding and will increase as a proportion of total funding this year. We are targeting customer deposits to grow by a low teens percentage in 2008. Customer loans are forecast to increase by around 9% causing the loan to deposit ratio to fall from 157% at the end of 2007 to c. 150% at the end of 2008. We are targeting further reductions in this ratio in subsequent periods.

The bank had referred to its European businesses providing some relief to its p&l in previous statements. While AIB says its 70.5 per cent share in Poland's Bank Zachodni/WBK is still performing well with asset quality remaining good - it now admits the country is not so immune to the global credit crisis and that it will be vigilant over performance:

The very low level of bad debt charge in 2007 will not be repeated this year due to a lower level of recoveries and we expect the 2008 charge to be a low / mid 30 bps of average loans.

On the domestic front, the bank's outlook for its residential loan book is even bleaker. It now says the market can expect no meaningful recovery until the first half of 2011 (previously 2010), anticipating an average peak to trough fall in values of undeveloped land (c. €7bn of portfolio) and completed houses (c. €3.7bn of portfolio) of c. 40 per cent and 30 per cent respectively.

However, AIB says its commercial real-estate book is "solidly" supported by regular, recurring income streams and low vacancy rates. While it acknowledges decreasing rents could place some stress, overall quality remains good.

JP Morgan might beg to differ though. In its latest report on the European commercial real estate market the bank highlighted AIB as exposed:

In this note we focus specifically in the risks (especially to earnings) embedded in the commercial real estate market, which we see as the next area to deteriorate after the well flagged crisis in the residential real estate market, and indeed we see CRE as the first part of the banks' corporate loan book to encounter asset quality problems.

Our universe of banks has €1trn of on-balance sheet exposure to the CRE market equivalent to 12% of their loan book or 1.76x their equity base; this is not immaterial. They also have €43bln exposure through CMBS. The most exposed banks are Aareal and Anglo with 97% and 82% respectively; they are followed by AIB, HRX, Handels, BOI, Natixis, all of whom have CRE loans of between 20% and 35%.

If troubles persist - the key question is would the bank consider the government-equity route? According to the Irish Times, AIB chief executive Eugene Sheehy told a gathering of private investors last week the bank would "rather die than raise equity" and that it had "options for self help" other than raising fresh equity. Presumably selling-off its US or Polish divisions?

[full back]

Rumours of a bank holiday tomorrow.  Get some cash out mexicans.

LONDON (Standard & Poor's) Nov. 5, 2008--Standard & Poor's Ratings Services
    said today that it reviewed its counterparty credit ratings on the following
    four independent rated Irish banks:
    -- Allied Irish Banks PLC
    -- Bank of Ireland
    -- Irish Life & Permanent PLC
    -- Anglo Irish Bank Corp. PLC
    Standard & Poor's revised its outlooks on Allied Irish Banks (AIB) and
    Bank of Ireland (BOI) to negative from stable. At the same time, the 'A+/A-1'
    counterparty credit ratings were affirmed. Additionally, Standard & Poor's
    lowered its long-term counterparty credit ratings on Irish Life & Permanent
    (IL&P) and Anglo Irish Bank (Anglo) to 'A-' from 'A'.

    At the same time, Standard & Poor's placed its 'A-/A-1' long- and short-term counter party credit ratings on IL&P and Anglo on CreditWatch with negative implications.
    Furthermore, we resolved the CreditWatch placements of the senior and dated subordinated issues of the four independent rated banks, which are guaranteed by the Republic of Ireland (AAA/Stable/A-1+).

Anyone explain this in laymans terms?

[full back]

The Bank of England has cut interest rates in the UK by one-and-a-half percentage points to 3%, its lowest since 1955, in a shock move.

Last month it cut rates from 5% to 4.5% in an emergency move co-ordinated with other central banks.

There had been widespread calls from industry for a major cut as the country begins to face up to the prospect of a deep recession.

It is the most dramatic cut since a two percentage point reduction in 1981.