Borrowing to buy BOI Shares????????

pocketdooz

PS - boom bb, one thing you should 100% read is Fortune's Formula by William Poundstone. (second would be 'rich dad poor dad' and then third is 'when genius fails')

Remember - it's only what you learn after you know it all that really counts . . .

Enjoy

chump

pocketdooz wrote: »

By the way, wait til 2011 and re-evaluate your opinion on M. O'Leary

It's only when the tide goes out that you find out who's swimming naked. Ryanair have no hedging on their oil costs - let's see if O'Leary is still a genius when oil breaks $200 a barrel and the dollar rebounds.

My two cents.

But how will he be in any WORSE a position than any other airline company.

What is the longest any airline hedges for? 6months, 1 year? Would you hedge now?

What is so good about hedging anyway? You are betting on market movements and paying a fee for the liberty. If you have the appropriate working capital facilities in place it may make more sense NOT to hedge.


I honestly cannot see how Ryanair will be worse off that any other airline if oil oil breaks $200. The company passes on the extra cost to the consumer - big deal? Who is going to undercut them?

Are they not the most cost efficient airline in the industry?

Idu

I would have thought airlines were constantly hedged to offset any price increases on their balance sheets but the price increase would still affect them in terms of cash flow

Idu

Antithetic wrote: »

Honest question: If AIB and BOI are such good buys, why isn't their price higher right now?

because they aren't a good buy. A stock's price will more often than not accurrately reflect their market position and the underlying fundamentals of the stock. Right now banking stocks the world over are in the toilet and this is reflected in the stock prices of AIB and BOI.

I get the feeling from this thread that people think that because BOI were trading higher before that it stands to reason their price will go up again. Stocks don't work like that. As pocketdoo has already pointed out there is no rule that says a stock cant go to zero

chump

janets_on_clubs wrote: »

I would have thought airlines were constantly hedged to offset any price increases on their balance sheets but the price increase would still affect them in terms of cash flow

Totally confused with this statement?

Minder

I am curious as to why either of the potential BOI investors (rugbyman and the OP) would decide to buy at this moment. I know the OP hasn't bought yet. What is the basis of your decision to buy today? for example. Because they are cheaper than yesterday? Will they be cheaper tomorrow? The shares haven't rebounded yet, and looking at the long term chart, they took a bounce in late 2007, before falling to todays level. Why is a five euro a good entry point? Why not 4.50 or 4 or 2.... Do you have a strategy that determines your entry point - and exit? Do you have a target price at which you will sell? If not, why not? Would you get a better rate of return somewhere else - high interest account as someone has already suggested? (not with borrowed money).

I'm not expecting an answer btw, these are just some questions you need to ask yourself before making a commitment to buy any shares...

Idu

chump wrote: »

Totally confused with this statement?

me too now that I read back over it. What I was trying to say was that airlines should have an unrealised profit on a hedged oil position which will offset the increasing cost of having to physically buy the oil they use. This will only show up on a balance sheet though so the increased cost of actually having to buy the oil will still affect the cash flow of the airline.

So in the case of Ryanair having no hedged position the effects will be more noticeable on their bottom line than other airlines and as such they will struggle to keep undercutting other airlines

Iago

I've invested in BOI shares, not a life changing amount but enough to notice the pinch if it was to drop to zero. I've done so because I think that over time, be that 1/3/5/10 years the price will rebound significantly enough for me to make a good profit from them.
At worst I believe I'll get my money back and only have lost out on potential earnings rather than capital by the time I'm done.

While I appreciate the fact that they have a high exposure (particularly in the commercial sector) in both Ireland and the UK, their very limited exposure to the american sub-prime crisis combined with the price they've dropped to makes them attractive in my eyes. I don't believe the Irish market will bottom out so far that the stock price won't get back to at least €6 at some point over the next 3-10 years and therefore to my mind they're a reasonable investment that may pay a good dividend, but should at worst breakeven.

Of course I've invested money that I had put aside and wouldn't borrow to buy these shares but I do think they're a good long term play.

Idu

Iago wrote: »

I've invested in BOI shares, not a life changing amount but enough to notice the pinch if it was to drop to zero. I've done so because I think that over time, be that 1/3/5/10 years the price will rebound significantly enough for me to make a good profit from them.
At worst I believe I'll get my money back and only have lost out on potential earnings rather than capital by the time I'm done.QUOTE]

General question but lots of people seem to be talking about BOI being a good long term investment but people seem to have a huge time range connected to that, as in ranging from 1 year to 10 years.

My question to you guys who have invested or want to invest, do you have a price where you want to get out and are willing to wait x amount of time for it to reach that or is it a case of "in x amount of years I'm going to sell this stock regardless"?

punchestown

boomboombazza wrote: »

most of my investments (not shares) have been pretty risky/balls to the wall so far and i haven't done too bad at all.

i'm a BOI customer and have had large loans with them previously which have been repaid. I wont have a problem getting a loan from them;)

If you have previously done well from investments, you should not need to be borrowing one big lump sum. The money being made from previous investments should be redistributed in other forms of investment (keeping the eggs from the one basket)

homer911

pocketdooz wrote: »

First off, apologies about the tone of my previous post. I shouldn't have been sarcastic. I just feel that from your post you are way out of your depth. You talk about not buying at 5.30, then they were 5.48 etc.etc. This either reads like someone who is joking or is not familiar with the topic.

Secondly, thanks for the compliment. If you read my original post I say . . . quote

"Bank of Ireland are a good LONG TERM investment at their present valuation. Long term is ambiguous though as it could be 2/3/5/10 years before we see a full turn around.

That's why it's called speculation. NEVER BORROW TO SPECULATE, YOU WILL GO BROKE "

My point was that they are a good LT investment BUT . . . this is a tricky time to be investing and it is not a good idea to put something as important as your kids savings (of €6000) into volatile shares like BOI. If you get Dublin airport bonds they pay over 6.5% guaranteed, Anglo has a savings account that pays 8% and AIB currently have a childrens savings account that pays 10% (there are obviously T&Cs with these) -

*** At these rates your kids savings will grow from €6000 to €25000 in 15 years (I dont know what age your kids are) . . . this is a secure investment. For BOI shares to show this level of return they would have to grow to €23 a share (never going to happen mate ! - not even at the height of the Celtic Tiger / Property boom did they get to these dizzying valuations.) ***

Options like these are a better idea in the current market in my opinion. Again, this is my opinion and you're perfectly entitles to tell me to go and ***** if you want. Either way, I hope it works out for your savings. All the best.

I dont know how you do your maths, but even at a 10% deposit rate with DIRT @ 20%, the best you could hope for on 6k is 19k after 15 years, including your original deposit.

Based on the current share price of €5, and lets say similar CGT of 20% with no indexation, and no stamp duty or brokerage fees (or allowances), if the price rose to about €18, this would produce a similar return. The decision you have to make is: Is the share price likely to hit €18 within the next 15 years? Even the most negative person would have to think yes!

rugbyman

I like the type of logic that appears here from time to time.Chump, you seem to have it.

I have my childrens money moved from the credit union to the bank awaiting my electronic command tomorrow morning. b of i were a few pence over 5 euro this evening.

One person asked how do we know its at its lowest? we dont.,obviously.

Buying bank shares in Ireland after such a fall is not overly risky. certainly not like backing a horse. if the day comes that boi or aib falls to nothing the country will have reached armaggedon. Irish banks saw the writing on the wall over a year ago and were busy drawing in their horns. Though thousands may be unemployed there are hundreds of thousands in secure jobs,still buying cars, and spending money. those who will suffer are those who took out too much credit and drew it from different sources. the dust will settle. Many fortunes will be made this year, by those with the money to cash in on those who bite the dust. liquidators will chase buyers with money and money will be king.

A poster last year pointed out that boi were always worth buying at 9 euro . three times that year they swung back to ten, but it would have been wise to sell whenever one saw profit. In any case though I agreed with that view, no really bad vibes were on the horizon . Obviously things are vastly different today.

Those who advocated deposits will indeed be safe, but there is no great upside.

to those who ask how long to keep them? 2/5/10 years. I dont know, my plan is to take profit when i see ourselves up 1,000 euro. the age old adage is to take your principal out and leave the profit in shares.

reading over this ,its perhaps a bit of a jumpy spiel, ,so, roll on the morn.

stepbar

I talk as an employee here.

I don't think we have seen the end of the fall just yet. Lending is tightening up big time. I know because I have direct experence of it. BOI will drop profit next year, you can be guarenteed that and impared loans will rise. However what remains to be seen is (and I'm very suprised that no one has talked about this yet) will BOI cut their dividend next year? Because we all know what effect that would have on the market if they did.

At present prices BOI shares would look like a steal (simply because of the dividend to price ratio). However on the face of it I'm not so sure. BOI's 3 main markets are Ireland, the UK and the US, all of which are in recession. A strategy of organic growth will only get you so far and won't get you very far in times of recession. Compare BOI to AIB and the markets they are in and you will soon find that perhaps AIB is the better long term buy. AIB has bought well in the Baltic states and has a good setup in Poland which is producing year on year growth. Probably needs to sell out of the US but perhaps now is the wrong time. On the other hand BOI hasn't had a major purchase in the last 10 years and sold crown jewels such as Bristol and West (I bet you their deposit book would come in handy now....) and Davy. BIAM is practically now non performing having been the top of the tree 5-6 odd years ago. The only thing that will save the BOI is the fact that they're probably one of the most conservative banks in the country. Trust me, if there's a bank to go bust first it won't be BOI. All in all I think the BOI shares have a small bit to go before the reach the bottom.

BTW, when the BOI share price hit 18eur back in Feb of last year I was advising my collegues to sell out and fast. I knew there was no way in hell the BOI could be valued as such. I just couldn't see where the value was TBH.


Final comment (To the OP): Don't be suprised if you don't get 20k because it wouldn't suprise me TBH. I borrowed 15k myself before things really tightened up and TBH I thought I wouldn't get it. I'm really thinking about putting it in BOI shares but not just yet. I might cash out of my options first and put the whole lot in at the lower price TBH. For me the main attraction is the dividend. Knowing what's happing on the inside I would have no concern for BOI TBH.

Minder

rugbyman wrote: »

One person asked how do we know its at its lowest? we dont.,obviously.

Buying bank shares in Ireland after such a fall is not overly risky.

Correct, we don't know that we have reached bottom. But what should be obvious is that the share price is continuing to fall. If you had pressed the button yesterday, your investment would be down 8.12% as I look this morning - that requires the shares to go up 10% for you to get your money back. Volatile it certainly is. Why not wait until they have stopped falling? How will you know? Because the price will be rising. You could take the view that you will wait for three consecutive days of rising prices and then buy.

Without any strategy regarding the entry and exit price, this is not investing, it's gambling. The only difference is, no-one knows how long the race is. Good luck!

Idu

Rumours this morning of BOI being in serious trouble. Heard it on a european news sqwuak too which rarely, if ever, covers Irish stocks

boomboombazza

janets_on_clubs wrote: »

Rumours this morning of BOI being in serious trouble. Heard it on a european news sqwuak too which rarely, if ever, covers Irish stocks

beat me to it:mad:


looks like you guys saved me a few quid. they are tanking today:eek:

randombar

Lads what are their stock name??

boomboombazza

punchestown wrote: »

If you have previously done well from investments, you should not need to be borrowing one big lump sum. The money being made from previous investments should be redistributed in other forms of investment (keeping the eggs from the one basket)

i have already said why i want to borrow for this investment . if you read the thread you would know this

punchestown

boomboombazza wrote: »

i have already said why i want to borrow for this investment . if you read the thread you would know this

Apologies, I gave up when I read this piece ; '
borrow 20k.
costs lets say 7k in interest(it wont cost this much will it?
thats 27k'

chump

rugbyman wrote: »

I like the type of logic that appears here from time to time.Chump, you seem to have it.

I think you caught the wrong end of my schtick :pac::D
I do not think ryanair is going to go bust, and versus other airline companies I view it as a well managed. I don't mean to say it's share price won't drop.

Irish banks on the other hand. :pac::D

I, for one, have no idea why anyone would buy the shares on a downward slope.
I'd much rather see a sustained market rally, with them following an upward trend. I'd wait until the worst is over, as they say, and then try to jump on. [but who wouldn't? ] - Point is I'd try not to catch a falling sword.

But I don't have the money or inclination to invest on the stock market anyway!
I get fairly obsessed with things I have no 'personal' interest in, I can only imagine how much of my life I'd waste if I had a serious wedge in a few stocks - never mind one!

Jivin Turkey

BOI currently trading at €4.51. Definitely buy now they can't go any lower

Minder

GaryCocs wrote: »

Lads what are their stock name??

Bank of Ireland ticker is BIR.IR if that's what you mean.

rugbyman

well, got them bought. fortunately there was a glitch on my first ever e banking transaction, so when I want ed to buy at 5.05 euro, I failed and got them cheaper. Another glitch meant I did not buy them at 4.39, but did buy at 4.51. They have risen twice since then(bought at 4 pm yesterday)., i am reluctant to make any comment, good or bad.

Idu

The FED announcing they would extend their borrowing facility has put a bit of a lift into the financial sector after the disasterous start to Tuesday after the rumours of Fannie Mae and Freddie Mac being in trouble on monday night so that would explain the rise in BOI stocks.

However if you listen to the forecasts from the BOI chief he has basically admitted that the banks earnings are going to start seriously suffering as more and more people default on loan repayments.

Best of luck with the shares anyway, wouldn't wish you to lose your money. It looks like it's gonna be a rocky road ahead though

edzillion

my 2¢:
Dont

pocketdooz

homer911 wrote: »

I dont know how you do your maths, but even at a 10% deposit rate with DIRT @ 20%, the best you could hope for on 6k is 19k after 15 years, including your original deposit.

Based on the current share price of €5, and lets say similar CGT of 20% with no indexation, and no stamp duty or brokerage fees (or allowances), if the price rose to about €18, this would produce a similar return. The decision you have to make is:Is the share price likely to hit €18 within the next 15 years? Even the most negative person would have to think yes!

I didn't start to calculate what it would be with taxation and dividends.

But besides that the maths are right - Also, your last assumption is very naive and shows that you don't really understand the topic. Why would the share price 'hit' €18 - what underlying logic do you have for this statement ? None, by the looks of things

Idu

My friend reckons BOI are back to the price they were pre celtic tiger boom. Anyone know if this is true or not? This guy would know his stuff with regards to Irish stocks

bosra

you are basically back at 97 or 98 price level..

Genco

I thought they were back to 94/95 levels but not 100% sure on that Just wish I had sold some of my now meagre holding last year

EDIT
Just caught roundup on us markets today and seems like financials took another battering today.

S&P Financial Index down by more than 5% at close
FNMA down 13%
FRE down 24% after selling 3 billion dollars of 2 year notes at 74 bps more than treasuries
Wachovia down 8% after Merrill Lynch reporting that WB losses could be up to 18 billion over next four years
Bank of America down 6% but regained half of that after hours after confiming they do not foresee any cut in dividend or need to raise capital.

Diarmuid

kmick wrote: »

My 25k quinnlife fund is losing 500 quid a day at the moment so Id steer clear. However you could probably make some money shorting bank stocks at the moment.

Good thing you didn't put it all into BOI shares then! Everything is going down now, that's the risk you take when investing in shares. However if you picked a well diversified fund with low cost your should be up in the long run. I don't know which Quinnlife fund you invested in but the Eurostoxx one would be my choice.

Diarmuid

rugbyman wrote: »

well, got them bought. fortunately there was a glitch on my first ever e banking transaction, so when I want ed to buy at 5.05 euro, I failed and got them cheaper. Another glitch meant I did not buy them at 4.39, but did buy at 4.51. They have risen twice since then(bought at 4 pm yesterday)., i am reluctant to make any comment, good or bad.

One question. If you figured it was a good idea to invest in shares, at a minimum why didn't you buy some ETF? As it stands you have no diversification! It's like putting your money on the roulette table on 12 instead of black. Both a risky but one is more risky than the other (likewise the return is greater on one, but it's your kids future you are risking)

rugbyman

My history of shares is one of loss. put 6 k on a basket of shares in 1987 and they flopped. NEVER came back. lost 50 % when i had to sell .

My reckoning is that Bank of Ireland,no science used, must have been close to their break up value. I dont know but I dont imagine that 5 % of their stock has been traded in the recent turmoil. I dont know about etf but will click on your post now.
Childrens future not at risk. the amount I have saved for them wont pay for accomodation for even one of them at college for one year. hopefully B of I might stretch that by another term. yesterday I could have sold the 4,500 euro bundle and banked 300 euro after trading costs, I did not, greed perhaps?
from what I can gather there will be a dividend this month.We will see.

Genco

BOI went ex div back at the end of May or thereabouts therefore you will not be getting any dividend on the shares you purchased the other day until they pay their interim dividend (IF ANY )

seventhwave

Intraday5 Dy1 Mo3 Mo6 Mo1 Yr2 Yr5 Yr
This was the outlook for BOI shares in the last 5 years that was obtained from http://www.sharewatch.com/platforms/site/index1206.php , it seems that there are worth less now than 5 years ago.

Oafley Jones

seventhwave wrote: »

Intraday5 Dy1 Mo3 Mo6 Mo1 Yr2 Yr5 Yr
This was the outlook for BOI shares in the last 5 years that was obtained from http://www.sharewatch.com/platforms/site/index1206.php , it seems that there are worth less now than 5 years ago.

Don't forget, there was a 2 for 1 share split in 2001.

woodseb

Oafley Jones wrote: »

Don't forget, there was a 2 for 1 share split in 2001.

that's been adjusted for

pocketdooz

Genco wrote: »

I thought they were back to 94/95 levels but not 100% sure on that Just wish I had sold some of my now meagre holding last year

EDIT
Just caught roundup on us markets today and seems like financials took another battering today.

S&P Financial Index down by more than 5% at close
FNMA down 13%
FRE down 24% after selling 3 billion dollars of 2 year notes at 74 bps more than treasuries
Wachovia down 8% after Merrill Lynch reporting that WB losses could be up to 18 billion over next four years
Bank of America down 6% but regained half of that after hours after confiming they do not foresee any cut in dividend or need to raise capital.

Bank of Ireland share ARE back at their 1993 levels

They have given everything back that was made during the Celtic Tiger years

Wollie

I haven't followed all the posts under this heading, but I don't think that the suggestion is as hare-brained as some are suggesting (although I still wouldn't reccomend it!). Firstly, on the maths, the Bank of Ireland's share price is now so low that the dividend on 10k worth of shares is higher than the interest cost of the borrowing. Therefore, if the share price in 5 years' time is exactly the same as it is now, our friend will have made money on his investment. He doesn't have to depend on the share price rising.

Arguably, it's even better. Even if the share price is lower in 5 years' time than it is now and if (a big IF) the Bank hasn't cut its dividend in the meantime, then he could (in theory at least) still be in clover, as he could roll over his loan for another few years, happy in the knowledge that the dividend was still more than covering his interest costs.

The problem however is that there is a risk that the bank will cut its dividend. Things would have to be very bad for it to do this - I don't know if the BOI has cut its dividend in living memory, but could be wrong. There are some who believe that things are very different today and that the Bank will have no option but to cut its dividend, which would undermine the entire optimistic argument set out above.

pocketdooz

Wollie wrote: »

I haven't followed all the posts under this heading, but I don't think that the suggestion is as hare-brained as some are suggesting (although I still wouldn't reccomend it!). Firstly, on the maths, the Bank of Ireland's share price is now so low that the dividend on 10k worth of shares is higher than the interest cost of the borrowing. Therefore, if the share price in 5 years' time is exactly the same as it is now, our friend will have made money on his investment. He doesn't have to depend on the share price rising.

Arguably, it's even better. Even if the share price is lower in 5 years' time than it is now and if (a big IF) the Bank hasn't cut its dividend in the meantime, then he could (in theory at least) still be in clover, as he could roll over his loan for another few years, happy in the knowledge that the dividend was still more than covering his interest costs.

The problem however is that there is a risk that the bank will cut its dividend. Things would have to be very bad for it to do this - I don't know if the BOI has cut its dividend in living memory, but could be wrong. There are some who believe that things are very different today and that the Bank will have no option but to cut its dividend, which would undermine the entire optimistic argument set out above.

Dividends on BOI shares very likely to be cut as earnings are down 25%

This will result in a further drop in share price

The cost of borrowing will increase as the ECB raises rates to combate very high food and energy inflation.

Therefore he will lose money on this proposition. In fact - if he did it last week when he intended to - his €20000 would now be worth about €17500 or so.

portomar

what if interest rates hit 8/10 percent? boi will tank and your loan will be much pricier than it is now. there are many of these possible outcomes, i wouldnt do it

Wollie

In reply to Pocketdooz, I don't think we're too far apart, and we both understand the points the other is making. For those not familiar with stock markets however, it is worth pointing out that the dividend yield on BOI shares is now over 12%, which gives quite a bit of headroom for future increases in interest rates on borrowings or a reduction in the bank's dividend (or a combination of both). It is also worth noting that companies always aim to pay out only a proportion (generally around 50%) of their earnings in dividends, so that they can take the pain of a hit to earnings without having to cut their dividend. For a Bank to cut its dividend, it is a major sign of weakness, so they will do what they can to avoid that scenario. Having said all that, there's a wonderful phrase in the investment world, that there's no such thing as a free lunch. If something looks too good to be true, it normally is. The lesson therefore is that the market is pricing in some pretty woeful future bad news into the share price of BOI (and other banks). If our friend who posted this question originally is a betting man (or woman) and can afford to lose a few quid, then it's not a bad bet, but it definitely is a gamble, not an investment.

pocketdooz

Well put Wollie

My only concern is that people will read this thread and think that there is any good in this idea.

Hopefully not

Minder

portomar wrote: »

what if interest rates hit 8/10 percent? boi will tank and your loan will be much pricier than it is now. there are many of these possible outcomes, i wouldnt do it

I don't follow. Unsecured loans are not made on a variable interest rate. Whatever rate you get when the loan comes into existence is the prevailing rate for the life of the loan. Interest rates can rise and fall without affecting the cost of the loan.

Borrowing may dry up if interest rates climb, effecting the bank's return, and so the value of the shares, but the cost side of the calculation doesn't change.

pocketdooz

Minder wrote: »

I don't follow. Unsecured loans are not made on a variable interest rate. Whatever rate you get when the loan comes into existence is the prevailing rate for the life of the loan. Interest rates can rise and fall without affecting the cost of the loan.

Borrowing may dry up if interest rates climb, effecting the bank's return, and so the value of the shares, but the cost side of the calculation doesn't change.

Lol, please - this is absolutely wrong.

all bank loans are variable - do you really think a bank will give a 5 year loan at a fixed rate, unsecured ? Wow, there really is some bad info. in this thread !

pocketdooz

Minder wrote: »

I don't follow. Unsecured loans are not made on a variable interest rate. Whatever rate you get when the loan comes into existence is the prevailing rate for the life of the loan. Interest rates can rise and fall without affecting the cost of the loan.

Borrowing may dry up if interest rates climb, effecting the bank's return, and so the value of the shares, but the cost side of the calculation doesn't change.

Minder - the Internet is your friend. At least make a cursory attempt to find out if what you are writing is accurate . . . from AIB's website . . .

Personal Lendings APRPersonal Loans

**All Personal Loans are based on the Bank's Variable 'A' Loan Rate and the amount borrowed.

stepbar

pocketdooz wrote: »

Lol, please - this is absolutely wrong.

all bank loans are variable - do you really think a bank will give a 5 year loan at a fixed rate, unsecured ? Wow, there really is some bad info. in this thread !

All bank loans are not variable. They can be fixed or variable and yes you can get a 5 year loan fixed if you want to, unsecured. Yes all loan are based on the underlying variable base rate i.e ECB.

I may add that I'm a banker and knows what I'm talking about unlike some people round here. Where in gods name did you pull a figure of 25% (by which BOI's earnings would fall)?

pocketdooz

stepbar wrote: »

All bank loans are not variable. They can be fixed or variable and yes you can get a 5 year loan fixed if you want to, unsecured. Yes all loan are based on the underlying variable base rate i.e ECB.

I may add that I'm a banker and knows what I'm talking about unlike some people round here. Where in gods name did you pull a figure of 25% (by which BOI's earnings would fall)?

Wow - you're a banker and know what you're talking about. That's great.

Fair enough - please tell me which bank will loan a 22 year old €20,000 unsecured for 5 years at a fixed rate in this current rising interest rate, inflationary environment to buy bank shares . . . (a link or posting would be good for clarity)

Where in God's name did I pull that figure . . . Brian Goggins BOI Investors Report last week, and also quoted in the Sunday Business Post last weekend. By the way, if you don't learn that in Banker school, Brian Goggin is Chief Executive of BOI so will probably know what he is talking about, wouldn't you agree?

By the way, not that it really matters, but just cos of your little childish jab in your post, I'm also a MScFinance / CFA and work in a bond trading firm in the city centre, so I have a fair idea what I'm talking about - and would not post something online if I wasn't pretty sure it was accurate.

Also, it wasn't an opinion of how BOIs earnings WOULD fall - it was 25% that they have fallen . . . anyway, I hope this answers your question

rugbyman

Good man pocketdooz, just the man i need. i know of an investor who is thinking of taking a hit on bonds which pay 4 per cent p.a. perhaps even 4.75.
they are currently bid at 20% of face value i.e. 200,000 for 1,000,000 invested some years ago.
does this mean i can buy them, say 50,000 worth and get a return of 4 % on the nominal value of 250,000 in other words an annual return of 20 per cent until the bond issuer buys me out.


If this is true, an this investor does not sell, are there others who will.

in the case of some bond issued by aGerman Bank which has folded recently, are these gauranteed for ever by the German Govt.

pocketdooz

rugbyman wrote: »

Good man pocketdooz, just the man i need. i know of an investor who is thinking of taking a hit on bonds which pay 4 per cent p.a. perhaps even 4.75.
they are currently bid at 20% of face value i.e. 200,000 for 1,000,000 invested some years ago.
does this mean i can buy them, say 50,000 worth and get a return of 4 % on the nominal value of 250,000 in other words an annual return of 20 per cent until the bond issuer buys me out.


If this is true, an this investor does not sell, are there others who will.

in the case of some bond issued by aGerman Bank which has folded recently, are these gauranteed for ever by the German Govt.

Sorry but I don't understand your post - if you PM me I will explain what you want to you.

From your post though it's not clear.

Thanks

bosra

I agree with Pocket on the earnings outlook for the Irish banks. I am an equity trader with no positions in the banks.

The bad debt cycle needs to be confronted by the banks instead of sweeping it under the carpet. By their own admission, the last few years have seen record amounts of credit expansion in Ireland. This has coincided with the house market topping out. What does this mean? It mean developers have been given 100s of millions to buy land that is now worth alot less and to build houses they can't sell at the prices they accounted for when they took the loans. Cashflow is key here. It's like a noose. Eventually the banks will have to take the hit on their balance sheets just like in the US. Remember the US housing downturn started a few years back ..First we heard it was a soft landing..then it took some time for the bad debts to feed through..That is going to be the experience in Ireland too. So when the Central bank tell you everything is fine , start asking questions..

I could go on ad nauseum about all the different segments that are potential bad debts waiting to happen for the banks.. but I won't cause my fingers are getting sore now and I always stop reading after the first 5 lines.. anyway suffice to say..if the banks get away with 75% of their earnings demolished..that would be a good result..
One last point..Don't believe any hype about rights issues or capital injections saving the day..they havent in the US or the UK and they wont do the magic here either.. this is a process of price adjustments..it will take time..alot of dead wood will have to be cut out..there is no miracle cure