October 26, 2008

When opportunity knocks

Posted in International Economy · 87 comments ·
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The current market instability could create lucrative chances for those willing to take a risk.

Because of the panic that has gripped the markets, the next few months will probably be the most profitable opportunity to make money in this generation. But you’d hardly think so by listening to the mainstream commentary in Ireland.

Sometimes it’s difficult not to laugh at the type of advice that is being thrown around Dublin by so-called financial experts. For example, the same lads who were telling you last year that Irish property was ‘‘fundamentally’’ sound and would experience, at worst, a ‘‘soft landing’’ are now telling you that the world is ending.

Last year, these heads were telling you that AIB shares were a buy at €20.Today they are suggesting that AIB at €3.7 is a sell. God knows who pays these lads, or why. Nobody is suggesting that the background noise has not changed dramatically. Nor is anyone underestimating the risk involved in trying to stop the bottom of any market, but if we stand back a wee bit, we might gain that most valuable of insights – perspective.

The key thing to appreciate, is that all financial crises are temporary. They tend to blow over. People with debts and companies going into the crisis get hammered and those with cash prosper. The rout in asset prices becomes self-correcting.

Either markets exhaust themselves in a selling frenzy or they get pushed back by the heavy artillery of government intervention. Either way, the system rights itself at a different price and we start again.

We are now seeing huge falls, mainly because hedge funds are selling everything to meet their financial obligations. Their clients are demanding cash and, as a result, the funds have to sell everything they have.

At times like this, the selling becomes indiscriminate, which is why certain blue-chip companies – ones that will almost certainly survive the recession – are offering double-digit yields. Given that global interest rates are headed downwards rapidly, such companies must be a screaming buy.

But like everything in investing, you have to be diligent and, most of all, patient in your research. A crucial dynamic in all these episodes is that markets overshoot. In good times, as we’ve seen to our regret in the Irish property market, markets overshoot on the upside, bringing prices up to ludicrous levels.

In bad times, like now, the same process occurs and asset prices overshoot on the downside, bringing prices down to levels where the assets are at bargain basement prices. We are seeing this now in stock markets.

Unfortunately, this is not happening in the Irish housing market which, on any rational basis, is still wildly overvalued. Last year, this column ran a simple financial model for where fair value might be in the Irish housing market. This is back-of-the-envelope stuff, but bear with me. The price of any asset must be related to the amount of money the asset generates each year.

In the US, analysts claim that, in the long run, house prices should be equal to between 12 and 14 times earnings. This means that if a house is generating a rent of $10,000 a year, it must be worth between $120,000 and $140,000 a year.

Apply this test to Ireland. A quick search of Daft.ie will reveal, for example, that a three-bedroom house in Co Wicklow – advertised as an investment property – is on sale for €289,000.

The same website tells us that the average rent for a three-bed in Arklow is €850. So let us say that, in the best possible case, this place is rented for 11 profitable months a year – the final month’s rent goes on various costs. The implication from the American model is that the house is worth about €122,000.

The implication from this, compared to the advertised price of €289,000, is that the house is still wildly overvalued. The Irish calculation means that the house is trading at 31 times its annual yield. This clearly needs to fall dramatically by close to 60 per cent for it to make any financial sense to buy.

So one of the factors impinging on Ireland’s recovery is that we have to see house prices fall dramatically for any investor in their right mind to get back into the market. As long as estate agents, banks and builders are in denial about where prices need to go, we will not have a platform for any recovery.

So property investment is out, but let’s go back to the stock markets. The question is whether we are near the bottom? In Ireland, the bottom might take a few more months to materialise because we are caught in a bad debt brace.

Going into the crisis we were the most indebted population in the world. More worrying, practically all of that personal debt had been taken on since 2000, so not only were we indebted but we were newly indebted. Finally, practically all of that debt was property-related.

At this stage – for heavily indebted players – it hardly matters now what happens to interest rates. Sure, a few decreases will help, but the employment situation is of much more consequence for mortgage holders. Unfortunately, unemployment in this country is likely to rise substantially in the coming months and years because so much of our recent job increases were generated by the domestic service sector and the construction sector.

Rising unemployment will prompt industrial-scale mortgage defaults in Ireland and the defaulting process will follow the same pattern we have seen in the US. We are likely to experience what could be described as ‘‘shunting defaults’’, as people’s defaults shunt on from one loan to another. This means that we will also witness large-scale credit card default, many thousands of car loans will never be paid and home loans will similarly be reneged on.

This will lead to house prices tumbling in a delayed reaction. However, this is probably the point at which the Irish stock market will begin to rally.

For the brave, for those who understand the dynamic of markets, this week’s panic should be the signal to begin the process of thinking about investing again. The lessons from history are that turbulent times pass and also present the buying opportunity of a generation.


  1. Fergal

    I’m in agreement with the thrust of this article, but the American formula is dependent on the historically low interest rates the globe has experienced over the last 10 years. Should interest rates rise (which will probably not happen – but it might) then this mutiple would be reduced – to something more like 6 – 8 times.
    For a long time, DmCW has been advising people not to invest in property, and he’s been proved right (although it took a long time). If you’re thinking of buying a place, wait – property has a long way to fall in Ireland (as well as globally).

  2. CD

    I’m a cletic tiger cub. I’m 32 years of age, dont rember the 80′s & i’m still full of the confidence me & my buddies grew up with. I’m not loaded but I got a bit of spare cash every month. 3 years ago i wanted to buy a 2nd house & jump on the property band waggon. My girlfriend works in property rental & listening to her, in decided to go for it. I was approved for almost €300,000 and we had a chat. I could get a house for that money and take about €950 in rent a month. I could also buy 2 houses @ €150,000 and take €650 each a month…..so borrow €300,000 and take in €1300 a month instead???? I shopped around & got one for €115,000 and the other for €125,000. €240,000 total and took €1300 in rent. They went up to €175,000 each @ one stage & i was laughing. now they’re realistically back down to where they started but i’m paying under €1400 & the rent prices are holding. My mates laughed as i bought in so called ‘bad areas’ while they paid €300,000 1 house in a so called good area! Still now, ‘pound for pound’, real working class estates provide good value for small fry like me wanting to bump the pension up a bit. Because of their snobby attitude to the location of the property, my greedy mates are up shits creek & in ‘life changing’ negitave equity. Me? i’m now waiting for prices to drop, just a little, so i can snap up another in and around €100,000 – €110,000 at €650 mortgage & €650+ in rent also…..the lower house prices go, the easier it is to make money.

    • Jay

      To CD.
      I am 38 and I do remember the 80s, your summary of how smart a buy property can be no matter what the state of the economy or the location of the property is exactly what got the Irish economy into the current mess. It is a pity that people like yourself and others don’t take example from our European neighbours and base your wealth on what you create and earn rather than how easy it is to buy mulitple houses and rent them out at no apparent cost or risk. To be honest your comment doesn’t seem genuine.

    • Juicylucy

      CD

      I see where you’re coming from.

      I also think along those lines,

      Most people on websites like daft will not rent to people on RENT ALLOWANCE i think renting your house to a family on the dole is basically a state gaurantee of my rental income, so I try to get as much as I can out of the government.

      Over the coming months and years i’ll be happy to help someone (maybe everyone) with housing.

      In the private sector rents will only fall as more and more empty houses go on to the market as rental properties, but I can still basically charge the government as much as the maximum RENT ALLOWANCE dole families are entitied to claim.

      These families don’t lose and I don’t lose.

  3. Johnny Dunne

    “The current market instability could create lucrative chances for those willing to take a risk.”

    What compnanes on the Irish stock exchnge look like value taking a medium to long term view ?

    Most of the major stocks are dependent on financial servcies, property or local consumer spend !

    How about C&C group down at €1.19 from €5.75 less than a year ago with a P/E of 4 – lot’s of great brands – others ?

  4. AndrewGMooney

    Warren Buffett has called The Bottom in the USA. Antony Bolton has called it in the UK, but given that the Nikkei is trading in a position it was last in 20 years ago, it’s hard not to pause and reflect.

    It this a V, U or L shaped downturn? Is it deflation, disinflation or the prelude to hyperinflation? I dunno. There are so many conflicting and contrasting theories from the ‘experts’ that it makes the head spin.

    Some people say you should only put money in shares that you can afford to lose. If you’re in that fortunate position then I’d go for it. The only other thing that really makes sense if for younger readers of this blog to think about their pensions, as boring as that must sound. Unless you think the world is ending, drip feeding money into a pension now in your 20s, 30s or 40s has got to make sense. Even if it’s tempting to pay down the mortgage to feel comfortable on a short term basis.

    David’s optimism is refreshing, but everyone’s situation is different, depending on age, debt/savings levels, location. It’s nice to read a jargon-free, rational attempt to put The Panic in a longer term perspective. My impression is that a lot of ordinary folk are seriously freaked by the media hysteria to date.

  5. Deco

    David yourself, George Lee, Morgan Kelly, Colm McCarthy, Robbie Kelliher, Shane Ross, Alan Ahearne, and Sean Barrett – have all provided careful, cautious predictions with respect to economics over the last five years. You have critiqued and laid bare the fact that the Celtic Tiger was an aberration behind an giant magnigifying glass.

    Most of the the economics profession that we seen on television on the news bulletins, have made commentary that has proven to be costly, excessively optimistic and factually incorrect. So now we are witnessing them all trying to rebuild their credibility.

    The fundamental difference is that the economists, like David, who used tried and tested models for economic behaviour, have been proven correct. The basis of the incorrect models, have been policy decisions, and market share objectives of careerists in the orginzations where they work. We know now that the exact approach to economics id the reliable approach. We know that forecasts that came from with the cosy consensus, the banal unfounded optimism, from the leafy susburbs of South East Dublin, is a load of nonsense. It has been shown to be a functioning pyramid scheme.

    (Dan McLoughlin being prime examples). Dan McLoughlin’s incorrect forecasts are now a serious impediment to his employers share prices, so he has stayed quiet. We are also seeing that AIB was the first Irish managed bank to convert to more conservative banking practices. And now AIB appears the strongest of these. Though wide margins, profits retained, and profitable overseas subsidiaries are probably a big help to AIB, also. Hilariously enough, AIB is the one bank of the six with the most outward leaning tendency in it’s management – if you could imagine that occurring in the incestious little world of corporate Ireland. The only think holding AIB back is the prestige culture nonsense that predominates in the entire industry – as evidenced by the account given a few weeks ago by Shane Ross of AIB staff on a golf junket. In other words unfitting behaviour will have to be resolved. Everywhere.

    As things stand, the shares of most Irish companies have collapsed on the Irish stock market, to a near bottom levels, levels that are in some cases touching the level of abusdly cheap. The banks are incapable of reinvesting their deposit money into Irish company shares for another two years, at least. In previous market declines this has occurred. Banks, who know the business as the gaurantor of the credit to Irish companies, knew which businesses were going where. They literally had insider knowledge. But even in current circumstances it means nothing. The banks might have know which shares to hold on to until the last possible moment. But evertually balance sheets and current account ratios had to be fixed. This meant that investments had to be sold, to be converted to cash to plug holes. And there are many holes to plug. This means that viable companies are no up for grabs. However, we can say that the Irish Stock Exchange is not representative of Irish economic activity. The High Tech sector, Big Pharma, and international financial services are barely represented.

    The best candidates for upward movement are companies that export their product largely. The home market is contracting below the economic level of sustainability in many sectors. Seasoned competitors in international markets should survive. Companies with cost and structural advantages. Companies that are outside the tent of Irish nepotism are very favourably placed. (It has been revealed in Wall Street as well as in Ireland that Nepotism produced organizational underperformance). Companies that have cross-shareholdings in each otehr and share directors – or which are laden with family members, or where the management all play golf in the same club will receive widespread cynicism from investment funds. Companies that control niche product/service areas are also advantaged. Companies with reduced exposure to the falling pound sterling are also advantaged.

    Watch as we see that some companies pickup faster, and cleaner than others. Yes, there is a recession. But recessions and booms are very sectoral. Some sectors will survive – due to their necessity, or their underlying asset value. Others will undergo massive heamorraging, debt restructuring, realignment, rationalization, and near death. They might even see, boards of directors get completely replaced. Business Models are out. Projections are out. Even market share will get questioned. Cash flow, margin, cost control, value chains and revenue stability are in.

    But the key issue – the criteria underlying a company’s performance will be analyzed in a manner that has not been the case over the course of the last five years. Investor tolerance of shennagins in the board rooms of Irish companies will be much lower than previously. The workers and the taxpayers will all be much better off as a result. Ireland has an opportunity to clean up it’s bad business practices, and go back to the spirit of inititiative and drive that predominated before the Ahern years. We must undo the Ahern legacy in our business climate. Cutting down on state meddling is essetial. Making state institutions standard bearers in integrity is also absolutely necessary. The government can do a lot to fis the economy by fixing the bad behaviours that it has created for the rest of the economy. And in particular the government must rein in the Economic Rent Infrastructure, in the sheltered economy, which is sucking the competitive sector dry.

    Based on what we have seen so far, it is beyond our political leadership, in terms of intellect and willpower to address this issue. That is not just my opinion. The people canvassed in recent opinion polls seem to hold the same conviction. The thousands of Irish people now leaving for Australia, hold that conviction even more strongly !!!

    David, please tell them what they need to do !!

  6. Jay

    ok, the message in todays article was certainly on my mind. However, what shares would be a buy? Certainly not financial shares, other shares are holding steady while others continue to fall. What criteria should be used.

    To CD.
    I am 38 and I do remember the 80s, your summary of how smart a buy property can be not matter what the state of the economy or the location of the property is exactly what got the Irish economy into the current mess. It is a pity that people like yourself and others don’t take example from our European neighbours and base your wealth on what you create and earn rather than how easy it is to buy mulitple houses and rent them out at no apparent cost or risk. To be honest your comment doesn’t seem genuine.

  7. Ger Kennedy

    @CD

    I dont know where you got houses in Ireland at those prices in Ireland in 2005 but I find it hard to believe those prices were near any sort of real urban area at those prices in 2005 Ireland. Maybe Limerick? (Moyross?)

    If you managed it and it is paying off then fair play. As regard rents holding, that is going to be unreliable down the line as more and more rental property comes online with the emigration of many of the eastern european workers over the next few years along with all the empty newbuilds out there.

    Personally I think blue chip stocks are the way to go. Buy good companies that know how to make money and sell products that people need. Think technology. Think natural resources. Think food. Think pharma. Buy the best. Buy to hold.

    Property is yesterdays game. Ther are 250000 empty housing units in Ireland by some estimates. Hardly a recipe for buoyant rents. It is down to supply and demand. There is no demand.

    Best of luck dude

    Ger

    • Jay

      Hello Ger,

      Yes, CDs apparent success does seem unlikely.

      Like the summary of how to think in regards to some possible share investments. Whe n you say buy to hold, please explain what you mean. I was thinking if shares make some profit then sell some as time goes on.

      Regards
      Jay

    • Juicylucy

      Ger

      You seem to imply that every family in Moyross is rough.

      Most people living in this area are ordinary people just like yourself.

      I see a lot of state gauranteed income in moyross, just wish I could get my hands on some property there before the government buys it back at market value to knock down and redevelop as part of limericks deprived areas regeneration scheme.

    • Ger

      Hi Ger

      did you see the Irish Independant today? A builder was talking of a go-slow period, which would enable the supply of houses to catch up with demand, it would be interesting to know how many units are vacant in Ireland, 250,000 sounds like a lot to me, how long can builders afford to leave them vacant? Won’t the banks be calling in the money especially given recent events?

      I have a friend in property with a lot of rentals who feels he is protected but when I look at it from a layman’s point of view I personally see some trouble.

      Firstly there is the X factor some unforeseen event, like a health issue, something he has not remotely considered as he is so focused on the dime.

      Secondly he may only have to contend with a possible drop in population. A lot of the Eastern Europeans were economic migrants, I noticed around the city that their numbers are down. Construction has dried up and more and more stories indicate that they are heading home. If the American multinationals up sticks and relocate to Poland as is the rumour, then this will see a further decline in population.

      Add to this growing unemployment among the Irish, young professionals and graduating students won’t stay either as they will take their chances in growing Western economies like Canada and Australia.

      So the guy relying on rental incomes might be in trouble, yes, there are always those who rent, I am renting myself because I thought house prices were absurd, so currently sitting it out and assessing. House prices are not dropping below the affordable housing scheme, with builders slashing prices in a desperate effort to get revenue in – which illustrates the margins they were dealing with all along.
      I was looking at two reasonable houses last week at €180,000, these previously could have fetched anywhere from €250,000 – €300,000 so its a buyers market.

      So builders may play the waiting game until units are occupied, but there has been such an amount of building that I am not sure about that game especially if the population does decline, which I believe it will and fast.

  8. Juicylucy

    Buying a house at €289 000 and getting €850 x 12 months =10200/289000 = 3.5% return on my investment before tax is paid.

    How could people think that a 3.5 % return per annum is a good investment when the bank is charging them 3% per year interest on that 289,000 every year for 40 years!!!!!!…………..hello……….I think people got more emotional about owning their own home (which they don’t own, the mortgage is on the banks Balance sheet as an ASSET) than thinking things through and comparing themselves to the rest of the world instead of thinking that IRISH IS BETTER.

  9. Ger Kennedy

    When I say buy to hold I mean buy to hold. If you buy good companies and hold them long enough then you may be able to retire on the back of those holdings. I will give you an example.

    I was living in LA when the ’94 quake hit. The guy next door had a beautiful house, new cars, pool, decent neighbourhood, wife at home all day. I figured he was some sort of professional. The morning of the quake he showed up at his house at 5AM (just after the quake) driving an MTA (equivalent of CIE) bus. I was shocked.

    Curiosity got the better of me and a few weeks later over a beer over the yard fence one Saturday afternnon I asked him how he had the life he had driving an MTA bus? He laughed. He used to work in banking. He spotted Microsoft in 1980 and bought shares. He kept buying shares and re-investing dividends. Within 10 years he was able to “retire” with the income from dividends alone. He drove a bus so he wouldnt have to spend all day with his wife.

    That is an extreme example and I am not sure if it is 100% true or what other investments he had. However it is an example of what I mean. I dont see any companies out there right now that are tomorrows microsofts. (If I did I wouldn’t tell you anyway.) But they are out there. Probably not in IT. More likely in Medical science or pharmaceuticals. Or possibly natural resources or alternative energy.

    Remember I am not a financial advisor. However it seems as if the way to build wealth over the long haul is good equities. Either that or find an oil well or two in your back garden. The you get to live the dream and drive a bus.

    Ger

    • Jay

      Hello Ger,

      Thanks for the reply and yes I see what you mean now. Pity you won’t tell me what the next microsoft will be but perhaps I can figurer out myself.

      Jay

  10. Ger Kennedy

    @JuicyLucy

    What you are talking about is being a slumlord. It is certainly a legitimate business it is profitable to some degree. However will come under increasing pressure over time as the financial constraints on the Irish Government become ever tighter over the next few years nad the pressure on social welfare budgets (who, I assume, administer rent allowance, not being familiar with the process in Ireland) becomes ever tighter with the increase in the number of social welfare recipients over the next few years. Expect “cuts” to rent allowance in the near futire given the fact that private rents are going down dramatically. Think of it as negative benchmarking for slumlords. I dont see a massive movement of people on the streets for slumlords as we have seen for the elderly or will likely see fro the theachers.

    Slumlords are necessary and they do provide many poor people with housing which is a good thing. It is also a legitimate business. Nothing wrong with that. But like it or not, you may and probably will, end up dealing with people who for many reasons (including drug addiction, criminal backgrounds etc) are unable to obtain private rented accomodation. Dont know about you but it wouldn’t be my cup of tea. That can be a very tough business. Again I am thinking the Moyross scenario. Remember it is not a property game really. It is more of a social welfare income channelling business.

    Good luck with it all. It is one way of doing it I guess.

    Ger

    • Juicylucy

      Hi Ger

      As far as the “cuts” are concerned, i’ll explain. Firstly, most people in Ireland are not gangsters (0.5% of population are), & being a landlord with experience you can pick who you would like to rent to.

      If tenants don’t pay, you can take things up with the social welfare office, if people don’t pay up in the private sector you can’t just throw them out etc….. and the legal process in ireland means it takes years and a lot of money to get a solution to the dispute.

      Social welfare Rent Allowance cuts will be the last in the long line of cuts to be implemented, if ever implemented. The government is more likely to incease taxes on the working class to ensure that the poorest are protected as far as possible.

      Remember: the rich don’t pay and the poor don’t pay, its the ordinary middle classes in any democracy that carry the country’s rich, poor and old.

      So good luck to you all, travel more, and learn to see things as they really are, not what the media has lead you to believe.

      I have found that ordinary people who have the least, always try to pay to the best of their ability.

      Loan sharks know this little life secret too, why do you think the banks lent people massive amounts of money over 40yrs?……….cause they know Mr. average Joe will do whatever it takes, even go without food, to make those mortgage payments.

      CD and I are not the same person, but I can see that he has some real experience.

  11. Jay

    are Juicylucy and CD one and the same….. hmmmmmm

  12. b

    Hahaha. CD you are a riot!

    You had a chat with your bird and decided just when it all went to shit to become a property magnete. Woo hoo! Good for you. Hope the bird sticks around because she is obviously the brains of the operation.

    JuicyLucy is what we all know as a bottom feeder. They do well because everyone needs somewhere to live.

    The banks are not to be trusted. They are holding out and prices are in a state of stasis. When this whole mess winds itself up we will know where we are. At this time I think we are nowhere near the bottom and while optimism is great I think its a bit premature and self delusional.

    Just remember the government haven’t a notion and I would look to Mystic Meg first for advice.

    • CD

      I’m not in it to make a million & i’ve no desire to become a property magnate either. I just want a rental property that’s bought for me by someone else that i’ll sell when I retire or use it to help the kids out. The prices I quoted earlier are correct and if i was to post here under 2 names I would’ve chosen something other than ‘JuicyLucy’ (no offence intended). People said i was ‘mad’ to buy the 2 houses in the ‘rough’ estate but Dunnes Stores recently invested around the corner and its a 5 min walk to an Institute of Technology. Those same people bought expensive houses with interest only mortgages and are now up shits creek due to their own snobbery. All they wanted to do was brag about their investment property in the latest luxury development around town.

      My ‘bird’ works in the property rental industry therefore giving her an educated insight into whats easily rentable. I’d be a fool not to listen to her.

      I’m just a guy trying to do the best for the future & maybe I hit it lucky or maybe it’ll all come crashing down around me. Anyway, the bank owns the 2 houses & the one I live in so the worst that can happen is that they take them all back which leaves me back where I started. And whats so bad about that.

      My only point is that there were bargains out there then and maybe there are bargains out there now….if your in it for the long haul. I have spare income and dont want to leave it under the matress. I dont want a big house or a fancy car. I’ve no interest or notion about shares and i’m happy to keep it that way.

      My generations big asset is confidence. The desire to move forward, the confidence to take a punt and start a business (which i hope to do some day). My job puts me in contact with lots of people with good business ideas who want to make them work. As long as there are lots of people with the confidence to better themselves & start a business this country will be fine. If the next generation loses that, then we are in trouble.

      Anyway, only time will tell.

      • b

        Hey man, I am in the same generation. Confidence is great but realy and truly the property thing is getting old and old very very fast. I appreciate you want to get on but buying in a market that is flying up and and crashing down is crazy. You may very well make money as a landlord and good luck to you but there are easier and less stressful ways to make money.

        Your bird might know the rental business and you might be sorted. But from personal experience as a renter I am bunking in with friends untll reality hits the rental market. Rent is still far too high and it needs to come back. And also if our new cousins go back home what the hell is going to happen to house prices? Who are you going to rent to? It may seem like a bargain now but if the market slides for the next 3-5 years at the ferocious rate it is threatening your cashflow could go out the window. And walking away from a property in Ireland is no easy thing. Walking away from a rental is easy.

        We have two businesses and by sheer force of will have made them work. We had a third but political forces closed it down. We run a business for another fella with buckets of confidence but not a notion how to run a business. This business runs in spite of the owner. If her stepped in to run it it would be gone by the end of the week. He couldn’t find his arse with both hands and a map. He made his money in the over inflated stock market and the more I look at it the more it was as a result of luck rather than skill.

        Business ideas are like ar*eholes. Everyone has one and nobody wants to see them. Execution and cashflow are the only show in town now. The cheap credit has washed out and only the natural born survivors and executioners are going to make it.

        We have seen many many businesses in Ireland fail. We have seen them fail in the good times too. Most are not killed by the external environment. The number one killer of a business is hubris and the inability to see your own limitations or delusions. We had one client that was well connected fail because it had stopped collecting money from its clients. Publicly quoted, started believing its own bullshit, took its eye off the ball and BANG! it was gone. This shower sponsored spiders climbing up the wall.

        Unfortunately my business is going to skyrocket. Unfortunately because its the knackers yard for business. Not liquidation or recievership but the patient has usually had two or three heart attacks and a stroke by the time they ask for help. In the boom the basics went out the window and you could borrow your way out of trouble and if the cashflow was high who cares how big the hole in the accounts is.

        When we go in we are as popular as a fart in a space suit but it has to be done and because all our business is either in the dirty end of the market or countercyclical we make money in the rain and are flat in the sunshine.

        I would wait until the big banging sounds stopped to invest in anything. Some people can make money when its really bad but it takes a wide awake person with a certain personality and the ability to take losses on the chin.

  13. Furrylugs

    David, good positive insight and advice.

  14. Stephen Kenny

    AndrewGMooney
    Just a quick thought on Warren Buffett. He didn’t call bottom of the US market, he’s always quite clear about that sort of thing. He calls ‘Good value investment’, which really isn’t the same thing at all. It’s probably also worth noting the deals that the guy pulls off – the Goldman’s deal was just spectacular, but not available to us mere mortals.

    Many stocks look good today, according to their p/e ratios, but it’s worth bearing in mind that the financial/credit slowdown is only just hitting the real world, so many of those earnings figures are likely to look very nostalgic, making the p/e ratios a little less luscious.

    Learned-sounding stock brokers and commentators have been calling bottom of the market, on a weekly basis, for the last 12 months. There seems to me to be some more to come – currencies, commodities, a lot of global debt still to appear (or not, if you see what I mean). I’d say it was brave to go in now, but there again, fortune favours the brave, or is it the foolish, I can never remember?

    These guys might be a bunch of goldbugs, but it’s quite an entertaining page:

    http://www.gold-eagle.com/editorials_01/seymour062001.html

    • Ger

      Hubris created Sarah Palin. People have been reading too many American ‘confidence’ books, you can do it if you believe it. Well try Iraq, Afghanistan, subpime market, stock crash and on and on it goes. Why not try humility, compassion for one another, replace aggressive competitiveness, taught on the fields of Eton and replace it an equitable, fair society for all and not just those who seek to cash on the backs of the poor for some imaginery and illusory pension.

  15. PF

    Confederated Slaveholdings, Transatlantic Zeppelin, Amalgamated Spats, Congreve’s Inflammable Powder, U.S. Hay and the Baltimore Opera Hat Company are all worth a look.

  16. Deco

    CD – You comment
    <>
    Have you learnt anything from the events of the last ten years ?
    Confidence is a liability. Confidence created the debt level that is going to cripple this country for a generation. It is the idea of ‘confidence in confidence’ that has created a mess of a sound economy. Confidence has prevented rational intelligent thinking. Confidence put Bertie Ahern into the Taoiseach’s chair three times. Confidence built up massive debt levels and resulted in developers conceiving even more stupid plans. Confidence sent Irish people to buy overvalued property in Budapest, Costa del Sol, Bulgaria, Berlin, Lanzarotte, etc. Confidence resulted in the Eircom debacle. And confidence resulted in people putting that minor blip behind them, and created the next bubble property.

    I hope that the next generation loses confidence. I hope that the next generation starts relyiing on stuff that works. We have had enough of ‘confidence’. It has destroyed us. Confidence has resulted in a banking crisis before the first mortgage default went into the court system.

    The last thing we need is another drive to drum up ‘confidence’. The confidence delusion should be dumped. It is not a proper economic strategy for our society and has resulted in a severe misallocation of resources !!!

    • b

      I agree with Deco to a point. Blind confidence is a liability.

      BUT and I am going against myself here it seems the market is uneven and people do need a place to live. So lumping the entire market together is too broad a brush stroke. There are many sub markets and some of these may throw out cash to na daoine clisteach. At the same time the market is still totally over cooked. Some people can make a purse out of a sows ear but most can’t.

      And yes, Eircom and the housing boom point to a serious lack of financial smarts in the Irish psyche. I bought neither. I am not saying I am smarter than the average bear but I don’t blindly follow a trend and I did get stung by over confidence during the dot bomb in 2000.

      The next generation is too late. THIS generation needs to come off the cocaine and champers and put their shoulders to the wheel.

      They could start by dropping the Me Fein party and maybe taking an interest and stop FF getting in by default. The civil war is long over and yet we are still hobbled by its politics.

      We need to grow up and take responsability. Unfortunately I don’t see this happening. I see a lot of bleating and gnashing of teeth and a lot of Sheepwalking in to a depression.

      We deserve better but we also need to wise up!

  17. Anto D

    “this week’s panic should be the signal to begin the process of thinking about investing again”

    1 more selloff could very well see a strong bounce!

    As for ISEQ! It’s scary knowing what I know about Market’s and seeing it relative; Globally! (historically)

  18. Jay

    Deco, well said. We need good business practice, companies to grow, products to be created, ideas to flourish. Not more bloody property mogels.

  19. b

    Now that I think about it a bit more CD and JuicyLucy you are both smoking crack. This thing is gigantic and its not jus a few skangers getting their gaff in Blanch repossesed and maybe taking one less holday in 2009. This is a major structural failure. The wheels are coming off big style.

    I took a look today at businesses in the local area. Its in Co. Meath and in the “baby belt” and the sheer amount of people that will be totally and utterly screwed by the collapsing housing market is enormous. Giant shopping malls that are funded by fresh air, estate agents and the like, roofers, tilers, electricians, carpet salesmen, banks, furniture stores (a dumb idea when IKEA is just up the road) are all goosed. Not just a drop in business. These guys are going to be wiped out. There is a whole sector of the economy that contributes NOTHING to competitiveness and is inward looking and pretends that we are a vast self-sustaining economy like the UK or US is. We are nothing of the sort.

    So buy to let with willing tenants may seem to be a good idea but you are going to get nailed to the wall if it goes as bad as I suspect it will. If we already have 250K of empty houses where the hell are you going to make money if 10% of the economy fecks off home? And these people had pikey levels of access to credit and did things like work in the real economy instead of going on the piss and borrowing makey up money from the bank to be property millionaires. Rents have got to crash.

    The economics don’t make sense. Lenihan hasn’t a bulls notion what to do and the banks have driven themselves into a corner with reckless and utterly stupid and arrogant lending.

    This, guys is a perfect storm. It hasn’t quite gone bang yet but it will.

    This is what we get for letting MBA exist. There should be no MBA students allowed after this financial holacoust. The derivatives and financial engineering they came up with is criminally irresponsible and will lead to millions of people worldwide losing their jobs, their homes and their dignity.

    We are royally screwed.

    • Jose Antonio

      Let go the MBA thing .. find me the MBAs among Brian Goggin, Sean Fitz .. or even Sean Dunne, Liam Carroll.etc

      Ireland is practically an MBA free zone ..

      I have an MBA and what did I learn? that the rational investor buys indices, minimizes transaction costs and has a diversified portfolio.

      No mention of property …

      Among the problems with CD and Jucy Lucy is the whole “Time value of money” concept.. if you buy for 100k and sell for 250k in 10 years you have not made 150k.

      If you want to make money, the first rule is is to pay yourself first .. i.e. start a company, be part of the production economy .. not the consumption economy …

      Interestingly I now teach to MBAs and where once the most popular course was Advance Financial Engineering or AFE, the most requested now is Corporate Social Responsibility or CSR.

      So one more time then. The rational investor buys indices, minimizes transaction costs and has a diversified portfolio.

      The rest is just shite.

      • Juicylucy

        Hi Jose

        I am very aware of the “time value of money”, but i also know the following:

        value of anything = the present value of the discounted future cashflows from that thing.

        In my case I have no outstanding mortgages, and the rental income is pure cashflow.

        I do not ever intend to sell any property I buy, as this will only trigger off Capital Gains Taxes.

        So I intend to build up a portfolio that generates cash for eternity, put it into a company and hand my wealth down to the next generation (kids), by placing them as salaried directors on the companies board.

        When I die, on paper I do not own anything, and so do not pay Capital Gains Tax, and my families wealth is everlasting as my kids can put their kids on the board of directors to replace themselves.

        I have met many people with up to 5 different qualifications and letters behind their name, all of them are lecturing night classes and over long weekends, none of them are wealthy. MBA’s are a waste of time and money.

  20. Lorcan

    AndrewGMooney > It this a V, U or L shaped downturn?

    The shape of the downturn will only become clear with the benifit of hindsight, the most important thing for the longer term investor is finding the bottom and getting in as close to it as possible.

    So, where is it? and more importantly, are we there yet?

    My answers are I don’t know, and I don’t think so.

    I think indicators point to a longer term economic contraction. My backround is in mining, one of the first industries to be hit in a downturn, and things are not pretty there at the moment. Many miners are down between 60% and 80%. This will have a serious knock-on effect for future growth because the big miners will be unwilling to invest in future mines if they can’t cover their costs or raise the capital necessary.
    http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=71484&sn=Detail

    Indicator no. 2 is something called the Baltic Dry index. It is currently at 1149, down from 11793 in May. The index is basically a measure of the cost of chartering a bulk dry goods ship (used for transporting basic raw materials). The market has panned in the past few months, leading to ships being anchored rather sail at a loss. Bulk dry goods are not moving across the globe at anything like the rate they were six months ago.
    http://www.lloydslist.com/ll/news/capesizes-anchored-as-daily-earnings-plummet/20017583457.htm

    Indicator no. 3 is credit availability. Remember the reason governments are jumping through hoops to protect the banks is not to protect the banks (in spite of the rumours to the contrary), it is to protect the markets. Markets run on credit. If I can’t get a letter of credit, I can’t get my order of christmas toys shipped from China, or I can’t get an overdraft to pay my workers while my goods sit on the dockside waiting for my customer in Europe to get their letter of credit sorted out. Without credit everything stops.
    http://www.ft.com/cms/s/0/ed607a1a-a219-11dd-a32f-000077b07658.html

    So not much good news there. Sorry. Personally speaking, I have never had much interest in property outside of the mortgage on my own house. I always though it too risky. And i certainly still do.

    P.S. interesting story in today’s FT. Thailand has agree to buy oil from Iran. Nothing unusual there? Not until you read that they are paying the Iranians with RICE. International barter, the way to go. Any country want to swop a tanker ship of oil for a container ship of unsold breakfast rolls?

  21. Furrylugs

    Leaving Cert Economics Question Part 1 Summer 2008

    Lets say then that by Mid-November confidence in the Government has evaporated and a vote of no confidence is carried before Christmas with an election in the late Spring.
    In the meantime the Germans come looking for their 250bn and a couple of banks fail. The Government can’t raise sufficient loans from anywhere and all we can lay our hands on is a couple of billion from the IMF for essential services, a la Iceland.
    Meanwhile, young president Obama creates an internal market in Nebraska or Wyoming and all the MNC’s skeddaddle back home. America might be shocking at regulation but they do isolationism quite well.
    The brains and youth of the country have flown off to dine on ‘Roo.
    We’re left, as stated above, with a huge internal black hole swallowing all our cash.
    So we’re producing nothing worth talking about. Our projected GDP is zilch so our borrowing power is zero.

    We’re bankrupt.

    1.Apart from the social problems that the authorities would have to contain, how does one build a business survival model, given that scenario?

    2.Is the EU, for the good of the EU, going to bail us out, the payback being Lisbon ratified?
    Or does the EU care about Ireland any more?

    3.The dogs in the street are saying that the present cabinet can’t govern because they’re in too deep with the sectors they’re supposed to be targetting.

    4. Is China going to ‘buy ‘ Ireland as Airstrip One?

    5. Since Paddy the Regulator has to show his teeth , ref Sean Quinn, is all the remaining wealth going to sod off to Aruba for 5 years and eradicate what remaining PPP / PFI projects we have?

    Lorcan, I did a bit of tunnelling in my time. Got anything going?
    Might be safer underground for the next few years.

  22. Lorcan

    Interesting looking at bank or irelands share price today. It’s standing at €1.38. That’s a P/E of 0.862. I’m not saying it’s a buy – far from it, but in any other context, it would be a free share.

    Does the stock market have further to go? The companies now part of the S&P500 (a much better indicator than the dow jones) traded at seven times earnings in the 1970s crisis. They are now, despite all the GMFO trading, at eleven times earnings. Room for more downward movement. 2009 will be messy.

    For stock-markets the motto is ‘early is the new wrong’.

    Furrylugs > 1.Apart from the social problems that the authorities would have to contain, how does one build a business survival model, given that scenario?

    One builds a personal survival model given that scenario.

    2.Is the EU, for the good of the EU, going to bail us out, the payback being Lisbon ratified?
    Or does the EU care about Ireland any more?

    Euro membership will be our saviour. Our money will still be worth something. It is all that is saving us from the Iceland path right now.

    3.The dogs in the street are saying that the present cabinet can’t govern because they’re in too deep with the sectors they’re supposed to be targetting.

    The government are not supposed to be targeting anyone. Construction and finance have been the two biggest contributors to GDP. They think that by saving them they are saving the economy. Our anger at these sectors is justified, but unless there is a viable alternative to them for powering the economy they will continue to protect them.

    4. Is China going to ‘buy ‘ Ireland as Airstrip One?

    China has had it’s hands badly burnt during this financial meltdown. The US might be good at isolationalism, but the chinese have perfected it over centuries.

    5. Since Paddy the Regulator has to show his teeth , ref Sean Quinn, is all the remaining wealth going to sod off to Aruba for 5 years and eradicate what remaining PPP / PFI projects we have?

    Builders don’t really have wealth. They have (had) good credit lines. I believe in the government being the employer of last resort in times of economic turbulance rather than the lender of last resort. Take the middle P out of PPP and we should be ok.

    Lorcan, I did a bit of tunnelling in my time. Got anything going?
    Might be safer underground for the next few years.

    I was a bit hopeful about Minco’s plans for a new mine in Co Limerick ( http://www.mincoplc.com ), but unfortunatly they are in bed with Xstrata, the most debt laden ‘big-player’ mining company, so a short term development looks less likely.

    Underground might be a good idea though. Certainly head below the parapets time.

  23. Furrylugs

    Looks like the Aussie one way tickets might have been a tad premature?

    http://www.abc.net.au/news/stories/2008/10/28/2403163.htm?section=justin

  24. Philip

    I notice the whole fear of derivatives (a real symptom on confidence in confidence is ever there was one) seems to have gone away. If all the hedge funds are looking for cash to meet their obligations, are we not about to see another dip. Let’s face it, there is no guarantee that the current bailouts going on for banks worldwide are going to work. If anything, given the stall in credit lines and consequential impact in supply chains world wide (Lorcan you mention boats being moored rather than sailed at a loss), I see further downward pressure and lots of it.

    Also, I think we can forget about China pulling us out of the fire as well. They are feeling the effects of when the world stops buying. China was really propped up by idiotic and criminally funded (using funny money that’s now being uncovered) business models which saw all manufacturing being outsourced to them. Granted, it has probably done them a lot of good. But it’s proving to be a zero sum game at a global level.

    While the old dictum that recessions comes and go and we will see a pickup eventually, I think we need to understand that this is a big one and it we are undergoing a massive paradigm shift much bigger than anything that happened in the 1930s. This is a major banking/business model cockup which has been exaserbated by banking sector that remained unregulated for the last 20 or so years. In addition, there have been profound business changes in the midst of a society that still has the wasteful living habits of the early 20th century. The real effects of multinational power, IT driven value chains that have profoundly affected logistics and outsourcing business models are only now starting to be understood in terms of their tenuous benefits and societal damage.

    Right now, for Ireland, the needs to be an emergency conference of interested called to deal with the problem and name it and set about solving it. This is not a matter of lifting the mantle of denial, but also of recognising we have both a internal and global structural cockup to manage. The game has changed and while I am all for spotting opportunity as DMcW suggests, I think he’s very old style in his thinking. We are not going to see a recovery any time soon. You can’t just stop integrated logistics and expect it to reboot itself magically overnight just becasue you inject cash late in the day. The world has just too much inertia. Once things gets turned off, it takes years if not decades to restart. If anything we could be close to a societal collapse -so many specialists all relying on these service/ logistics being laid off and no good at doing anything locally as their skills were so globally focused – which I see happening across Europe as well – as the idiots fiddle while Rome burns (so to speak). The EU Central bank needs to take more executive and action. I did not believe I would ever see myself saying it… but we actually need a federal Europe which can work with the US to tidy up this mess and it needs to happen fast. I think we have 2-3 months or else you can forget about Euros etc.

  25. Ger

    “For the brave, for those who understand the dynamic of markets, this week’s panic should be the signal to begin the process of thinking about investing again.”

    Quite frankly I find this whole system and debate disgusting. Markets rise and fall, business men make losses some huge profits. Does anyone care about the people? Do any of these economists/investors/speculators factor in the social impact of their decisions. Is the human ‘externality’ ever considered or is it just profit? Can people not see the insanity of this, the drive for the bottom line?

    People who lose their jobs, have negative equity in their homes etc etc, marriages under pressure – the fabric of society is breaking down and all so a small minority can have their houses and pools in the sun.

    There was an article in today’s Irish indepedent quoting some builder who said there would be a ‘go slow period’ – we can read between the line – demand will surpass supply, propery prices will and once again be inflated and people can be squeezed till they burst enabling ‘entrepreneurs/innovators’ to suck up the profits – and this type of crap is rewarded with prizes and 5 course dinners on television – guys are given medals and things for the their mantlepiece, so they can point to and say look what a great guy I am in the eyes of commerce!!!!!

    Where is the government? Why is the market not being regulated? Why are Irish citizens being exploited in their own country by these people and by the market?

    This stuff makes me want to vomit, Do these people make any real contribution?

    These speclators, these people making money off the rise and fall of food prices are a disgrace. Dam the ‘logic’ of this article, this bust and boom – ‘cyclical’ crap is a game for the insane.

    Go on David, get out your old investment banker dice, give it a James Bond throw, encourage the herd off the cliff! Let us go through all this again, in 18 years (the average period of a boom and bust cycle).

    Or go off and make yourself look good in the eyes of the ignorant and ‘interview’ Kissinger, J. Sachs, Welch and Co., but don’t ask them about landmine victims in Cambodia, deformed children in Vietnam as a result of agent orange & 3 million dead, economic collapse in Poland and Russia, or the thousands made jobless and the consequences for their families…….no, no, parade them as prophets, all knowing, all seeing.

    For someone so outspoken about the economy one minute and now this, I find your arguments ‘cyclical’ and reckless.

  26. Ire_in_Exile

    I’m normally in tune with DmcWs articles but I demur on this one..
    There have been many forum comments recently that the boom and bust were due to one cause only- avarice. Complete blind rapacious Vampire greed, in which all values were thrown out for the sake of profit. But the boom saw Irish peoples pockets expand while their standard of living contracted…now the smoke has cleared from the crumbled edifice- people face terrible losses- and thus far there is just a gaping incredulity as the roof caves in.
    How did we lose everything? we were advised we were going to be rich?

    The real pain and loss from the downturn have not hit home yet- but it will be very severe indeed…as noted by @b above.
    There is only one positive outcome, people may have learned something and may go in and repair the damage and make sure the same doesn’t happen in future.
    Responsibility is the key. It is good to create wealth and create a thriving economy but it must be balanced against some higher purpose.
    The advice that the whole financial system has collapsed due to being rotten but there is still money to be made off the corpse is suspect….?

    • Ger

      agree with this assessment

      it is going to get extremely rough. I suspect the government is well aware but don’t want ‘the mindless herd’ to panic. I expect they don’t see themselves in office a year from now.

      With rising unemployment, declining population (which was inflated), declining house prices (which were inflated), global meltdown, a US president (Obama or McCain) targeting business/corporation tax, mentioning Ireland’s in the presidential debates and interviews, this is shaping up to be a category 6 economic storm. If US multinationals pull the plug, the knock on affect coupled with the issues listed above will be devastating. No job, negative equity – what a trap. Feel sorry for those who jumped in, but then the motivations of the majority have to be examined – yes, it may well teach people a lesson, but at what price?

  27. blueangel

    In relation to the so-called ‘credit crunch’…
    People on this blog might be interested in contributing to a creative commons hosted problem exploration event hosted at: http://www.debategraph.org/
    This is an experimental means of tapping into ‘crowd wistom’ using a ‘knowledge cartography’ tool. As Ireland’s record of good governance over the last number of years demonstrates the executive branch of public service and professional advice companies has nowhere near a monopoly on management skill.
    Making a practical contribution in this way might be a more positive activity than rubbishing the character of our political leaders, however therapeutic that might feel!

  28. b

    People don’t learn. We will do this all again.

    The true effects of the collapse are yet to be seen and yes there is money to be made off the corpse. Death, war and bust are all big businesses.

  29. Philip

    @Ger and Ire-in-Exile, Boom and bust cycles are fine in a competitive environment as it weeds out bad practice and obsolence and encourages diligence. What’s been happening over the last 20 or so years is that money was printed (i.e. credit) backed by the fradulent valuation of assets and fraudulent assessment of the ability of people to pay back – all for the sake of collecting commission. This disease spread all over the place. The boom and bust cycles were never allowed to to do the clensing needed to effect a better cycle of events the next time around. We effectively borrowed our way out until the next mess.

    We have to remember that the financial system was allowed run unregulated for far too long. We now have a situation that unless the banks are bailed out, they can stop the economy. That’s it in a nutshell.

    The banks (by virture of the power vested in them to manage credit supply) own the economies and the nations. Goverments are kidding themselves if they think they can bail this out independently nation by nation. This is a global threat that needs a coordinated global response and right now, I think the various nations are failing. Ireland will need to pump money into the banks soon…just you wait and see. No one country can fix this by themselves becasue the banks are too interconnected by lines of credit elsewhere.

    Who’s to blame? Anyone who bought into the property boom and any other get rich quick without producing anything scheme and it was aided and abetted by frauduent behaviour. It’s a bit like having a light drug and sure isnt everyone at it and before you know it, you are financing a global coke empire that even the US military cannot handle.

    Cannot help feeling there’s a biblical armageddon theme getting underway here. I think it’s entirely avoidable once people start being honest and grasping the nettle – but the thing is, they have to act as a community on this one. The chances of that happening is looking low right now. Too many selfish people running for cover and screw everyone else.

    I am afraid of shortages of basics hitting a part of the world more than ever before…e.g. China, Saudi etc. Food, Water etc. If the credit lines fail, we could see issues here and that leads to all sorts of unpleasantness.

    • Ger

      @ Philip

      “Boom and bust cycles are fine in a competitive environment as it weeds out bad practice and obsolesce and encourages diligence.”

      Fine for who? Fine for those who suffer the consequences of ‘unregulated’ ‘markets’, ‘banking practices’, ‘property exploiters’ ‘predatory lending’.

      This system is rotten from top to bottom. You can’t expect a politically appointed regulator to do jack s**t, or politicians to intervene to say ‘bold boy’, when these people work in concert with one another – the old boys network – all of which has been exposed over the last two weeks.

      The Irish government doesn’t have any say in the ‘regulated’ banks, even after all this, they have non-voting, silent members on the boards, at least Britain went further than that, firing some CEOs, holding back bonuses, taking a share in the bank and have people on boards with ‘teeth’ – contrary to Lenihan’s rhetoric the government did not take the hard decisions it fudged, old school boy network!

      The old adage is true, ‘the rich man will sell you the rope that will hang him if he thinks there is a buck in it’. Nothing over the 20th century or any century for that matter indicates that greed has limitations, or can be checked, the whole basis of this current system is the accumulation of capital, by any means necessary, therefore regulation or other preventative measures run contrary to the logic of the system.

      You are correct to a the point on the powerlessness of governments over current world markets, the ‘liberalisation’ of the market system, with the end of the Bretton Woods system, has created a Frankenstein that no one government or body can regulate. With trillions moving around the market anyone day, private finance an speculation is a silent superpower, which can destroy whole economies 9Iceland etc) at the push of a button or a change in sentiment (i.e. lack of confidence).

      Maybe an international organisation, as is being proposed can turn the tide, but i sincerely doubt it. As we have seen in Ireland, the financial institutions sometimes don’t even have to robustly defend their positions when they have such an obsequious government, so in a global context I can’t see it happening.

      Correct me if I am wrong, but in the US a rise in property price (in a so called ‘bidding war’) has to be documented, in Ireland in many instances it was said over the phone with no evidence provided – this is sheer lunacy, human nature would indicate this practice was open to wholesale abuse, especially when the agent bases his/her income primarily on commission.

  30. b

    If letters of credit fail we won’t have any imports.

    We are an island. So we better learn how to row a boat to get supplies.

    The banks have never and will never give a flying sh1te about real humans. They are only interested in their own survival. We can all go and starve for all they care.

  31. DundalkHawk

    “People said i was ‘mad’ to buy the 2 houses in the ‘rough’ estate but Dunnes Stores recently invested around the corner and its a 5 min walk to an Institute of Technology.”

    Sounds like CD bought in Muirhevnamore in Dundalk (the equivalent of Moyross!)

    • CD

      Well spotted, are you a journalist by the way???? I think you are.

      • b

        Its pretty easy. Get a list of towns with an IT and look for the one with the new Dunnes within 5 mins walk which I would reckon is half a mile. Not rocket science.

        This kind of research would be beyond a journalist who would prefer to just check the spellings on a press release and submit that as their own work.

  32. Stephen Kenny

    Regarding bail outs, currencies, and markets…..
    ‘Right now I feel like the guy who was told, “Cheer up – things could be worse!” So he cheered up, and sure enough, things got worse.” – Prof. Paul Krugman

  33. b

    If we were so comprehensivly lied to why has nobody been arrested and jailed for this scam? There is a former taoiseach with a broken leg who should be first to be picked up.

    The ENTIRE capitalist model has been utterly destroyed and yet we let the same fruitcakes ‘sort it out”.

  34. Bob

    “…if a house is generating a rent of $10,000 a year, it must be worth between $120,000 and $140,000 a year”

    David – I love the maths – do you not proof read this?

    I do appreciate the article though. It would be great to see a comparison of P/E ratios for the late 80′s

    • DundalkHawk

      The maths is right.

      “house prices should be equal to between 12 and 14 times earnings”

      10k x12 = 120k
      10k x14 = 140k.

      The ‘a year’ at the end of the sentence is a typo.

  35. Ed

    Bob, David is exaggerating – it was only 10 to 1 in the 80′s. – well in line with average earnings. In those days,Banks were the only lenders for commercial property – this was pre- demutualisation of the Building Societies.

  36. b

    in the 80′s you couldn’t give land away. Premier Dairies sat on 20 acres in Monkstown for years unable to sell it to anyone.

    • Ire_in_exile

      That is correct! I remember that…and it added to my dismay when houses in the nearby council estate were on sale for over 400,000k a decade or so later..
      As a friend said to me in 2006, reading the property pages these days is just like reading science fiction..well reading about any of it is now a horror movie…

      • b

        Well it was my Dad that was the lunatic trying to sell it….

        • irel_in_Exile

          :-) Premier Dairies was an all too visible icon of the 1980s slump…right in the heart of the supposedly well to do southern Dublin suburbs, an undeniable sign of the miserable times.
          But the same site will probably fester again in years now to come!!

        • b

          Well the dairy in question was an obsolete one like the one in Killester. The company consolidated its business to concentrate on Rathfarnham and Finglas.

          Its amazing to think that FF was peddling crap then and is still peddling crap now and we still buy it. I mean in 1983 we were told to tighten out belts.

          We survived the 1980s, the 1992-93 collapse and we are sure as hell going to survive this pile of crap. And at the end of the day nothing will change. Fianna Failure will still follow the failed logic it was founded on and try ernestly to tell us the world is flat and ram the economy and anyone with any spirit into the ground. It is impossible to have more contempt for the Greens than I do now and the PD is gone after the next election.

  37. Seamus

    Some of the comments on here are crazy. To say the Entire capitalist system has been destroyed is incorrect. Capitalism has not failed. What has failed is the regulation of it.

    As Marx(I think it was) said, Capitalism will eventually eat itself. And if you take pure capitalism to the nth degree, he is correct because unregulated capitalism leads to cartels and monopolies. Why do we have regulation laws and competition authorities? Many are asking the same questions now.

    The bottom line is the banks and current system have failed due to a complete lack of regulation and proper application of competition law. Where the balance is between civil servants regulating private business and allowing business to develop competitively is anybody’s guess. Regulation must be there for one sole purpose, to ensure abuse of markets does not happen. If a regulator is seen to be a vested interest or simply seen to not understand what it is to take a risk, it will clearly not work. Somehow a balance needs to be found.

    The way forward may be the Swedish model of the 90′s. While far from perfect, it is probably the only fair model that I have seen yet.

    Unfortunately this will not happen, at least not in this country. There is a lack of understanding in the Dail about real economics. They are trying to resuscitate the property market again as they see it as the only engine of wealth creation. Unfortunately, it doesnt create any wealth at all. They should be focussing on developing indigenuous industry and getting productivity up. They are doing neither. Scrimping around looking for ways to pay the outrageous civil service wage bill by increasing taxes and borrowing. Its bananas.

    Finally, as for shares in Ireland. Personally, until the above is acted upon, I wouldnt buy shares in any Irish company. I see no reason for optimism unless you’ve somehow got the inside track on some pharma or something.
    I hear people saying, “Oh look at Bank of Ireland, only €1.70c or whatever. They cant go lower.”. That displays a complete lack of knowledge about markets. Any share can go lower. They can be 2c tomorrow for all we know. PE of 0.8 is at that level for a reason.

    However, Buffett buying in the US is another story entirely. The US is nimble and has the knowhow to sort their issues out. They will do it eventually. Our story is entirely different. And I wouldnt be expecting the EU to sort themselves out in any hurry either. In the middle of the boom years the EU was struggling to create employment. What makes people think theyll do well in a recession is beyond me….

    • Ire_in_Exile

      In effect the real advice thus is avoid “get rich schemes” altogether!
      Avoid property. the stock market or any other perilous ‘chase after lucre for it’s own sake’ because it is a slippery and venomous serpent likely to strike back and sink it’s ruthless fangs.
      Go out and do something real, make something worthwhile, create something…dream of productivity not riches. Enjoy your work.
      The filthy lucre will thus more likely come knocking at your door of it’s own accord….and if it doesn’t you’ll at least have some satisfaction in your life….?

      • Ger

        absolutely, spot on! If we all adopted that attitude what a world we would have, but certain people go for the ‘quick’ kill, ‘quick buck’, but as we see in the newspapers some end up in bigger trouble. Financial sector, apart from employment, contributes little in a positive sense, but has dreadful negative consequences across the world, the human ‘externalities’ are never factored in, these individuals (stock brokers, dealers on the floor etc) chase the bottom line, making vast profits for themselves, which can vanish in an instance.

        The reaction to these speculative actions (basic law of physics) is that someone, somewhere must loose out, the miners in Bolivia, South Africa, the poor of the world etc

        These people are never considered in the NYSC, just look at the trader being interviewed in the documentary ‘The Corporation’. He said after the towers were hit on 9/11 after the initial shock he said traders were immediately saying to themselves, the ‘price of gold must have rocketed up’ – this to me spoke volumes. He said when they speculated on the price of copper etc they weren’t thinking about the working conditions in copper factories in South America or the weighing up the impact on the environment.

        This system lacks compassion, humanity – it is highly destructive but man has deceived himself, twisted his heart – just ask the Native peoples of any continent, they’ll fill you in on all you need to know.

        To quote one “Only after the last tree has been cut down, only after the last river has been posioned, only after tje last fish has been caught, only then will you find that money cannot be eaten’.

    • Furrylugs

      “There is a lack of understanding in the Dail about real economics.”

      Yup, and in the various government departments, enterprise agencies, county councils,urban councils or for that matter, anywhere in Irish public life.

      And it seems that, given the thrashing today on the markets, our banks PE will soon be PEE.

      There is an argument for the US aversion to any form of socialism. The dross seems to weedle itself into unaccountable positions of influence and having got there, wields no influence except self promotion.
      Almost the anthitesis of the rabid profiteering thats caused this particular global mess.
      Somewhere in the middle lies the way forward but senior heads from both camps must be rooted out to allow the genesis of a new system.

      The Hungry Huberts are more or less gone because there’s no easy pickings anymore. There’s balanced risk, as DMcW says, but no sure fire killing. As Seamus reminds us, they’ve eaten themselves. They’ll reach all sorts of private accommodations, as public schoolboys do, to protect themselves from the fallout and then take a back seat for a few years.

      But the ranks of the Hopeless & Useless are still swelled with their own self belief that they have actually contributed something along the way. There’s a cull needed there followed by some constitutional change.

      We have moved into and now out of a global arena protected by an aspirational document that makes Magna Carta look hip.
      Collective commercial practices prioritising the safety of the State nedd writing up now so that, when the Huberts return with some other scheme, we will be left alone to tip away quietly.

      For until we reach a critical mass of 10 -12 million inhabitants, we are provincial. We should accept that and play the game accordingly.

  38. Deco

    Jose Antonio
    <>
    Correct. The Irish elite go to school to mix with each other. And to avoid mixing with the lower 85% of the population, urban riff-raff, provincials, country bumpkins, etc..Then they join competing political parties, run competing banks, try their hand in different professions. They offer us ‘choice’. The rest of the population actually do the work and sustain the entire thing. The best example I can give you of how much of a joke it has become is Gormless sobbing when Bertie Ahern stood down. The same Gormless attacked McDowell in Ranelagh about what we are not supposed to remember anymore.

    For a short period – from 1987 to 1998 we were an enterprise economy. Then the ‘establishment’ took over again, because they realised that the ground rules had changed. For a short period it looked like Ireland would become dominated by free enterprise. Even more worryingly a new worldly wise, assertive, technical, educated class might emerge that might upset the apple cart. It was like as if a quiet revolution might take place. As Ruairi Quinn said ‘we are going to become boring, organized and rich like the Swedes’. The losers in all of this were the ‘estalblished order’ who had been steadily getting control of Ireland in the aftermath of the gradual decline of the Catholic Church. This established order was based on a network of the old school tie, the sports club and wheeler-dealers. They were creating the societal vision from the 1980s onwards. They threw out the Catholic Church, the traditional left, the small town businessmen, the famers, the GAA. They replaced it three and four letter anagrams, and associations. They had their own moral code to sustain it also. As we have seen in the Tribunals. With overpaid lawyers scelping the taxpayer, in an effort to bring justice to politicians an officials who also scelped the taxpayer. The establishment is the network of vested interests. And suddenly there was a cuckoo in the nest. The cuckoo in the nest was invariably part of the competitive sector. And the value set was very different. This was a seperate existence to the established business culture. Enter Bertie Ahern. The ‘safe pair of hands’ to restore order. Enter Tony O’Reilly. The uncrowned king of Ireland and the sharpest blade of the establish order. Enter the article titled “Payback time” to get Ahern in power. Enter the bankers, the media, the professional classes, the people who controlled the economic rent infrastructure. Enter,the tent in Ballybrit with the developers all drunk on optimism surrounding their Taoiseach, Ahern. Slowly in the Ahern years they re-established control. Slowly they re-oriented Irish society. Business became very very good. And at the end of it all,the got Brian Lenihan to be minister for Finance. And the public sector unions joined the party. And everybody wanted to party.We became the party nation of Europe. We made reasons out of thin air, and this was sufficient reason in itself. We were special. And we had a President who told us we were to celeberate the new Ireland, as a special place in time, and a special place in the world. And like sheep, many, many people beleived all this nonsense. The culture was based on consumerism,plastic paddy patriotism, green flagism, arrogance, social class as the primary aspiration, selfishness, fear, drunkeness, obliteration, and an awful lot of easy credit. It went out of control. The vision of society was a drunken mob in Eircom jerseys cheering on a team that never won anything. The command was to celebrate.

    The danger is that now, in a crisis the Irish people might actually wake up to how things are really run for them. It looked like it occurred several times. That Roy Keane Saipan incident had the Irish asking dangerous questions. Like the role of alcohol as a performance inhibiting drug. The Eddie Hobbs Rip-off Republic phenomenon really hit a dangerous nerve – and had Sean Fitzpatrick threatening the media to stop that sort of thing, which was completely foreign to the Irish media. And now we have had the primary result of the culture of excess, delusion, obsession and nonsense. Bankruptcy.
    That reality has become so stark that people might actually make a sudden intellectual development. But all that has happened so far is that business has continued as usual, with every sector of Irish society trying to get something at somebody else’s expense. A competitive system that rewards the most agressive, the most deceptive and the most disingenuous. And they rallying call is always the same – they are protecting something or other. And the politicians are there to protect. They are not there to solve – as you probably guessed. But to protect. Time was when the Catholic Church ruled Ireland, and people prayed to the Saints. But now we now that it is much faster to have your representative vested interest body on the job. This, as both Obama and McCain have stated in the US, is making a mess of everything. And McSharry and Dukes came to the same conclusion in 1987. Unfortunately, North Dublin sent McSharry to Brussels before he became Taoiseach. And South Dublin sent Dukes to back benches before he became Taoiseach.

    Fact is – either we make a massive intellectual transition, or this country is finished. We have to compete now to maintain our society as it stands. We are in serious trouble. Unfortunately as a society, we are becomming less of a society, and more of a squable. Years of consumerism, credit and arrogance indulgence have made us an ultimate consumerist model of society. Reaganomics did not create us, we adopted it, beleived it’s tenets and followed it. This is the lasting result of the 1960s revolution. Everyone indulge one’s urges and delusions in an undeveloped, unrestrained, uncivilised, noisy agressive manner. It is a civil right. And people created the moral imperative afterwards. Do not expect the two to be in any way connected-that is never really necessary. We are not the only society with this problem. The problem is that people do not drop delusions, they merely throw out a working delusion, and bring another into place.

    Well, now I wonder what will the new set of delusions be, and whom will they profit ? Beware the next set of revolutionaries-they are just creating new deceptions. What drivel will be presented to Irish society as the new culture ? Trust me – it will come from the same people who got us into the current mess. It will include bailouts for everybody in the audience. Everybody will be promised something for nothing. Because that is the basis of the contract at the heart of our society today. And I don’t see anybody questioning it. Kunstler has questioned it in the US. But in Ireland we even have liberal minded promise makers like Lenihan who will indulge everybody’s request and act as a national Santa Claus. Until we become more bankrupt than we were in 1986. And this time around, we will be morally incapable of getting our act together a second time.

  39. Shannoner Scalder

    Folks,

    In relation to earlier comments regarding house prices..etc, one person made a relevant reference with respect to the 18 year property cycle. I suggest anyone with property interests reads.

    “Boom, Bust: House Prices, Banking and the Depression of 2010″ by Fred Harrison, r.r.p. £18.

    This books focusses mainly on property cycles of Anglo-Saxon democrocies over the last 300 to 400 years, and concludes the 18 year property cycle (cycle mechanisms starting from recession – property price undershoot when bank lending tightens & unemployment rises – at which stage cash is king & only people with money can buy property cheaply and get construction work/services done cheaply – progresses to start of economic recovery – progresses to stabilisation – progresses to banks getting more confidence – progresses to banks starting to lend again to Joe Public – progresses to rise in property prices – progresses to banks now loosinging lending criteria to get in on easy gains in property – progresses to bubble & high prices to hire services & wastage in general in both public & private section service economy – progresses back to recession and start subsequent repeat of 18 year cycle).

    An interesting point is that in old Imperial Europe was that each “empire” had their own, exclusive, economic and thus property cycle. That changed with the Second World War where the post-rebuilding of Europe alligned the economic/property cycles of the weakened European “countries” (..no longer Empires) with that of the new superpower USA. Another “new” feature in this last cycle (to trough in 2010) was the allignment of world economies in the last 18 year cycle due to significant integration of Globalisation. This feature has magnified the effects of the current cycle.

    Another interesting feature is that the 18 year cycle has a mid, but mild, recession. This should have occured in 2000/2001 in the current cycle. However it did not occur in USA/Britian and Ireland, though did in other places, as the former countries “borrowed” themselves out of recession – i.e. dramatic growth in personal, domestic, borrowing maintained retail spending…etc. Hence the “fall” now due will be greater than typically expected from the cycle.

    I find the discussion in this book consistent with DMcW’s “rantings” of the Irish property bubble over the last few years that I have been reading in his columns.

    As ever, its the layman who gets screwed throughout this cycle – a bit like shares – buying at the wrong time when the Prawn Sandwich Bragade are looking to sell to take their profits of the situation that they instigated (beacause they could, as they had funds to invest when Joe Public did not).

  40. Nagelz

    Supply/Demand….08.

    We have lots of empty houses

    We don’t need any more houses

    We cant get credit to buy houses anyway

    So, we have a population of say four million….figure in that there was say 400,000 houses built over the past ten years……previous to that houses were being built as well.

    I think that we’re beyond saturation point re houses imo, our population will decline over the next few years.

    I honestly think that house completions are going to cease being spoken about because there wont be any need for house completions over the next decade other than one off private houses.

    The big devs are screwed…….BRM was more often the guy grafting for the devs David (I’m a builder and I take great umbridge at being classed with the reprobates that fuelled the greed craze lol)BRM is in fact probably owed tens of thousands from these a-holes.

    There should be no pity for the fools that thought they were living in a hugely populated country that kept needing their product at any price.
    Interesting times……and they’ll get more interesting when the rest of the crows make their way home in ’09.

  41. Barry

    David,once again an excellent article. There are two things I would like to ask you. Firstly,do you really believe the TSB/ERSI statistics that prices this year have dropped only 6.6%? Where can one get accurate statistics?

    Secondly ,while I think your predictions have been pretty accurate , your articles don’t seem to note the real suffering a lot of people are going through. Don’t get me wrong-most economists don’t, but you are not most economists . You write in a very accessible style and also seem to have a sense of Humor. Please show you have a heart. I wouldn’t like to see you being accused of being smug.

  42. Juicylucy

    see Jose above

  43. Deco

    Barry, concerning the TSB house price official statistics bulletin…the entire media and official coverage of the current Irish ecnomic crisis is understated severly….As they used to say in the old Soviet Union….”when you hear the official denial…then you know with absolute certainty…that the rumours are true”

    Where have you been the last ten years…look at all the bank economists talking up the economy…then when a crisis occurs….it is dramatised and emotionalised in case we might do something rational and fix the problem…

  44. Stephen Kenny

    Barry
    The BBC website has an interesting approach to the current situation. The BBC are very clear that they do not see it as their role to ‘unsettle’ people, and to that end, there is little useful coverage of the financial situation, and what there is, is, rather strangely, in a blog.

    Deco
    I think you’re quite right. It’s interesting, as you could view it as being the great malaise of recent decades: Optimism.
    Nothing wrong with optimism, in general, but there’s a lot wrong with mindless optimism. People remind us that financial markets are ‘all about optimism’, which of course is as correct as it is misleading – it’s a bit like saying that flight is all about wings. It’s not.
    So, try on this as an idea:
    The fundamental problem we’ve had (as has been alluded to further up this page) is that everyone has just become optimistic, at the expense of almost everything else. When presented with two alternatives to making a living, optimism blurs, or removes, the average person’s critical faculties:

    How to retire comfortably:
    1. Train, work hard – you’re an average guy so don’t expect too much – save a good proportion of your pay, and when you’re 65 you should have a nice little house by the sea, with enough money to live quietly until you die.
    2. Take out a bunch of mortgages, and become a professional lute player. You’ll retire when you’re 45, because you’re a brilliant lutist, and each property will be worth 10 times what it is now. You will never die.

    Anyone’s selection will depend on their level of mindless optimism. For myself, and I’m old, I looked around the world of the late 70s, checked out the competition, and chose 1. But then, I’m hardly Mr Optimistic.

  45. Lorcan

    Stephen, great post.

    Oscar Wilde once said ” The basis of optimism is sheer terror”

    Unfortunatly, many here now see the opposite of optimism being realism rather than pessimism. The tone of David’s article is, for him, optimistic. But, obviously, this doesn’t mean anything has changed.

    So perhaps the question we should be asking is where do we go from here?

    To answer that question we have to try to define where here is for us.

    ‘Us’ is an important word. We exist as a society and in any society there will always be those who do well and those who don’t do so well. Those who do well will be (and always have been) blamed by those who do not do so well for their misfortune.

    If the poor remain poor through some systematic imbalance ( eg the tenant/landlord system in Ireland in the 1800s ) where the poor are denied the opportunity to escape their poverty then revolution is, and often has been, the answer. But when the poor remain poor, or people become poor, because of a system that gives them opportunities, revolution is both less likely, and probably pointless.

    Currently the Irish sytem does give opportunities to escape poverty. But it also gives plenty of opportunities to become poor. That is the quid pro quo of a system of opportunities.

    So, in my opinion, the system is, broadly speaking, the right one.

    But the current moral panic tells us there is something wrong with the system. Perhaps, as Stephen points out, the problem is with our perception of the system. If we choose Stephen’s option 1 we are accepting our place within the system and denying our ambition in favour of a safe route through the system, a mind-set prevalent pre 1960s. If we choose option 2 we are over-valuing how much the system is skewed in our favour, we believe the system owes us something.

    It is easy to ignore financial risk when you have little experience of both sides of the equation. But financial risk doesn’t care about your opinion of it. The only way to remove it is to remove humanity from the equation.

    So where does this leave us? We still have the same amount of risk in our lives, we are just seeing the other side of it at the moment. We still have the same system. So our outlook may have changed ( ie pessimism is more popular ) but broadly speaking not much has changed.

    We may find the current ‘dislocation’ unpalitable, but it is part of the system. The bigger the plus we have had, the bigger the minus needed to rebalance the system. Cycles happen because equilibrium cannot exist, the human factor won’t allow it.

    So where do we go from here? I’ll leave that one to Thomas Edison.
    “Opportunity is missed by most people because it is dressed in overalls and looks like work”

  46. Deco

    Optimist – somebody with insufficient information. We were informed by the Irish establishment, and we became optimists as a result.
    The lesson is clear – find out the truth for yourself – don’t be a fool who believes everything that is peddled as fact by society. The collective group think created by all the official statements for the last ten years created optimism. The RippOff Republic phenomenon in 2004 alerted many that there was something amiss in Ireland. That a lot of the assumptions were absolute rubbish. And nowwe see this to be true. But at the time it was a real problem for the political establishment, the public sector, the media, the economic rent infrastructure and the banking sector. Sean Fitzpatrick (ANIB) threw a right hissy fit about the whole thing, on the Marian Finuicane show (nepotism again). Fitzy wanted Hobbs banned from every getting on the media again – because he was introducing something dangerous ‘never seen before in the Irish polical establishment’. The entire phenomenon went unreported in the print media, until it became unavoidable.

    We must inform ourselves, using information we see every day, our everyday common sense. The media are only misinforming us – providing us with ‘insufficient information’ and keeping the optimism fuelled.

  47. Deco

    Misinformation was the source of much of the unfounded optimism.Washed down with alcohol, it became a lethal influence on the collective judgement of many in our society. The naive always get punished. Time for the naive to wake up.

  48. Malcolm McClure

    Opportunity knocks alright if you are an active investor. getting in and out again within a few days, There will be wild gyrations in certain stocks caused by technical factors rather than fundamentals. Superimposed on these gyrations is another factor caused by the American election. People are optimistic that the election of a new president will bring in a new era of prosperity on the basis that nothing could be worse than what Bush achieved. The DOW & S&P will rise until the new prezi completes his 100 days. Then they will plumb new depths forming the second leg of a W shaped recession. Thatt leg could even be U shaped lasting a couple of years. Not a market where widows and orphans will thrive but well managed Hedge Funds might make a killing.

  49. b

    I found that by not listening to the radio and not buying a newspaper I found that I could make my own decisions. If I never hear 98FM or FM104 again it will be too soon.

    I also found that by not watching other peoples lives on Soaps and going outside and doing things was far healthier. Interacting with real people with real lives rather than every night watching some loo la drama and then the following day at work talk about it as if it was real.

    My point is that the media decides what is news and Irish people being at their core conservative tend to go along with this. Conservatives are easy to scare as they want the world to be in neat little rows with few surprises or deviations from business as usual. We don’t want surprises and the whole world is mapped out and safe for us and our children is tha attitude.

    I am afraid that most of our dynamic and bold people were exported through the years and we are left with the decisions of the old and old fashioned. These decisions and policies have come home to roost.

    The wisest teacher I ever had said that emigration leaves behind the old and the old fashioned. Funnily enough he was in the private sector and not paid for by the State.

    • Jay

      Dear b (is that your full name),

      I don’t think its true as you say

      ” our dynamic and bold people were exported through the years and we are left with the decisions of the old and old fashioned.”

      Many of these supposed brilliant people returned to Ireland from 2000 onwards and seem to contribute little to making this country a dynamic and better place to live. In fact many of these returning emigrates only served to feed the property and consumer boom leading to such an unsustainable increase in the cost of living.

      I remember saying to some returned colleagues in 2001 that now would be a goodtime to put a hold on rising costs so anyone who wishes too, can return to happily live and work in Ireland, this suggestion only drew derision. Like you they seem to think that anyone who stayed in Ireland in the bad times didn’t deserved much respect, as we didn’t represent a certain worldly perspective.

      Many emigrants, particular those who left to work in the professions such IT, Financial services etc experience a certain amount of mockery for being Irish which gave them a kind of self-loathing. I felt a kind of resentment or disdain from returned Irish and I believe this subconscious resentment is part of the need for a new cosmopolitan Ireland. This only served to increase the costs of living in what should have been a low cost economy with a vibrant work force and enterprise from both International and local companies.

      Regards
      Jay,

      • b

        I wasn’t talking about recent emigrants. I was talking about the emigrants who are of a similar age to the political “class” and older. This is a legacy problem over generations and not solved in one generation.

  50. Jay

    The same issue of attitude towards to the old isle has been prevalent through several emigrant generations. I experience the same in the USA and England from those who had emigrated in the 50s.

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