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These banks. What can be said with certainty? Not that much. It is emerging how little the directors of banks in general understood risk. In the words of Donald Rumsfeld (a man, incidentally, whom I admire, unlike the rest of the planet) there is the known known: US sub-prime mortgages. We are starting to get a grip on where we are with that one. Now there remains a known unknown: ordinary, regular or standard mortgages. We watch and wait. Another known unknown is the massive Irish housing bubble, rivalling that of the US but which has not yet been properly punctured. Recently there has appeared on the scene what, so far as I know, is an example of the most lethal member of the species: an unknown unknown: the Structured Investment Vehicle (SIV).

The conclusion I draw is that I prefer cement. I have made two purchases of UK:ALBK but will not make the planned third, although I may make a purchase of UK:ANGL. It is simply that I do not like what I do not understand. I don't even really understand the definition of a structured investment vehicle, though it is explained today on TMF, nor its effect, if any, on our company.

These banks.
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Strelna,

I think that largely depends on the bank. Some are pretty good at disclosing what types of loans they're making and in how much quantity. And with enough digging you can usually figure that out in ball park terms for most banks, even if the disclosure isn't that great.

I'd also classify an SIV as a known unknown, as in we know they're out there we know who set them up in any quantity, but the average person doesn't have a good idea of what they're holding.

Just my $0.02...

Nate
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I think that is right but it is difficult to get as good a grip on banks as other things. I guess that is the opportunity, but it takes guts. The brokers remarks at the bottom of www.angloirishbank.co.uk are reassuring. Like Allied Irish, this is an exceptionally well-run bank. (I hope those words don't come back to haunt me!)
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Hi strelna

Donald Rumsfeld (a man, incidentally, whom I admire, unlike the rest of the planet)

Being with the rest of the planet, I prefer not to ask you about the reasons why this man should be admired at all - taking into account his role in the Irak affair. While respecting anyone's rights to choose his/her own heroes, I would prefer to avoid sharp political issues discussed on this page. Even if someone's nick is (by accident?) the name my childhood's picnic spot.


As for AIB troubles, I would not interpolate US subprime woes into the Old World. First - because of different racial / social bachgrounds and second - because of different approaches to business. I think, Europe has much more conservative approach.

Victor
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You are right of course and I apologise, even though the aside was in brackets.

Re your second para., I think the only real difference to detect between the extreme European property bubbles (Ireland, UK, Netherlands) and that of the US is the scale of immigration. In the UK, the situation is straightforward: immigration is utterly out of control, which is one reason why there is confusion about the future of the housing market. However, in the case of Ireland, it is only a small factor. As a result, Ireland closely matched the US in the scale of its property bubble.
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strelna

Never mind ... On AIB , I tend to believe that it should not be directly involved in subprime mess .. and any indirect involvement should be very limited. Maybe, Europe/Ireland has property bubble at a moment but not in so ugly sense we had it here. I wonder if anyone in Ireland, in clear mind but without stable income would ever buy a house on 0% downpayment on hopes that the rising equity price makes the house sort of a magic money well.

Victor
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Hey all,

I don't want to frighten you, but Ireland has had quite a substantial boom in property prices over the past dozen years or so, and it's common to hear of people buying houses with a 0% downpayment hoping that their house price doesn't fall. However, AIB is one of the more conservative lenders in the Irish market and the slow down / decline in property prices in Ireland is unlikely to hurt AIB greatly. You need to look at the recent property boom in Ireland in context. There was a lot of catching up to do. I'm not sure if this link will work, but I'd encourage you to take a look at the message I posted previously with regard to how we got to where we are today:
http://boards.fool.com/Message.asp?mid=25568897&bid=118235

In my humble opinion, property in Ireland may be currently overvalued by between 10% and 20% but I don't think AIB is carrying anything like the risk that seems to be priced into the stock these days. I think that what hurts AIB most these days is maintaining the growth that they had become familiar with during the Irish property boom, and to that end, AIB have gradually (and very strategically) expanded their footprint in the Eastern European countries that are experiencing the greatest growth - places such as Poland, Estonia, Lithuania, etc. This is not a new phenomenon. AIB have been proactive in this space and to be fair to the AIB management team, they recognized this risk very early. AIB are shrewd operators. A case in point was their decision to sell and lease back their own headquarter building in the height of the property price boom.

With the dividend yield on AIB, this stock is great value right now (disclosure: I'm long AIB), but I felt obligated to make sure you were aware that the mortgage lending practices in the USA did cross the Atlantic so you should be aware of what you are getting into.

The AIB share price today is excellent value and is a leader in it's market. It reminds me of Warren Buffett's statement that he seeks outstanding businesses at a sensible price rather than a mediocre business at a bargain price. AIB is an outstanding business and it looks like it's on sale right now.

Fool on!

Morse
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