{"id":2324,"date":"2010-11-17T07:22:24","date_gmt":"2010-11-17T14:22:24","guid":{"rendered":"http:\/\/www.jasonapollovoss.local\/?p=2324"},"modified":"2018-08-17T09:03:16","modified_gmt":"2018-08-17T13:03:16","slug":"rumors-of-irish-collapse-make-for-a-good-case-study","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2010\/11\/17\/rumors-of-irish-collapse-make-for-a-good-case-study\/","title":{"rendered":"Rumors of Irish collapse make for a good case study"},"content":{"rendered":"

Yesterday the financial markets experience a big selloff.\u00a0 Ostensibly this was due to mounting fears of a collapse of the Irish nation’s financial system and economy.\u00a0 Apparently the rumors began, interestingly enough, in Germany.\u00a0 Then the fears spread like wildfire across the world: “The EU is going to have to bail out another nation.\u00a0 This is just like Greece!”<\/span><\/p>\n

First, let me address Ireland.\u00a0 Is Ireland in economic trouble?\u00a0 Yes.\u00a0 However, let me enumerate why this supposed “crisis” is so radically different than the Greek crisis that we experienced earlier this year.\u00a0 To begin, the Irish government is publicly and loudly turning down offers of assistance from the EU.\u00a0 Are they foolish?\u00a0 Why would they do this?\u00a0 They are doing this because unlike Greece the state’s problems are not public abuse of debt.\u00a0 In Greece the state used debt to fund entitlement problems and has nearly bankrupted itself.\u00a0 In Ireland the problem is that its banks, private institutions, gorged themselve on debt.\u00a0 This situation is similar to what happened in the United States.\u00a0 In Ireland the government, its financial sector, and its private business sector are all functioning well.<\/span><\/p>\n

For example, the Irish are already two years into a self-imposed austerity plan.\u00a0 Ireland also has some of the lowest corporate tax rates in Europe.\u00a0 This has attracted a lot of capital to the little island.\u00a0 But that policy could also be slightly rolled back to raise the tax base and help make more solvent the Irish state.\u00a0 But don’t count on that happening.\u00a0 The reason is that the Irish don’t need to raise that much money to make their banking system more solid.\u00a0 The amount of money that the Irish are talking about is only\u00a0\u20ac20 billion.\u00a0 Additionally, the Irish do not have any major re-financings of public debt for many months.\u00a0\u00a0 In the Greek crisis they had major refinancings of debt that were just around the corner.\u00a0 Lastly, Ireland is one of the very few states in europe that does not depend on Germany or France for its economic well-being.\u00a0 Instead its economy is more closely interlaced with the United Kingdom and with the United States.<\/span><\/p>\n

So fears of an Irish collapse are MASSIVELY overblown.<\/span><\/p>\n

But this situation is instructive nontheless.\u00a0 I first want to focus attention on the tendency of people to rely upon archetypes to do their analysis for them.\u00a0 The way it works is that a seemingly dramatic situation unfolds that requires an investor to make a seemingly immediate choice.\u00a0 In this situation of high stress and panic it is very difficult to reign in the relevant and pertinent facts to properly assess a situation.\u00a0 Instead what happens is that people will evaluate a new situation to the degree that it parallels situations with which they are more familiar.\u00a0 So the Irish situation becomes:<\/span><\/p>\n

“It\u00a0looks like and smells like the Greek situation.\u00a0 The Greek situation caused financial markets to fall rapidly!\u00a0 I lost a lot of money then.\u00a0 Wow!\u00a0 I should SELL!”<\/span><\/p>\n

Well the Irish are not going to collapse – that’s a promise!\u00a0 If you are interested in Ireland or its businesses I would take this as an opportunity to buy in now.\u00a0 All success in investing boils down to four words, “buy low, sell high.”\u00a0 Prices are artificially low right now.<\/span><\/p>\n

The other thing that I wanted to point out that is much more timely and topical is that a goodly proportion of investors out there must be skittish.\u00a0 Yesterday I highlighted that markets were moving sideways.\u00a0 Well now they are moving sharply down with the first little, ittle bit of potential bad news.\u00a0 The curtain has been pulled back and now we see that many investors are quivering.\u00a0 I will have this state of affairs in the back of my mind as I evaluate the state of things going forward.\u00a0 Bad news of any kind is likely to lead to a big sell off.\u00a0 That means that the bias in the equity markets is most likely a negative\/selling bias.\u00a0 Interesting.<\/span><\/p>\n

Jason<\/span><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Yesterday the financial markets experience a big selloff.\u00a0 Ostensibly this was due to mounting fears of a collapse of the Irish nation’s financial system and economy.\u00a0 Apparently the rumors began, interestingly enough, in Germany.\u00a0 Then the fears spread like wildfire across the world: “The EU is going to have to bail out another nation.\u00a0 This […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-2324","post","type-post","status-publish","format-standard","hentry","category-the-blog"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/2324","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=2324"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/2324\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=2324"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=2324"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=2324"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}