Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Irish banks Bank of Ireland
So what: Ireland's officials have done a good bit of posturing lately to try and convince the world -- and bond-market investors in particular -- that the country was financially strong enough to go without accepting outside aid. Nobody was convinced. Today, the government's rhetoric softened, possibly paving the way for the creation of a large fund that the country can tap to deal with its predicament. Of course, Irish officials aren't totally ready to concede yet, and they have implied that the country won't actually have to draw upon that resource.
Now what: The banks are right in the middle of Ireland's woes, and today's rally is riding on hopes that the EU bailout will bring fresh funding to these struggling institutions. However, I think equity investors might be overestimating where they stand in the food chain here. At this point, politicians are first and foremost trying to keep the country on steady ground, which means making sure bond investors aren't freaking out.
I'm going to go out on a limb and say that few of the people making the important decisions are worrying too much about equity investors. That doesn't mean that shareholders will definitely be left out in the cold, but it does mean that they'll largely be an afterthought. If trading and speculation is your game, though, have at it. If there's one thing we can count on from both B of I and Allied Irish at this point, it's more volatility.
Want to keep up to date on the Irish banks? Add Bank of Ireland to your watchlist, then add Allied Irish Banks to your watchlist.
