Don’t follow me down this road. Contrarian moves.

the shady bunchThe markets took the single biggest battering since the 20% fall off experienced in the 1987 crash. It came on the back of a rejection of the $700 billion bailout plan in the USA. The markets had earlier rallied based on the belief it would go ahead. The S&P dropped 8.8%, the Dow is down 7%.

This is first for me, I was alive and well in 1987 but I wasn’t in the workforce and did not have a full appreciation for what was happening. This is the first big crash I will have worked through, the dotcom crash was no fun, but it was not as big as the mess we seem to be seeing form in the finance world.

In belief that everybody will run scared I am choosing to stay, tomorrow I will buy Irish financial stocks (Tuesday 30th Sept), I’m saying this on record, so if I lose then I lose, that can’t be glossed over. My intention is to get a small portion of the most distressed shares I can buy and to purchase them on the basis that I am willing to lose everything. A point worth noting is that I don’t plan to do this to the degree that I will be out on the road if my plan doesn’t come together, this is being done with money saved for a time like this. It will be a small purchase that is being done to track the effect of buying during a crisis.

[edit] Upon arrival in work (start at 8 a.m.) it was already too late, the Irish government have stepped in and fully backed the big four banks, share prices rocketed – Anglo already up 41%. The purchase made was on the way up but not before the jump had started, so I didn’t get the ‘rock bottom’ I had hoped for.

market failure - where do we go from hereThe Government guarantee is going to last for all deposits with Anglo, BOI, Nationwide, EBS, AIB, and PTsb. The basics are as follows – all deposits, debts, bank bonds are guaranteed, if one of the institutions should still fail then Govt. will back it up, any money required will be levied on taxpayers.

Result: Protecting depositors has always been in the public interest, however, the Government plan could have done a few things differently, firstly they could have said they would protect not protect the first bank, only the second one. The reason would be that it will ensure nobody wants to go first. Strange things happen when folks know they have an umbrella, they tend to have less concern about a walk in the rain.

All said though, this is an emergency measure,nobody could have gotten everything right.

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