Good Afternoon ,
After the melt down that was going on last Friday , markets are in somewhat more resilient mode today. It is really hard to call it . The overtones of November 2008 are all too apparent except at that stage corporate earnings outlook was decidedly on the slippery slope. At this point however even with financial markets remaining as volatile and corporate and personal access to credit very much uncertain there is no doubt that the corporate earnings landscape is in decidedly better shape.
Notwithstanding the risks associated with the current macro worries , I am and remain a bull of Ireland. The sharp fall in the value of the Euro against the dollar and Sterling has dramatically improved the underlying competitive position of the Irish economy. Given the wage adjustments that have already taken place in Ireland the total relative shift in Irish competitiveness is very large. We have been laid low by a sense of misery and leaderlessness over the past year and a half and no one seems to have spotted what could be the single biggest stimulus to getting Ireland moving again. If they have they are being very quiet about it.
When Gary McGann of Smurfit Kappa came in to talk to us last week , I asked him if I had mis heard his comments about the pick up in Ireland in the past four weeks. He said that I was not mistaken and that he had doubled checked his own figures prior to making the statement. So for the brave who are prepared to live with the sovereign debt uncertainty , there is a potentially very strong buy case to be made for Irish equities and for a recovery ion the Irish economy faster than expected.
I also quietly fancy Germany as a place to invest also . With interest rates likely now to have to stay lower much longer than the ECB woud naturally like and Corporate Germany also on an upgrade cycle , there is every chance that Germany may experience a bubble of its own.
The Bank of Ireland Rights issue finally got underway today amidst the backdrop of the volatility in the markets and this is another positive step to putting the Irish economy back on its feet once the banks get re-capitalised.
The Ash Cloud returned today but Heathrow and Gatwick opened followed by the Dutch and the French airports. Ryanair's chief executive Michael O'Leary said "Airlines have known for some weeks now that there has been little evidence of any volcanic ash in the atmosphere over Ireland, the UK or Continental Europe (much of it, thousands of miles away from Iceland). The fact that Heathrow and Gatwick airports have reopened this morning, despite the fact that the VACC charts show this imaginary black plume (or no fly zone) directly over these major London airports shows that the VACC charts have no credibility. There cannot be one safety model for busy London airports, and a different safety model for smaller regional airports. It should and must be the one safety rule for all," said O'Leary.
"It is frankly ridiculous that the flight plans of millions of air passengers across Europe are being disrupted on a daily basis by an outdated, inappropriate and imaginary computer generated VACC model and it is time that these charts were done away with. If Heathrow and Gatwick are open today, when the VACC charts clearly shows they're in the middle of a no fly zone, then the VACC charts have no validity or credibility. It is time to do away with this model now and replace it with the US model which is a practical, safe and sensible response to passenger safety in the aftermath of further volcanic eruptions in Iceland".
Need I point to the obvious and suggest that if O'Leary is right and I think he has a point….that there may be scope for a decent rally in the price of the airline stocks who have all been affected by the ash cloud.
Busy day ahead tomorrow with DCC results and a Paddy Power IMS due. Will they have comments that supports my thesis ? lets see…
Have a good evening
Liam
___________________________________________
Liam Boggan
Merrion Stockbrokers
Tel.: 353-1-2404171
Mob:353-87-2313505
www.merrion-capital.com
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