Saturday, June 21, 2008

Masters of the Miniverse

If, like most normal people, you find the day-to-day machinations of the stock market mind-blowingly boring then you're probably not aware of the recent implosion of Irish banks. The index of Irish banking and financial stocks - ISEQ Financial - fell yesterday by 2.53% in a single day to below 7,000 at one point. The combined market value of financial stocks on the Irish Stock Exchange now stands at €23.8 billion. That might seem like a lot to you and me but not when you look at what they were worth at their peak on 21st February 2007: a massive €59.7 billion. In other words, the combined value of the banks most of us save with and borrow from is down over 60% in just sixteen months. Not so much Masters of the Universe as Masters of the Miniverse. Really, would you trust these people to invest your money?

That's a rhetorical question, by the way. Because if you're contributing to a pension fund (or you're a public sector worker banking on The National Pensions Reserve Fund) then it's more than likely that you are either contributing to a fund managed by an Irish financial institution - or your fund has invested in the self same financial institutions. Or probably both. And don't think all this is a bit academic if you are a civil servant - the Irish Examiner reported yesterday that the National Pensions Reserve Fund has lost over 5% of its value so far this year (it was down over 10% as recently as March). The Fund is meant to provide the money to meet the pension entitlements of hundreds of thousands of retiring civil servants over the next number of decades. Though even then it will barely cover 25% of the projected cost. Those of us not in the public sector will be expected to make up the difference through our taxes. Regardless, of course, of what has happened to our own pension funds in the mean time.

Guess we're all going to have to pay a lot more attention to this stock market stuff from now on.

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