Thursday, October 15, 2009

The Harder We Look, The Less We See.

Research has shown that anxiety disrupts people's ability to notice the unexpected.

In one experiment, people were asked to watch a moving dot in the centre of a computer screen.

Without warning, large dots would occasionally be flashed at the edges of the screen.

Nearly all participants noticed these large dots.

The experiment was then repeated with a second group of people, who were offered a large financial reward for accurately watching the centre dot, creating more anxiety.

They became focused on the centre dot and more than a third of them missed the large dots when they appeared on the screen.

The harder they looked, the less they saw.


Friday, September 25, 2009

The FT Covers Intrade thanks to Carl, Intrade Exchange Operations Manager

Politics: Several ways to lose a deposit
By Huw Richards
Published: September 25 2009 01:59 | Last updated: September 25 2009 01:59
Governments that fear they may be mere months from oblivion must take comfort where they can. So a listing on Intrade, the Ireland-based predictions exchange, has to be counted good news – or at least as good as it gets – for Gordon Brown and colleagues.

Eighth on the list of the markets currently most favoured by Intrade’s predominantly American clientele – and shoehorned between the Democratic and Republican prospects in the forthcoming election for Governor of Virginia – was the one on the likelihood of a Labour victory come the forthcoming UK General Election.

Admittedly, one element in this is that Labour’s hopes now appear to have receded to a point that they offer the thoughtful trader a potentially lucrative long-shot with only a limited downside. A win on a predictions market pays out at 100. Intrade rated Labour’s chance of being largest party following the next election at 15.

Still, it represented a marginal improvement on a site whose traders have earned a formidable reputation for collective wisdom – predicting all 50 states in the tightly-contested US presidential election of 2004, and in 2008 missing only on two, whose outcome was so close that they took some days to resolve.

As the UK election looms, spread betting and prediction sites can expect a sharp rise in political business. Interest inevitably follows the electoral cycle, spiking at election time after long periods of quiet. This is one reason why politics tends to be an add-on for companies whose main business is in more consistently appealing fields.

Politics has won Intrade a lot of publicity, but its core markets are financial. In Britain, politics tends to be the concern of companies that otherwise focus on sport.

Wayne Lincoln, trading spokesman for Sporting Index, says: “It builds into very good business at election time and brings in customers who don’t usually bet on sport, except perhaps on the Boat Race.”

By far the largest market at present – Mr Lincoln puts it at 95 per cent of SI’s politics business – is the number of seats gained by each party at the next election.

There has been little good news for Gordon Brown in the way this market has progressed. When he became prime minister in July 2007, Labour and the Conservatives were nearly level. The initial “Brown bounce” took Labour almost 100 ahead at 330-336 against 234-240 for the Conservatives.

But by the end of the year, Labour was back to 267-273 against the Conservative 300-306 – and its position has steadily eroded since: “Whatever goes wrong, it seems to stick to Labour at the moment,” says Mr Lincoln.

Recently, Labour has been rading at 205-210 on Extra bet, compared with a Conservative spread of 354-359 and the Liberal Democrats at 50-53.

The range of markets will grow as the election approaches. Sporting Index expects to add a considerable number on issues such as the number of women MPs and the time of the first declaration on election night.

It also has a market on the identity of the next chancellor of the exchequer. Mr Lincoln explains: “We put that up when it seemed likely Alastair Darling might go.” With that now seeming unlikely this side of the general election, the market leader is George Osborne, the shadow chancellor, with his deputy Philip Hammond running second.

One bet that might seem equally popular is the identity of the next Labour leader, but there is as yet only limited interest. Chris Shillington of Extrabet says: “We offered a fixed-odds market on that a few months ago. It got us a fair bit of publicity and a lot more traffic on our politics markets in general, but not a single bet was laid on it.”

Anyone who still fancies Boris Johnson’s chances of being the next Tory premier can back their hunch on Intrade, which puts its probability at about 6.9 per cent. Carl Wolfenden, Exchange Operations Manager, says: “That was a market we put up at the request of a member and there have been 53 contracts traded, which isn’t bad.” Several of Intrade markets originate in such suggestions. Mr Wolfenden says: “One example was presidential endorsements last year, which created a lot of interest.”

If hardly on the scale of a US presidential election, a British poll represents useful business for Intrade, which traded more than 17,000 contracts on the 2005 General Election. Much depends on how close it looks – predictions sites thrive on close-run things. The British poll at the moment seems rather too predictable, as does Germany’s election this month, with Intrade rating incumbent Angela Merkel as 95 per cent likely to continue in the job.

Still, US politics continues to offer much to intrigue Intrade’s clients. One particularly strong market at present is on President Obama’s health reforms, with agreement to a Federal-run health plan before the end of this year reckoned at 20.5 per cent.

Friday, September 11, 2009

Intrade Confidential Survey Results - Now Public

Intrade is currently running a survey from its homepage.

The survey may be accessed here (Please take the survey if you haven’t already).

We are making the results* of our survey transparent and public. We are doing this as we believe providing open access to this information is in the best interests of our members, our business, the industry, our competitors, supporters and even our rare ;-) symbiotic detractors.

Should you like to discuss or collaborate on this or related surveys please contact me directly at


John Delaney



1. How did you discover



Friend or colleague


Search engine (e.g. Google, Yahoo!)






Other (please specify)

48% (Top thematic answers: College Professor, CNN, CNBC, HardBall with Chris Matthews, Larry Kudlow, Glen Beck, ABC 20/20, Politickr)

2. How would you feel if you could no longer use

Very disappointed


Somewhat disappointed


Not disappointed


N/A - I no longer use


3. What would you likely use as an alternative if were no longer available?

I probably wouldn’t use an alternative


I would use an alternative

35% (Top thematic answers: Drudge Report, Iowa Electronic Markets, survey/public opinion poll data, more time on virtual currency markets, any other real money prediction market)

4. What is the primary benefit that you have received from

Various responses from respondents

85% (Top thematic answers: Profit, insight, excitement, hedge, training, education for finance, “seeing the curve before it curves”)

No responses from respondents


5. Have you recommended to others? If Yes, why?




74% (Top thematic answers: A futures market on events rather than commodities, , risk managed way to trade futures, a great place to use your knowledge to make money, the best predictions market with a good history, as an opportunity to profit from your good judgment, futures trading on current events.)

6. What type of person do you think would benefit most from

Various responses from respondents

79% (Top thematic answers: finance, trader, investor, speculators, politicians, media people, people with expert information, Corp. CEO's, managers, 'Joe 6 pack')

No responses from respondents


7. How can we improve to better meet your needs?

Various responses from respondents

83% (Top thematic answers: Improve liquidity somehow, Make depositing easier, a better user interface/upgrade your website, a central clearing counterparty, add sport markets, more local markets, make it easier to spread the Intrade word)

No responses from respondents


8. Would it be okay if we followed up by email to request a clarification to one or more of your responses?





* From approx 100 initial respondents.

Monday, July 27, 2009

Market Volatility Report Just Launched

We have just pushed a new report live this morning. You can access this report here or by clicking on the link from the homepage called “Market Data Reports – New”.

The first report here is called the “Contract Volatility” report and it shows the most volatile* markets during the last trading session.

We hope that this report allows you focus on markets that may offer good trading opportunities due to their volatile nature.

We will be adding more reports to this section soon. Please let me have your suggestions for any specific reports you would like to see.


John Delaney

*Volatility is defined as the absolute percentage change in closing prices from yesterday to the day before, i.e. the opening price for this trading session to opening price from the pervious opening session.

Friday, July 17, 2009

Ireland Has A Good Recovery Plan Now - Will it Implement it?

Well at least it has an idea on how to solidify its foundation.

Implementation of public spending report would reduce structural deficit by 3% of GDP

A Group set up to recommend how we reduce our public service numbers and costs released its report yesterday. It detailed €5.2bn in expenditure cuts. This equals 3% of 2009 GDP.

Top elements are...
Cut public employee numbers by 5% or 17,000 (€700ml payroll saving plus a fortune in non-payroll costs)
Cut social welfare payments by 5%

Lets hope the cuts happen soon. The Group think they can be in the majority in 2010.

If these cuts are implemented in full then our Government Deficit could get to 7% by end-2011.

Wednesday, July 15, 2009

Trade Alerts on Twitter

We are now posting real-time trades to Twitter using Twitter username “IntradeTrades”

We intend to provide for customizable Trade Alerts by email in the near future.

Appreciate your comments below or to me on

Tuesday, July 14, 2009

Don Not Criminalize Risk Taking.

With so many businesses failing and risk being a pariah of biblical proportions what are some of the future implications and what can we do about it now?

Here is an example.

Say the business you started was to fail. You may feel that you would have been better off if you had stayed in an 8-till-5.30 job and took your 15 days holidays per year instead of giving every hour of every week to your own business.

There is a lot of risk aversion right now. People are saving. Taking too much risk is the stated cause of the mess we are in. But if we somehow criminalize the concept of risk taking where is the innovation and entrepreneurial spirit going to come from in the future?

Related Story from Washington Times "EDITORIAL: In defense of speculators"

Related Market - wouldnt it be good to have this type of information on your company.

Wednesday, July 8, 2009

Real Time Trade Alerts – Should be Publish?

We already have much of the technology developed to publish via email, Twitter etc instant real-time notifications of matched trades on Intrade.

The notification would be short like the example below but would inform those interested of activity on Intrade.

Before we develop this I would appreciate you’re your input as to whether you would value this information / transparency.

The body of the text would be…


Prediction market 2012.REP.NOM.PALIN just traded at 10.5% ($1.05 out of $10) on Intrade. Previous trade was 10.5%.

Monday, July 6, 2009

Economic Green-Shoots Wilting. Stronger Fertilizer Needed.

Trillions have been asserted to be invested in getting us out of the recession, crisis or whatever you care to call it to-date. However to-date most of it hasn’t found its way out of bureaucratic processes. Even still, the CEO of GE, Jeffrey Inmelt, and others believe that "the crisis is over”.

Do you agree with him? Whether you do or don’t consider please…

June unemployment: Another half million added to the 14.5 million unemployed bringing the rate to 9.5%. This is expected to increase. There is a 70% chance that unemployment will be above 10.25% at year end. As a CEO of a company, we will be reluctant to resume hiring until growth commences.

Consumer Spending Reducing: Credit card companies are curbing consumer spending further as they are being stung by increased defaults and delinquencies. But consumers are adding to this be saving hard for the rainy day as evidenced by the recent saving statistics. With less people employed, spending will reduce further.

Individual States in Crisis: E.g. California defaulting on short term obligations. They can’t run current budget deficits. With taxes falling they are forced to cut spending (something the Irish government seem unbelievable slow to do) which will reduce consumer spending now and the foundation for growth in future as education spending is being cut.

Foreclosures Increasing: The rising number of foreclosed and abandoned homes and commercial property. There are about 2 million foreclosed or abandoned homes now.

So the crisis is over? Alas this seems wishful thinking to me at least.

Wednesday, July 1, 2009

Politickr Intrade Market Wrap Video

Watch an independent periodic video market wrap here...

Thanks to Politickr.

Tuesday, May 19, 2009

On Innovation

Yesterday I mentioned that we need to be innovative facing our challenges. But it dawned on me I did not talk about innovation enough. 

Commuting in at 4.30am this morning I was considering it again. Here are some further thoughts...

Innovation is a fashionable word. I use it often, probably too often. But what is innovation and how should we think about it. Or "frame" it?

Think of it as the discovery of new paths, creating something new or a better version of something that already exists.

I looked for innovation in others and found Scott Belsky again. According to Scott Belsky of Behance “part of the process is defying the status quo”. 

Here are a few quotes via Scott…

“The conventional view serves to protect us from the painful job of thinking.” -John Kenneth Galbraith

 “If you can’t solve a problem, it’s because you’re playing by the rules.” -Paul Arden

“The truth is, creativity isn’t about wild talent as much as it’s about productivity. To find a few ideas that work, you need to try a lot that don’t. It’s a pure numbers game.” -Robert Sutton, a professor of management science and engineering at Stanford Engineering School.

Looking to old quotes may not be innovative but nothing wrong from building from the "shoulders of giants". 

Have a good day. 

Innovation and Competitiveness and Our Future

We need to up-our-game. It is unlikely that the supportive winds of a global recovery will arrive for years and therefore we need to put in place now the foundation to have a big sail (think spinnaker) to catch the wind if and when it arrives.

Lets focus on education, innovation and competitiveness.

A recent report carried our by a Washington DC think tank ranks Ireland as 13th out of 40 for innovation and competitiveness. In some categories we did poorly, but overall we are in the top 15 of 40. In areas like corporate tax rates and foreign direct investment we are #1. The report focused on EU states and the US.

One of the many things concerning about the report is that Ireland only rank 18th in R&D and below places like China and the EU10 accession countries. This bodes badly for us in the future should our standing remain so low.

In the category of GDP per hour worked, Ireland exceeds the United State but in terms of I.T. investment and researchers per capita we are only at 75% approx. of the US levels. Again this is worrying.

While VC capital availability has become more troublesome from the last survey we are still 14th and in the top 10 for entrepreneurship.

With the ongoing rise of China, India and global competition Ireland, the EU and the US will need to up-its-game.

I know investment capital at the moment is as rare as hens that have teeth. People are maxed out with borrowings including our government but where we can, indeed where we must we should focus now on…

1. Education – the cornerstone. Lets focus on the science, technology, energy, climate and food. I think clean traceable organic food may be the next “black gold”. And Ireland can be a super producer of this currently under appreciated commodity.

2. Technical Rights to Succeed. We need all the facilitating links to make sure we catch the wind and contribute to it.

a. The right regulatory framework – I give us an arbitrary score of 7

b. An accommodative tax policy – mixed score here. R&D investment relief OK, cost of employing and VAT is crazy, corp tax rates great. Score 6.5

c. Technological infrastructure. We are dreadful in this area. We need to do more and fast. I live 21 miles from Dublin and cant get broadband.

3. Focus on some “wicked problems” where we have strengths. E.g. we can contribute significantly to solving our and others fossil fuel dependency. Ireland has masses of untapped wind and waver energy. While we may not have the capital base to do the entire R&D required we must invest in these areas. We have had success before. Same can be said again for good food and water.

In conclusion, we and others are on our knees at the moment but we must continue to invest in our long term. Increase our productive capacity by focusing on education in the first instance and removing the hurdles to innovation and competitiveness.

In Ireland we are innovative and entrepreneurial by nature but we must keep our morale strong. Yes things are bad and will get worse, but “this too shall pass”, and when it does our attitude is what will fuel our recovery.

Follow me on Twitter

Friday, May 15, 2009

Tell us how to Improve Here.

We're using crowd wisdom to improve.

Have your say here

Thursday, May 7, 2009

Announcing the Intrade Virtual Internships.

Announcing the Intrade Virtual Internships.

What will the ECB Do Today?

Currencies Lets hope the ECB drop rates and confirm a program of quantitative easing today.

Tuesday, May 5, 2009

EU think 2010 unemployment in Eurozone will top 11%

EU think 2010 unemployment in Eurozone will top 11%. We think it is higher.

US Tax Changes - Will Hurt Ireland

US multinationals paid $16bn US tax on $70bn earnings or a tax of 2.3% in '04. Obama intends to change this - Ireland to suffer.

Saturday, May 2, 2009

Swine Flu - Update

The markets are pricing in a 40% chance of 5000 or more cases of Swine Flu be end June.

Wednesday, April 29, 2009

Irish EU Commissioner McCreevy proposes new Directors Pay Guidelines

These are new guidelines but the Commissioner will propose they be enshrined in law soon. 

The guidelines apply to all financial undertakings having their registered office or head office in an EU state. 

The main elements of the bankers' guidelines include:

-- payment of the major part of the bonus should be deferred to take into account risks linked to the underlying performance through the business cycle;
-- performance measurement criteria should privilege longer-term performance of a company;
-- financial institutions should be able to claim back already paid bonuses where data has been proven to be manifestly misstated;
-- a company's board should have responsibility for oversight of remuneration policy throughout the bank;
-- board members and other staff involved in the design and operation of remuneration policies should be independent;
-- remuneration policy should be adequately disclosed to stakeholders;
-- supervisors should ensure that financial institutions apply the principles on sound remuneration.
-- severance pay in cases of failure ot be banned
-- a minimum vesting period of at least three years on stock options and shares with some retained until employment ends.
-- Companies should also be allowed to reclaim the variable component of a director's pay
-- non-executive directors should not receive share options as part of their remuneration to avoid conflicts of interest. 

Ireland to Shrink Most of Any Economy Since 1930’s

Ireland’s economy may suffer the biggest decline of any industrialized country since the Great Depression of the 1930s, according to the Irish Economic & Social Research Institute.

Here are a few of the dreadful projections…

·          GDP is set to decline 8.3 percent this year they believe.

·          Ireland's economy is expected to shrink by 11.6 percent 2008-2009.

·          Ireland’s economy will contract by 14 percent 2008-2010.

·          Unemployment is set to increase to 13.2% this year-17% in 2010.

·          Our budget deficit will hit 12% of GDP.

Remember that Ireland was once the fastest growing economy in the euro region.  While Ireland is an open economy (3rd most open in the world behind Hong Kong and Singapore) and therefore exposed to the global situation the driver of the Irish problem is construction, the same sector that drove the boom.

Also a 10 percent contraction from its peak crosses the line that is often used to distinguish between a recession and a depression. 

Due to our particular predicament our Government needed to increase taxes recently, and will increase them further in the October budget, and at the same time reduce spending. However they got the balance wrong. Increasing taxes reduces the chances that employers can achieve the pay-cuts that are needed to make Ireland competitive again. We desperately need to increase our competitiveness if we are to avail of an export-led recovery if and when the rest of the world bounces back.

But as Paul Krugman recently noted the “troubles of the Irish banks are largely responsible for putting the Irish government in the policy straitjacket they are in”.

In September the government offered to guarantee deposits at Irish banks which equates to a notional liability equal to twice our G.D.P. The combination of deficits and exposure to bank losses raised doubts about Ireland’s long-run solvency, reflected in a rising risk premium on Irish debt and warnings about possible downgrades from ratings agencies.

Earlier this month the government simultaneously announced a plan to set up a bad-bank to buy the bad assets from our banks while raising taxes and cutting spending, to reassure our lenders.

So what can we do?

1.       Reduce our spending and increase our competitiveness. This requires severe government spending cuts alas.   

2.       Remember that like the boom, this bust will not last forever. It will be painful while it does. Our standard of living will reduce by 20% perhaps. 

3.    Don’t let the negative news get us down. Our morale and spirit is our most important resource now to get us out of the mess.

Tuesday, March 31, 2009

$50 to $46,562 in 2 years on Intrade.

I was reminded this morning of a member (lets call her “Mrs. Midas” for this note) who made one deposit of $50 on 1st March 2007. As of 31st March, Mrs. Midas has an account balance of $46,562.30.

Mrs. Midas has made no other deposits, nor has she made any withdrawals. She has paid the exchange $4,463.66 in trading fees during this time.

During the two years since the initial deposit she has traded against 1,061 of other traders. The successful member traded on 516 separate markets covering economic, financial, political, entertainment, legal and current event categories on Intrade.

While this member was unprofitable on 38% of markets traded, a demonstrably disciplined cash and investment management approach contributed to the superb performance of her account.

The growth in her account balance and the dispersion of profitable markets to unprofitable markets traded are depicted below.

Monday, March 30, 2009

Deflation Most Likely, But What (and When) about Inflation?

Most (as do we) believe that the risks of deflation are far greater than inflation currently. However, if the vastness of the quantitative easing and other “unconventional measures” being taken by central banks cause to much money to be printed then inflation expectations might and I mean might just ignite.

There are of course many other reasons why expectations of inflation may ignite, e.g. people start believing that the global role of the US dollar is undermined.

So while we predict that deflationary pressures will be with us for quite a while when will inflation raise its head and what types of markets would you like us to list on these topics?

Please let us know here.

Source: Google Trends

Thursday, March 5, 2009

We and Others Know How To Get Credit Flowing Again - We Think!

Now that governments around the world have declared they won’t let banks fail, at least certain banks that is, credit should start flowing between these banks naturally at national and international levels. But the credit is not flowing yet and this is due to lack of confidence between the banks.

This lack of confidence is due to lack of timely and accurate financial information (aka transparency) relating to the quality of the balance sheets of banks. Bank A will not do business with Bank B because of fear that B may be unable to honor its obligations due to toxic assets (aka bad loans or derivative positions) or go out of business even though Bank B’s government has bailed it out before.

But if governments (central bank’s, treasury’s, etc) are already acting as an insurer of banks through bailouts what is needed is to go one step further. This need not cost more per se. That step is moving bank to bank lending and borrowing onto a central market place where all transactions are guaranteed by a clearing house. In financial speak, move bilateral over-the-counter interbank trading onto an exchange with a central clearing house and clearing members.

Sure, there would be implementation issues like who would manage the exchange (While Intrade is happy to help ;-) perhaps the G20 could establish), who would be the clearing members and what banks would get trading rights. Also the thorny problems like would or should Ireland be able to join with our current precarious (albeit exaggerated) position? It should also be a pre-requisite for any bank to get approval of their guarantor Government before they can trade on the interbank platform to provide the very best financial information about its assets and liabilities.

Access to the market would create massive incentives for governments and banks to “come clean”. The incentives are access to credit and comfort when giving credit. If Japanese banks had such an incentive in the 90’s would they have recognized their debts earlier and would this have shortened their lost decade?

So, if what is needed is more transparency and trust then use an exchange with a clearing house. They work elsewhere. They have a big role to play here now we think.

What do you think?

Wednesday, February 18, 2009

European Banking & Deposit Guarantees

There is justifiable discussion surrounding the Irish (and other EU members) banking industry and the government guarantees supporting customer deposits. 

This is a very important issue for Intrade.  It is one that we monitor closely on a daily basis. We do not take risks with customer funds.  We have diversified the institutions where we hold segregated customer funds and the underlying government guarantees are not all from Ireland. 

In the unlikely event of a single bank where we maintain funds defaulting and the government (Irish, Danish, UK or wherever) who has guaranteed those funds being unable to honor its guarantees (including an inability to access national reserve fund assets, support from the markets, from fellow members of the EU or the ECB itself etc) it is theoretically possible that all funds we have placed on deposit would not be easily accessible. In such a remote eventuality then the company from its own capital base (held at various institutions) would cover any theoretical shortfall. 

While I appreciate the above is hypothetical, and I believe highly remote, on a far more practical level let me make a very respectful suggestion, one that I do not make facetiously or glibly. For anyone who is seriously worried about the full recoverability of their funds at any institution, Intrade included, they should periodically test the institution in question by seeking a withdrawal in whole or part. 

Perhaps the above comment may be taken and reported on as a recommendation to withdrawal funds from Intrade or other institution, but my motivation is not to cause withdrawals but to encourage the people who have understandable concerns to remove those concerns by considering risk reduction actions. 

As additional information becomes available I will post it here. 

Personal note:  I personally bank at the retail level the same banks where Intrade segregated customer funds are maintained at the corporate level. I do not believe the banks where Intrade segregated customer funds are maintained have any material default risk although I do believe further recapitalizations will be required. Furthermore I do not believe the Irish government will be unable to access additional funds to finance our growing deficit but I am aware that Irish credit default swaps.  

The following article from Bloomberg this morning is insightful. 

Germany and France may be forced to contemplate the bailout of entire nations rather than just individual banks as European government budgets buckle under the weight of recession.

German Finance Minister Peer Steinbrueck became the first senior policy maker to broach the topic this week, saying some of the 16 euro nations are “getting into difficulties” and may need help. French officials are also concerned about market tensions as the cost of insuring Irish, Greek and Spanish debt against default rises to records and bond spreads widen.

The nightmare for Angela Merkel and Nicolas Sarkozy is that widening deficits will prompt investors to shun the debt of some countries, sparking a region-wide crisis. While few investors are yet forecasting any defaults, the mere risk of it may prompt the bloc’s two richest economies to ignore the European Central Bank and announce their willingness to come to the rescue.

“When push comes to shove Germany, France, the larger players will bail out those smaller peripheral players,” said Alex Allen, chief investment officer of Eddington Capital Management. “You can’t let one part of the system fail because it leads to failure of the whole system.”
Allen’s betting that the risk at least one nation will leave the bloc is higher than the market currently expects.

Swelling Deficits
European deficits have ballooned as governments from Berlin to Dublin committed more than 1.2 trillion euros ($1.5 trillion) to save their banking systems from collapse. The situation will be underscored by the European Commission today, when it publishes a progress report on budget policies at 11.15 a.m. in Brussels.

The European Union’s executive arm forecasts a deficit of 11 percent in Ireland, 6.2 percent in Spain and 4.6 percent in Portugal this year. The euro region’s average budget gap was just 0.6 percent in 2007.

European officials have already expressed concern that their bond market could potentially face a crisis similar to that unleashed by the collapse of Lehman Brothers Holdings Inc. in September. ECB board member Lorenzo Bini Smaghi said Feb. 12 there’s a “risk that the mistrust that there is today in financial markets” is “transformed into mistrust in states.”

“I would be very reluctant to say: ‘O.K., let Ireland or Greece default, the market will sort it out, punish them for their irresponsibility of the past,’” said Thomas Mayer, co-head of global economics at Deutsche Bank AG in London. “They tried it with Lehman and realized that was not a good idea.”

Bond Spreads
The gap between the interest rates Greece, Austria and Spain must pay investors to borrow for 10 years and the rate charged Germany yesterday rose to the widest since before they adopted the euro. Credit-default swaps on Ireland rose to a record on Feb. 16, climbing to 378.4 points.
Greek credit-default swaps, 270 points on Feb. 16, show a 4.5 percent chance that the country will default in the next 12 months, according to ING Bank NV.

Eddington Capital’s Allen, who runs a fund of hedge funds, says the market currently “vastly underestimates” the risks and expects credit-default swaps for Greece, Italy, Spain and Portugal to double in the next 12 months.

Any state-funded rescues may meet with opposition from the ECB, which has repeatedly said the Maastricht Treaty forbids bailouts.

“The no bailout rule is an important pillar on which the European Union was founded,” says ECB Executive Board Juergen Stark, who helped draw up the fiscal rules underpinning the euro.

No Bailout?
At the same time, the treaty says that EU nations can grant financial assistance to a member state if a country is “threatened with severe difficulties” caused by “exceptional occurrences beyond its control.”

“The member countries are working hard on a ‘pre-emptive de facto bailout’ to prevent the test of the ‘‘no bailout’’ clause,” said Juergen Michels, an economist at Citigroup Inc. in London.
Part of the problem policy makers now face stems from the fact the currency union does not have a single treasury and relies on the Stability and Growth Pact, which has been breached in the past, to keep budgets in check. Billionaire investor George Soros said yesterday the region’s economy must confront the problem posed by the lack of a Europe-wide finance ministry.
For now, finance officials say that market concerns are not justified. ECB President Jean-Claude Trichet said in Rome on Feb. 14 he’s confident countries will work towards sustainable public finances.

State Rescue
Greek Finance Minister Ioannis Papathanasiou said three days earlier the extra interest rates on his country’s debt were unjustified. Spain’s Deputy Finance Minister Carlos Ocana categorically ruled out a default on Feb. 16, and the Irish Finance Ministry warned yesterday against drawing conclusions about public finances from the CDS market.
Steinbrueck’s comments nevertheless suggest that views in Berlin are shifting as the financial crisis worsens.

“In reality the other states would have to rescue those running into difficulties,” he said Feb. 16. Steinbrueck said that Ireland was in a “very difficult situation.”

“There will have to be some kind of support package for some of the smaller economies to avoid the tension and speculation about breakup,” said Ken Wattret, senior economist at BNP Paribas SA in London. “The bigger national governments will say this isn’t our problem. But when push comes to shove they might need to provide some kind of financial support.”

To contact the reporter on this story: Emma Ross-Thomas in Madrid

Friday, January 30, 2009

The Intrade World Crisis Index

The Intrade World Crisis Index will tell us whether the Davos World Economic Forum Matters!

As business and political leagers gather at the five-day Davos meeting we will measure whether many of those who presided over blunders in business and policy can credibly lead us in 'Shaping the Post-Crisis World' - the theme for the meeting.

To measure the immediate impact of dozens of presentations and workshops by 2,500 business and 42 political leaders we have constructed the Intrade World Crisis Index.

Our admittedly unsophisticated sentiment index priced at 50.0 at the official opening of the meeting is comprised of eight equally weighted markets that measure the likelihood of recessions, depressions, increased unemployment, lower stock markets, and greater international tensions.

A higher post meeting index means our markets predict a more disastrous 2009 than before. A lower post-meeting index means our markets predict global leaders have reduced the probability that 2009 will be the disaster we previously thought.

You can see the updated Intrade World Crisis Index HERE.

Wednesday, January 21, 2009

Deposits Guaranteed

Intrade Member Deposits Guaranteed by Governments Guarantee Scheme:

On or about the 30 September 2008 the Irish Government put in place a guarantee arrangement to safeguard all deposits at major Irish banks including Anglo Irish Bank.

The guarantee is for 2 years.

More information on the guarantee is available here:

In addition, National Irish Bank's parent, Danske, is covered by a Danish Government Guarantee Scheme.

Therefore all member deposits are now guaranteed by the Irish and Danish governments.

Member Funds Segregated: All member funds are held in specific and designated member segregated accounts with National Irish Bank (a subsidiary of Danske Bank), and Anglo Irish Bank. These accounts are separate and distinct from Company funds.

Individual Member Segregated Bank Accounts: To provide additional transparency any member can request a specific account be established in their own name within the suite of segregated member funds accounts. The Company incurs a cost to provide this service and passes on the cost only to members availing of this service.

This service enables you to receive on an individual Bank Statement in from a bank guaranteed by the Irish or Danish governments your balance.

More information on Irish Public Finances is available here:

But what about Ireland itself?
Well Ireland's 'AAA' credit rating was affirmed on Jan 20th 2009 and said the outlook for Ireland's ratings was 'stable' while Standard & Poor's said it was reviewing the triple-A rating on Ireland, and Moody's has also indicated it is considering the triple-A sovereign rating. Ireland's GDP grew by 6pc in 2007, but contracted by over 1pc in 2008, and a further circa 5pc decline this year is likely.

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