Thursday 12 December 2019

Roman, you gambled on our banks and lost. Get over it

Children languish on waiting lists as State prioritises bondholders, says John Crown

We've all heard that annoying little sound bite at the end of radio advertisements for financial services. "So-and-so is a leveraged product, and you may lose more than your original investment. Investments may go down as well as up."

Telling non-brain-dead people that no investment is guaranteed sounds a little obvious, a bit like the product liability warnings on American consumer goods (brilliantly parodied by George Will in his "sled is not edible -- do not eat sled" gag).

People who buy houses, stamps, stocks, shares and yes, bonds, know that their investment may go down as well as up. I, for one, have never sold a house I didn't lose money on.

Roman Abramovich who owns Chelsea Football Club, the current English champions and one of Europe's most powerful clubs, knows all about investments.

He went from being a modest Communist Party functionary to being insanely wealthy over a few years.

His personal financial skill set was obviously singularly well-suited to the unprecedented environment of post-Soviet Russia. It wasn't all successful investing for Mr Abramovich though. Along the way he made some stinkers. Andriy Shevchenko is a case in point.

A once brilliant, but sadly past his prime attacker, he only played sporadically -- and scored even more sporadically -- for Cheslea following his €30m transfer from AC Milan. In this case, Mr Abramovich made a bad choice. He made a bad investment. The money he invested in Shevchenko is lost. Gone. Its the nature of business. The money he spent on Didier Drogba, Nicolas Anelka and Florent Malouda was, however, paid back by the brilliance of their performances on the field of play, performances which filled his stadium with paying guests, and amplified his TV and merchandising rights. The Chelsea experience will have taught Mr Abramovich that you win some and you lose some.

He didn't ask AC Milan, or the Italian government for that matter, for his money back when Shevchenko flopped. He just swallowed the loss and moved on.

He and many others who hold bonds in Irish banks are now asking the Irish government for their money back because they made one of the great all-time lousy investments. Did they make it because they were misty-eyed sentimentalists who wanted to help the old country? Did they want to invest in our hospitals or rebuild our crumbling schools? Were they funding Irish industrial development, or financing the search for off-shore oil or renewable energy?

No, they made it because they thought that they could make a fast buck in the casino-like conditions of the unregulated Irish banking sector.

According to our Government, it is essential that the children with the crooked spines on the Crumlin Hospital waiting list pay Mr Abramovich and the other bondholders €50bn. Apparently other investors will not loan money to our Government if we don't compensate them for their foolishness.

Tosh!! Investors want one thing only, and that is a return on their investment. If they think Irish government bonds are good value they will buy them, regardless of whether a prior investment was foolish. If they think those bonds are bad value, they won't buy them regardless of our treatment of Anglo Irish bondholders.

Would you prefer to invest in a country which has or has not a €50bn debt as a starting point?

Ultimately a group of rich gamblers entrusted their money to a collection of morons who our Government believed were wise, prescient, insightful financial geniuses.

Can you really build a smart economy by rewarding stupidity?

Professor John Crown is a consultant oncologist

Sunday Independent

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