The Masses Meet The Actual (NYSE: AIB) (NYSE: IRE)

NEW YORK - The masses which control the prices of stocks on the stock exchange consistently are behind the actual. The actual being what a stock should be valued at given the current information. The mass market reacts to information by its stock prices. Last week "according to the masses" shares of the Irish banks were up on European bailout rumors and this week according to the masses "they are down on European bailout fears." If only the masses had memories that they could learn from.

On November 15, The Markets Are Open in the article "Be Fearful when Others Are Greedy" said "Investors are currently rallying the stock around possible European bailout plans of Ireland. Not only is this new information but it was likely never factored into the valuation of AIB over the last year. What is important to note is most people felt Ireland could survive the crisis without European help which would intuitively be better. But now there are reports they need help, which is worse but has sent the stock rallying."

Last week AIB and IRE were up because the masses are behind the actual. Investors have consistently misread information either deliberately or intentionally which sends stocks soaring. For instance in October 2008, shares of Wells Fargo, PNC, and U.S. Bancorp hit record levels on rumors of a bailout plan. Even if these rumors were true it would not have warranted the price move.

Allied Irish Bank and Bank of Ireland will now be forced to run their funding plans through two institutions (Europe and Ireland) instead of one and this will amplify their difficulty. If AIB thought the Irish government was tough then they better bake a cake for the German government. Perhaps the only silver lining in the whole situation is the irony that the government which has condemned the banks for having to be bailed out, has now been bailed out.