No surprise that the Irish Stock Market has been one of the worst performers

It was no surprise that the Irish stock market has been among the worst performing in the world for the last two years. The only surprise was the reluctance of stock market professionals, who make a living from selling shares and writing commentary on local banks shares, to acknowledge the size of the market meltdown. The stock market research some of Dublin"s largest stock brokers published as recently as nine months ago shows an alarming trust in the banks here. International investors started selling out of Irish bank shares over two years ago. And because the four then stock market listed banks together accounted for about half the value of the stock market, in truth international investors had started to sell out of all Irish shares. That should have been warning enough for the government, the Financial Regulator, many property investors and, perhaps every pension fund trustee. Stock markets frequently send the wrong signals and they can get things wrong. But when the majority view abroad has decided to get out of a local national stock market then it is time to look up and take note. That was the case here just over two years ago. Bank stocks around the world tend to be a proxy for the rest of a national economy. When those banks have ramped up lending to a single sector - spewing billions of euro to fifty property developers for loans secured on the value of land priced higher than prime areas in Manhattan then consistent selling by one type of investor on a local stock market is a sign worth watching. The lure of property had already entangled many stock market listed companies with apparently little to do with land prices to join the party: fresh produce distributor Fyffes spun out a property company to tap the development potential of its central Dublin site and others in Britain; Greencore banked on property sites around the country and even the tiniest stock market listed companies looked to property revaluations. Add in the house building stocks and building supply companies servicing the boom here and in Britain, and the Irish Stock Exchange then took on the look of a huge Irish land property index. Not that you would have told that by many commentators who came up with some pretty convoluted explanations for the early evidence of stock market falls. International investors were quietly taking profits before they started to bail out in earnest. They had studied economic analysis of what happens to high growth countries, like Ireland, Spain, Portugal, Greece and the Baltic states, when the supply of once freely flowing cheap bank credit is suddenly turned off. Many overseas banking analysts correctly called what was happening here 18 months ago. Local pension funds and individual wealthy and not so wealthy investors were left to take the pain. As recently as February 19, 2007, only 25 months ago, Allied Irish Banks traded at its all-time high of €23.95 a share. Painfully, for us all because we all pay in one way or another through the effects on the country"s long term pension savings when a stock market like Ireland"s suffers a catastrophic drop. AIB last week was worth little over €1 each. Around the same time two years ago Bank of Ireland hit its all-time high at €18.65. Last week, Bank of Ireland was trading around 81 cent. However, stock markets around the world have shown some surprising rallies in recent weeks. The Standard and Poor 500 index, which includes the 500 largest stock market listed companies in the United States, including Microsoft, Johnson & Johnson, Procter & Gamble and Exxon, surged by up to 25 per cent. That still leaves most US shares trading below their year-end prices and, worse, valued at about half their value at the end of 2008. Citigroup, once the world"s largest banking group has lost almost two thirds of its value in the last three months alone. Nonetheless, the gains have been fairly extraordinary at a time when few would predict that the worst of the severe recession has past. The battered Irish stock market has not been immune from the rally either. The Iseq, the stock market index of Irish shares, rose back to levels it reached in early February, rebounding about 15 per cent since St Patrick"s Day. So what"s going on? Some stock market investors are betting that the worst of the worldwide recession will be reached in the next six or nine months. Markets are a mechanism to predict turning points some time in the future. Of course big name investors in Britain who called the bottom of the market and recommended buying British bank shares last September evidently got their timing wrong. But other investors will continue to make calls. Making sense of all this, analysts at Morgan Stanley and Goldman Sachs have separately in recent weeks cautioned that world stock markets could yet stagnate for many years or fall again. In short, investors could lose a lot of money again by placing their trust in an early recovery for the US economy. Ronan Carr at Morgan Stanley -- sceptics of an early world recovery -- put it fairly well when he said investors can afford to be cautious. Wait out and watch to see if the US housing market is showing signs of life next year. That"s early enough to avoid losing more money all over again. Once overly optimistic local stock market analysts appear to agree. The rash of 'buy" signs once plastered over any Irish stock market company have yet to appear this spring.