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Friday, March 18th, 2011
the hangover

No, the green line does not track the emotional state of a St. Patrick’s Day reveler over the last twenty-four hours.  Otherwise, the double vision should have gone away by now.

It is, instead, the market price (accompanied by the net asset value) of the New Ireland Fund (IRL), a closed-end fund that demonstrates well the cycles of hope, hype, and hangover that can be found in economies and markets.  IRL was up almost four hundred percent for the first four years of the chart, finishing with an extraordinary run at the end of 2006, as optimism about Ireland’s economy spilled out of whatever vessel it was poured into.  The assets in the fund exploded in price and the persistent discount to NAV became an eight percent premium.

It was quite a party while it lasted.  Now, everyone has sobered up and IRL trades at a substantial discount to a much-deflated pile of assets.  Before long, I suppose, we’ll do it all again.  Memories are short.  (Chart:  Bloomberg terminal.)