Monday, 21 January 2008

Stock Markets, Housing , Politics and Experts...

The stock markets around the world are experiencing a sharp correction. There are many reasons for that :

-Bets that the U.S. will enter into a recession are increasing, and could have a ripple effect into the global economy.

-Growth in the past 20 years have been sustained by a credit expansion and a rising property price. Same phenomenon seen in the late 80's. Debt is becoming a burden and people start to realize that they can't anymore live beyond their mean.

-Petrol, food shock start to bite and second round effect start to materialize. Higher salaries in many sectors have been concluded after series of Strikes especially in Finland. Competitiveness is plummeting and productivity is slowly starting to falter.

-Protectionism is rising, I'm sure every has been following the Nokia and the closure of the German factory. German Politicians start to get implicated and indirectly supporting protectionism measure in order to get the populist support.

-Polls have shown that environment is an important matter for the Finns. Political parties are then trying to leverage that in order to increase their popularity. Matti is the leader on that since He went and discuss with Arnold Schwarzenegger (damn it's hard to spell!) about environment... And the media, in a Berlusconi mind, are helping building the image of a Eco friendly minister (please revisit the article on Neste oil to get some insight). The link with the recession? bad leadership can bring an economy to a standstill, that might not directly apply to Finland but instead to the U.S. with Bush past years policies.

-Mass Retirement is changing the face of the economy. The "65 years old" population is increasing at a fast pace. Those category spend less especially in real estate. The baby "boomers" become the baby "buster" for the economy.

So is that all bad? history has shown that one place to be when we are in a recession is the stock market and not the housing market. The whole point is the timing. A stock market a highly liquid place (I'm not talking about emerging market here), this is different with the housing market.

Is it good time to invest in stock market now? I don't think so. I have highlighted beginning of January that stock markets will see a correction during the next 6 month and that emerging market are particularly vulnerable. This now happening. I recommended as well people to get out of Housing stocks in particular YIT. The share are now at 12.86 euro losing 25% from the call and it's only the beginning.

And then there is the brain washing media machine on full steam. Experts that you never heard of and were not around to warn before the 25% correction of the Helsinki Stock Exchange and the same "experts" will suddenly be silent when the times are good for investing in stock market as they were silent when time were good to invest in the housing market and when it has peaked there have been here to tell you that housing is a sure value...


Anonymous said...

"Finnish companies are global market leaders in many business lines,
such as mobile communications, various paper qualities, paper
machines and luxury yachts and some hospital equipment. Why couldn't
we be that in environmental technology, too?
" Prime Minister Matti Vanhanen asked in his speech.

He persists and sign....what a S...

Anton said...

"The FTSE Eurofirst 300 was down 5.7 per cent to 1,281.92, Frankfurt’s Xetra Dax shed 7 per cent to 6,799.24 - its biggest one-day fall since September 11 2001."

Anonymous said...

Strategists at Morgan Stanley told clients on Monday to stay in cash.

"Our themes continue to be: patience, earnings recession, U.S. recession spreading global, bear market regime, don't be lured into value stocks as most are likely to be value traps, much more monetary easing. We expect flat but volatile markets just as in the 1989-92 period -- a real whipsaw environment for the market," they said.

Jari said...

Asian stocks tumble on US recession fears : Nikkei falls 3.9%, Indian shares down 9%

Australian stocks erase 2007 gains
Market in longest losing streak in 26 years