Friday, 12 September 2008

Stocks: The Beginning of The Beginning?

Pohjola has launched a scheme to buy some stocks.
Indeed you got to put a floor to the current stock market crash.

The question is, are we just normalizing i.e correcting to lower price reflecting future lower profit?

Here is the pohjola press statement:
"The equity basket index includes the following 12 companies with the same weightings, selected by Pohjola Research:
-Neste Oil Corporation,

-Rautaruukki Corporation,
-Outokumpu Corporation,
-Fortum Corporation,
-Nokia Corporation,

-Konecranes Corporation,
-Outotec Corporation,
-Sampo plc,
-SanomaWSOY Corporation,
-TeliaSonera AB,
-Wärtsilä Corporation
-YIT Corporation
(what????!???, are they crazy? or are they just bailing out some friends?)."

You can clearly see (see image above) at the opening this morning that they are in action. Most probably they rose enought money to start the bail-out.

To my opinion, there is still way to go before you see some stable ground. Although not all cmpany should be put an equal weight - as Pojhola is doing, I think it's a mistake - The Rautaruuki, outokumou, outotec and YIT benefited to extreme and unusual market condition in the past five years due to enormous liquidity and leverage build up (due in part to low interest rates, investors complacency, carry trade, deterioration of credit standard).

The market need to clean up, not at a local level but at a global one. Indeed our policy makers have sold us the idea of globalization - mostly adding the use of cheap and abundant labors in the workforce - Now following this idea, only companies that have strong business model and resources should take the biggest share of the global market, the others should go - no government bail out can stop that, the free market forces unleashed are too great to fight. Trying to oppose them will result in greater losses than benefits.

How do you become competitive and gain market share? innovation, cost control and right strategies. You need competent work force, ambitious and motivated. You need also great leaders, not blind or short looking visionnary (e.g minicipality heads)

No comments: