Sunday, 4th January 2009
The clever can still make money
The Malta Stock Exchange, like any other in the world, reflects the condition of a country's economy and the purchasing power of its inhabitants. The strongest element swaying an exchange's movements is the human factor, and it speaks out in terms of optimism, pessimism, and even of outright fraudulent operations such as those that bedeviled Wall Street in the 1930s and which have reappeared.
Stockbroker Bernard Madoff is a reincarnation of the 1930s. The man has destroyed €35 billion and the life of such an aristocratic brokerage like that of Thierry de la Villehucet, whose family name is inscribed on the Arc de Triomphe in Paris. De La Villehucet committed suicide as he had pumped the money of the richest woman in France, the Betancourt Oreal heiress, into the maw of the Madoff monster.
Madoff's motives are comical and criminal. His operations were made possible first of all by an investigative financial press and hopelessly inefficient regulators. The first blame goes to Wall Street's Institutional Investor magazine.
This is the Street's guide to its bankers. It had on its staff an analyst who had worked out years ago the extent of the Madoff 'heist', as Irwin Stelzer has described it. It was indeed a heist. Financial shocks like this one have sent the globalised world economy into recession.
There is nothing like the murderous political atmosphere of the 1930s. It is true that an American attack on Iran can prove to be mischievous. This has by no means the dynamics to throw the world into a large scale war as Hitler's Germany and Hiroshito's Japan did.
This is by no means irrelevant to the Midi bond issue. It cannot be denied, however, that there has been a slowdown in the Maltese economy because of these adversities, however slight they might appear to be in comparison with those of the 1930s. Malta's tourism is due to contract in numbers, but not in quality.
In the early 1970s recession, the contraction in world trade was 10 per cent. It will not be less this time. The FTSE 100 has fallen by about 35 per cent, this year, while 12 top companies of the FTSE250 have lost 80 per cent. Clever people are still making money, especially those who realised 2.5 years ago, as did yours truly, that gold had taken off. Randgold Resources aided by gold prices has clocked in an 80 per cent gain. Gold has come back, but not for people careless about their money.
House prices are expected to fall next year in the UK, but not the prices of top commercial and luxury property. Belgravia, like Midi, is a different kettle of fish. This trend will definitely communicate itself to Malta.
Page 18 of the Midi prospectus is entitled 'Manoel Island: The shape of things to come' - one reasonably expects the international monied and highly educated to step up their custom of the outstanding yacht and cultural attractions of Marsamxett harbour.
Manoel Island has total foreign millionaire purchase potential if the villas are appropriately finished to Emerald Coast standards.
This is bound to uplift the prestige and value of the more mundane Tigné Point development.
Mr Azzopardi Vella, economic consultant with DBR Investments Ltd, has promoted the Malta Development Fund and advised S and P.
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Comments
The stock exchange doesn`t reflect the state of the economy of a country, it reflects the fear of the buyers and sellers of stocks. It is common believe that the fundamentals are intact in the american or european ecomomies, its just that the banks over done it once again, with their greed overwhelming their own existance. Hence the creation of Fear, on all major stock exchanges. Then we have a domino effect, were other sectors listed on the stock exchanges are pulled down together with he finanial sector. This down turn or fear then is transfered to main street were we hear unemployment figures rising, people spending less etc............
The theory of modern economics is not obeying its own laws, these are extrodinary times, were economic principles have been devalued by goverment interventions. In other words the economic cycle hasn´t been left on its own to clean away the bad apples.