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Our world of finance, of greed, of desperation to survive reeks of panic. Oodles of governments, of businesses, of individuals are reaching out to anything that may just give them a lifeline to the new world. A new world will come and the current woes will be history. Then in time the fear we have known in recent months will turn to greed and so the cycle will revolve predictably. Most don’t learn.
But in the meantime we will see lots of spin. I can recognize it as I am sure many of you can. Many of us have indulged in spin in various forms over our business history. I don’t mean deliberately telling lies to achieve an end but we have tended to ‘talk our book up’ at times.
Governments do it. They talk up the economy with a little sprinkling of reality so they can have a bob each way. I am not talking of any particular country's government but rather it is the role of politicians to be upbeat. So many governments stay as far away from the ‘R’ word as possible. It is like a curse. I remember writing in this column about December last year saying the USA was possibly in recession and the USA did not know it. That is the nature of recessions – we are sometimes there and we do not know it. And it is possible in OZ and many other countries right now we are already there and we don’t know it. Partly because we rely on lagging government’s stats to merely confirm what we already feel.
We also see a lot of spin from listed companies as they try to raise cash via rights issues etc. You may recall a few months ago we touched on this after an email from one very astute reader – asking was it likely banks may seek to raise funds. James L well done – you were right on the money.
Rights can often move unexpectedly once the raised cash is in hand and in the current climate it’s almost ‘London to brick’ that stocks will head south post rising. This makes for a tough decision. If you think the stock has more to fall do you forgo the rights and face dilution or do you stand aside? Dammed if you do, dammed if you don’t. It is a cruel world.
And because you can’t make up your mind quickly the capital advisers go straight to the Instos as they can do a quick raise which in a bull market can be irritating for retail shareholders but in a bear market you get your own back. So this week will have left a sour taste in the mouths of many Instos who took up rights.
There is more spin to come. Apply the cynics test.
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Enjoy the ride
Tom Scollon
Chief Analyst
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