Friday 5 November 2010

FINANCIAL ANALYSIS

With many of the world's economies in deep trouble, you would think that there would be a demand from voters for serious financial analysis. Yet a high proportion of the financial items on the television news are superficial, trivial even. First, because they tend to concentrate on stock markets. Stock markets are an important component of the financial markets, but they are just that; one component out of many. Secondly, because within stock markets, they concentrate on the headline indices. Again, while important, these indices represent only a fraction of the total market, not the whole market and perhaps not even the most important part of it.

On the Copenhagen stock exchange, the main index is the C20, covering Denmark's 20 biggest companies. These include four banks, two insurance companies, three shipping companies, a brewery, four pharmaceutical companies and Vestas, the world's leader in wind energy. However, they do not give a good picture of the domestic economy, not least because there is nothing agricultural amongst them (all those pigs, for instance). So, having a daily news item on the rise or fall of the C20 index may be interesting to day traders, but can hardly be considered serious financial journalism.

Given that we are all, through our taxes, paying for the clean-up of the current mess, I think it would be a good idea if the television media upped their game, and started doing more serious things. Like, for instance, explaining to the general public what quantitative easing means. However, since that is unlikely to happen, I am going to go back to my Economist.

Walter Blotscher
Posted by Walter Blotscher at 22:09

3 comments:

  1. Michael7 November 2010 at 12:15

    I agree with you and indeed have been giving tutorials to a reluctant audience. Inspired by my current squeeze passing the test on bond yields we moved on to quantitive easing- however my explanation was not pithy and clear enough for my audience fell asleep. My brother, carrying the authority of a successful career, says the only thing that matters is jobs.

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  2. Walter Blotscher8 November 2010 at 19:42

    Hi Michael,

    Surely the key thing about economics is that there is no one "only thing". Whether that be jobs, monetary policy, taxes, or anything else. It's about keeping a number of balls in the air at the same time, while slowly moving yourself forward and/or in another direction. As Edward Heath once memorably said about his successor Margaret Thatcher's obsession with monetarism, concentrating on one thing is a bit like playing golf with only one club in the bag.

    I like the idea of your nighttime tutorials. Though it does indeed sound as if you need to sharpen up the pitch.

    Regards,

    Walter

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  3. Michael12 November 2010 at 13:32

    Good point. I always take at least seven clubs to the golf course but this does not seem to prevent the ball too often landing in ponds or very deep bunkers. I blame the ball, the clubs, the weather, distraction.

    What is the Blotscher take on Ireland?

    And having ones benefits cut in England?

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