Sunshine after the rain
Economists interested in mathematics try to find some order in the development figures of gross national products, which could possibly help predict the future. As for now the best fortuneteller has been Old Testament’s Joseph, who advised the Pharaoh to hoard and store seeds during seven plentiful years for the following seven years of famine.
According to this well-known, although somewhat questionable source of evidence, Joseph estimated the length and the depth of the forthcoming depression by interpreting the Pharaoh’s dream. I wonder if today’s economists also dream.
An old wisdom says that it is time to move on to more reliable investments when taxi drivers begin giving financial advice. About six months after companies’ cutbacks take effect the taxi queues start getting awfully long. You either use public transport, or if worse comes to worst, stay at home.
The predictive power of taxi-index works worse the other way around since taking a taxi comes into question only if one has a real need and the extra dough.
And stock markets exaggerate. The real economy may not feel the effect of the stock market crash as deeply as expected. Also, increases in market rates are often associated with exceedingly optimistic expectations. But the stock market does give some indication on where we are going.
The rock bottom of the Helsinki Exchange, which is represented by the OMX Helsinki stock market index, was hit last Spring. Since March 2009 the index has increased from 4000 points to 6500 points, which is over 50 per cent.
A couple of weeks ago the investment magazine Arvopaperi reported that insider stock trading have increased significantly. The Confederation of Finnish Industries EK reported in its latest survey that signs of growth are already visible.
So it seems like there will be sunshine after the rain also this time around.
(Photo: Juuso Noronkoski)
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