The stock market in which Union Carbide was listed in 1984 had a narrow escape. Many influential stake holders demanded the company's entire net worth as compensation for the victims of the accident in Bhopal. Others wanted the company's Chairman arrested. Neither of these extreme actions has taken place, but it is a matter of concern for every stock market investor. What if a company on which you are invested is faced with a sudden product liability for which it does not have cover?
We may have written it off our stock market portfolio, and may not know exactly where in Africa it is, but the Chinese and Russians continue to court business prospects in Zimbabwe. The country's stock market is miniscule by international standards and the bureaucracy of foreign ownership and terms of listing are both confusing and changing. The GDP is in decline, and you never seem to know how long the country will last. The United Kingdom, which once ruled the land under the name Rhodesia, has led the Western world in a virtual boycott of Zimbabwe. So why bother...
Stock market analysts love indices. There is more than one index for commodities, metals and for all significant industrial sectors. Market capitalization is itself the subject of an index, which is commonly taken as a barometer of economic health. Indices can help people with enormous funds decide on country priorities-in which territories should they expand portfolios. They can also be used to choose sectors within a stock market.
Most stock market players are conditioned to heartily compliment managements which cut costs. However, there are ways of boosting bottom lines for a particular year that actually hurt investor interests in the long run. The ongoing nature of a business implies that certain maintenance and development expenses are musts even when the going is not the best. Every stock market participant has therefore to look for details when a company in which they have investments reports short term profit increases due to cost cutting.
Media savvy and self-appointed analysts abound in every stock market environment. Some of them behave more like spokespeople or even as promoters of executives who cultivate high profiles, than as responsible purveyors of the public good. Retail investors have to read between the lines when such people make statements, for they could be loaded with euphemisms.
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