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Turbulent Times

As we all know, the global economy is dealing with a lot of problems. Every day the media bring us bad news about the fi nancial crisis which was in part caused by the real estate market in the United States and the United Kingdom, about high infl ation and interest rates. This pressures growth of the world economy and causes problems for the banks in particular. All equity is hit, but the fi nancial shares really take a dive. Shareprice movements of three or more percent are no exception, despite a ban on short selling. The current situation can be compared to the crash of 1987 and some say even the turbulent thirties.

There is a flow of mergers and bankruptcies. Many Japanese banks, hardly infl uenced by the crisis on Wall Street as they learned a valuable lesson from their own fi nancial crisis ten years ago, are in a buying spree; Mitsubishi bought a stake in Morgan Stanley and Nomura acquired parts of Lehman Brothers.

In the third quarter, the Amsterdam Exchange dropped by 22 percent, a decline of 35 percent since the start of 2008. The Dow Jones Index fell by a little more than 5 percent in the third quarter and almost 20 percent in the year to date. Other leading indices show a similar development. Policymakers predict times of minimal growth or even recession. But in bad times a foundation is often laid for future recovery. The weak dollar for example helps to improve U.S. exports, limiting its trade defi cit. The dollar has shown a strong recovery versus the euro and other currencies. Since June oil prices fell. So maybe, the crisis will eventually result in better supervision and regulation and a healthier and stronger fi nancial sector.

Dick Klein Klouwenberg,
Delta Asset Management