Well what a terrible first half of 2008 and a shocking close to the financial year. After watching the market over the last week or so, I decided the best course of action was to finish work just after lunch and catch up with some reading and movie watching. One thing I was not doing was selling as I have no idea why people wait until this time of year to sell and take tax losses. In fact I picked up a few small parcels of shares as I hope we will see some upward market movement in July.
So where are we then. Well most people who hold shares would be feeling a little depressed. Most listed companies have seen their shares prices battered and although the press seems to be focused on the financial stocks it is hard to find a sector apart from mining, that has made shareholders happy.
But let’s not get carried away with some of the rubbish written about business models being broken etc. Clearly these comments are written by people who have never developed a business model because if they did they would know that business models are often adjusted and rarely does one remain unchanged for any length of time. The Babcock and Brown business model is not dead, but it needs reworking just as the way BHP reworked their business model back in the 1990’s. Maybe some readers will remember the days when BHP was seen as a dud stock and even in 2003 you could have picked up BHP stock for around $8. Have you heard about a company called Apple perhaps? Did they sell mobile phones in the 199o’s….no…. but they do now. That’s right, they have altered their business model, the old one was not broken as such, but it did need help.
All companies face challenges, some will fail and some become stronger. The reason companies have management teams is to manage the company through good times and bad. If you could simply develop a business model that never needed to be tweaked or changed, then you could send the senior management home and run the company on autopilot.
At the moment we are in a period where no doubt companies are looking at their business models and seeing what they need to do to survive in the current tough situation. Some will need to adjust the way they operate because of high oil prices, some because of the credit squeeze and some because of both. As we progress through the second half of the year we will start to see which companies seem to be getting things under control and which ones will struggle to survive in their current form.
I would be mad not to say that the second half is going to be tough. I do expect to see markets rebound but as I have said before, I am not expecting any significant gains this year, merely a recovery of some lost ground. I once thought oil would trade under $100 but I have just about given up on that now although I do feel a significant oil price correction is on the cards.
So most of us are a little bruised, but hang on…..there will be better days ahead……eventually.
Try and keep smiling!