Don’t Panic & Carry a Towel: Stock Markets Down, IPOs Shelved, Economies Uncertain

Markets hate uncertainty. And from Europe to China, there’s plenty on offer.

  • Just six months ago analysts were loath to mention the possibility of any member exiting the European Union. Now newspapers detail potential exit plans for Greece, and how politicians and central bankers would manage a return to Drachma over a three-day weekend. Shares in banknote printer De La Rue have appreciated as it is expected they would receive the printing contract for drachma. 
     
  • Spain is the latest country in the headlights. Its levels of bad debt and unemployment are equivalent in percentage terms to Greece. The problem is the country’s economy is much, much larger. If Greece was a stone thrown in the pond – and the uncertainty we feel are the ripples – then Spain is a boulder. 
     
  • Even two weeks ago Facebook listed at valuations above preliminary estimates. Today The Wall Street Journal discloses how options trading is taking off predicting a steep decline in the stock’s value. 
     
  • Mid-way through a global roadshow, high-end jeweler Graff Diamonds withdrew its IPO (Initial Public Offering). Graff failed to attract retail investors. The Hong Kong Standard said that, as of yesterday, less than 1% of the shares available to retail investors had been taken
     
  • China’s government hasn’t ruled out stimulus measures to keep the economy from faltering. They are loosening fiscal and monetary policy settings but steering clear of making any general pronouncements on stimulus measures. According to The Melbourne Age the concern is the announcement of such actions will further undermine the global economy – and risk China’s overall economy. Pundits say China is overly reliant on government spending. 
     
  • The Australian dollar hit a six month low. Many invest in the currency as a proxy for natural resources. From iron ore to coal to copper, Australia is one of the world’s largest exporters. Instead of buying shares in BHP Billiton or commodity contracts in specific minerals, the Australian dollar tracks the overall sector. In a strong economy that dollar appreciates and it falls amid uncertainty. 
It is wholly appropriate that all these global gyrations occur in the immediate aftermath of Towel Day

“Don’t panic and carry a towel.” Douglas Adams

These “Don’t Panic” and “Carry a Towel” recommendations are provided early in The Hitchhiker’s Guide to the Galaxy – a best-selling and ingenious fiction series by Douglas Adams. Every year fans commemorate these words of wisdom and carry a towel on May 25th – last Friday.

Arthur C. Clarke, the author of 2001: A Space Odyssey, said Douglas Adams’ use of “Don’t panic” was perhaps the best advice that could be given to humanity.

Should you be needing a little comfort, I recommend you dial back your computer’s calendar a week and come into work tomorrow with a towel. It should obviate panic. Otherwise you have 359 days to wait for Towel Day 2013.

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